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Biomerieux SA
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Good day and welcome to the bioMérieux Full Year 2021 Financial Results. Today's call is being recorded. At this time, I would like to turn the conference over to Franck Admant. Please go ahead.
Thank you. Good day, everyone, and thank you for joining us to review bioMérieux's performance for 2021 and our objectives for 2022. Before leaving the floor to Alexandre Mérieux, Chairman and CEO; and Guillaume Bouhours, CFO, I will just make a very short introduction to provide you with a couple of information. First of all, our press release was released this morning at 7:00 AM. You can find it on the homepage of our website. In addition, note that the slides of this meeting will be available also on the homepage, and you can download it shortly after the webcast. Promptly, after the end of the meeting, the webcast and the call will be available in replay on our website.
Now, going to the presentation contents. After reviewing our 2021 performance and 2022 objectives, we will hold a Q&A session. Questions can come from the conference call and from the chat of the webcast. If you wish to ask a question, please make sure to identify yourself, name and company. A very last word before starting the presentation. I will not read the slide which is currently projected, but I recommend you to take note of its contents that remind the usual disclaimer about the forward-looking statements.
Now, I hand the call over to Alexandre Mérieux.
Thank you. Hello, everyone. Good morning or good afternoon for some of you. So, let's start with the review of our 2021 activity. So, we'll start by saying that 2021 has been for bioMérieux, after two years of COVID, again a year of remarkable performance. I believe we delivered strong performance both in terms of sales growth. The organic growth was double-digit at plus 10.5%. Strong sales performance also as we reached €801 million in January, contributive EBIT, close to 24% of sales. And also, worth noting also that we are a debt-free company since we have a free cash flow generation of more than €500 million. I would say also that during this past year, also we have been able to improve
[indiscernible]
(00:02:29) corporate social responsibility vision. And with that, and as you will see also a bit further, we have a solid pipeline of new solutions to be launched. And also, as we hope that the world is going to end its phase of COVID, we believe we are well-positioned to address this endemic and also other needs related to the fight against AMR, standing for antimicrobial resistance.
So, maybe I'll start with the performance of key range which is BIOFIRE. As you can see, we have – we displayed last year organic growth of plus 14%. Important to note that during the COVID time period, we doubled the installed base of instruments. Now, we reached around 22,000 units being sold and placed. Worth noting also that we had good growth on respiratory panel at plus 14%. And the non-respiratory, so gastrointestinal panel, meningitis panel, pneumonia panel,
[indiscernible]
(00:03:35) panel also displayed nice growth in terms of reagents at plus 35%. So solid growth this year, the fact that Omicron was hitting the US and the rest of the world in Q4. Also, we have strong demand signals in Q4 for RP panels.
Maybe the next one. Microbiology
[indiscernible]
(00:04:02), nice, steady performance as we had both our classic system I would say, VITEK
[indiscernible]
(00:04:11) growing well in terms of growth, in terms of placement also. We have been able to leverage our offer across the portfolio. We launched in Europe; we got the CE marking for the VITEK MS PRIME which is a promising system. And we expect to have the VITEK MS PRIME to be FDA-cleared in 2022.
Regarding immunoassay, we had growth of 8% last year, I would say with positive effects from tailwind from the pandemic. Of course, we benefited from the good performance of our SARS-COV-2 serology tests. Also, we have stronger demand for a specific test linked to the infectious cases linked to COVID. But we also have some headwinds. We continue to have competitive pressure on PCT mainly in the US. And also, we had a Field Corrective Action in Q4 which is now resolved which impacted us in in Q4. Otherwise, also, we made good progress launching important new parameters on VIDAS such as TB-IGRA for tuberculosis, NEPHROCHECK for acute kidney injury, and also DENGUE
[indiscernible]
(00:05:28).
Looking at the industrial application which also had a solid performance, double-digit growth for the industry business in 2021 after a more difficult 2020 linked to the different lockdowns. And as you know, we're active in the field of healthcare and also in the field of food testing and quality control. And I would say in both segments, we enjoyed good growth pushed by our offering of course and the fact that the biopharma, biomanufacturing market is moving fast. And our QC solutions are well-adapted. And in food testing, we have very strong momentum with our solutions, mainly our solutions linked to molecular technologies such as GENE-UP and Invisible Sentinel.
With this short review of 2021, I will now leave the floor to Guillaume to guide us on the performance.
Thank you. Hello, everyone. So, let's review our financial and operating performance. So, here, you have the summary of what Alexandre has already presented, the split of the organic growth by major range. So, you see actually that all of our major ranges performed extremely well in 2021. Molecular is number one with 38% of sales. Overall, molecular is plus 8%. Inside molecular, Alexandre presented BIOFIRE; overall, plus 14%. I have to mention that the non-syndromic molecular was actually down, and we had reported on that during the year. After an exceptional 2020, our ARGENE, NUCLISENS ranges were overall down 40% in 2021, so basically coming back to more pre-pandemic levels or closer to. Microbiology, plus 13%; immuno, plus 8%; and industry plus 10% as presented by Alexandre. So, really balanced growth between clinical applications, plus 10.5%; and industry, plus 10.2%.
Now, looking at the same, so organic growth by geography. Americas remained, of course, our first region with almost half of the group sales at €1.7 billion. North America was up 8% with a strong push from syndromic molecular as well as microbiology, slightly offset by PCT pressure as Alexandre mentioned already. We can notice remarkable growth of 19% in Latin America, well-balanced overall inside the region, in the different countries. EMEA, of course, our second region at 11%. Europe was pushed by or driven by syndromic molecular but also a good growth of microbiology, immunoassay recovery from a low 2020 and industry as well. The Middle East and Africa region was up double digits so, overall, excellent performance there as well.
In Asia Pacific, plus 16%. There, I would like to mention a very strong success in Japan since the introduction of BIOFIRE at the end of 2019. And so, the success that we had mentioned in 2020 was pursued and accelerated in 2021, so excellent there. Steady growth in Southeast Asia. And overall, China suffered a bit in Q4 because we have a lot of immunoassay business there from the Field Corrective Actions. But still, overall, during the year it's a bit more than middle-digit growth, so quite good growth in China.
Now, moving to the P&L. So, overall, the 10% organic growth turns into an 8% reported growth with some negative foreign exchange, especially on the dollar, on the sales. As you can see, gross profit improved from 56% to 58%, so that's a significant improvement linked, first, to volumes, volume increase of course, and a better absorption of fixed costs that are above gross profit, gross margin; and second, to the mix with a positive mix effect. You have seen that the reagents of BIOFIRE in terms of growth are plus 18% in terms of organic, so obviously higher than the rest.
Cost below gross profit, so SG&A is overall 5% like-for-like growth. But we have to mention that this is on a low level of spend as we have said for the last two years actually, 2020 and 2021. Due to COVID, we are very low on congress, marketing, travel, and a number of these, let's say, commercial topics. R&D was, overall, on a like-for-like basis flat after – we have to remind in 2020, some COVID-related product development costs and performance share or phantom share, sorry, phantom share costs that were inflating the 2020 base not only in R&D but in a number of lines. So, overall, contributive operating income, our main KPI, at a record level of €800 million, almost 24% of sales, and up 36% on a like-for-like basis. Just to mention that on EBIT, on contributive operating income, the foreign exchange effect was also negative, minus €33 million, in line with our, let's say, expectations.
I move on now to the P&L below contributive EBIT. So, still let's say the flat recurring cost of acquisition or the PPA of BIOFIRE acquisition over 15 years that is capped at €17 million. This year, in 2021, we have no non-recurring expenses versus 2020 where we had a lot of exceptional solidarity actions and the first contribution to our corporate endowment fund of bioMérieux, that all these made €42 million last year as a reminder. Something to note is major improvement in the net financial expense, moving to minus €10 million. Of course, you will see in a minute that our net debt position moved to a net cash position that helps, but also the refinancing that we did on our debt in June 2020 has improved the situation and lowered the cost. Income tax is slightly decreasing at 22.7% effective tax rate. We benefit from a lower French corporate income tax that moved from 32% to 28% and also from a stronger US profit base. So overall, net income, group share, €600 million, up 49%. €5.06 EPS that will lead to a proposal at the AGM of a dividend of €0.85 per share which represents a payout ratio of 17%.
If we look together at our cash flow statement, for the first time, our EBITDA was above €1 million, of course in line with the EBIT improvement. Working capital was actually a consumption of €38 million of cash. Inventory increased by €62 million. You remember that we were very low on inventory of BIOFIRE
[indiscernible]
(00:13:31) at the end of 2020. So, we actually especially increased raw material and finished products for the BIOFIRE products. Payables and receivables, overall, very much in line with our activity; even some improvements of the days of receivables. And important to note, the last part of the famous phantom share plan – for everyone, this is our US team's retention plan; that was a bonus, long-term incentive plan based on the share price of bioMérieux – so, we paid it fully, the last part of it in March, April. So, that's of course a cash out in terms of working capital. CapEx, I will show you some details in a minute, but pretty solid at 9% of sales, €290 million. And so overall, leading to a free cash flow that is a record for us at €540 million. And that leaves, even after few small acquisitions and the dividends, at a strong, strong improvement of our net debt, actually becoming net cash position. So, now, a net cash position of €340 million, including IFRS 16 which is about €96 million.
Just a few pictures. I think it's nice to share with you where we invest. So, some of the main CapEx of 2021 – they are not the only ones, of course. But on the top left, you have the office, the new office building in Salt Lake City, just right next to the new plant that we opened the year before. That is finished and actually, our teams have moved in in November. On the top right, you have a picture of all the, let's say, additional capacity and also progressive automation of BIOFIRE manufacturing that we are investing in. And on the bottom left and right, you have two buildings that are almost next to each other in Suzhou in China. One is for bioMérieux blood culture business produced in China for China; and the other is for Hybiome, our immunoassay business that we took control of three years ago and which is building its new site, manufacturing and all functions.
And with that, I hand over back to Alexandre for our 2022 priorities.
Thanks, Guillaume. So, let's switch to our 2022 priorities and outlook, and we'll focus a bit on two key focus for us which is the fight against antimicrobial resistance, also syndromic testing. We'll give you also some details around innovation, R&D roadmap, new product launches. We'll talk about CSR and, of course, we'll give the guidance for 2022.
So, let's start with the antimicrobial stewardship which, as you know, is really core to bioMérieux. It's in our DNA to be present and to fight this important threat. You might have seen that The Lancet study has shown that in 2019, in fact, that 1.3 million of deaths link to AMR. Some call it the silent pandemic, and this is where bioMérieux is active. And we have seen during these last two years strong recognition of the value of diagnostics. And diagnostics also will be key to fight against AMR, knowing that we are lacking new antibiotics, but there will be a diagnostic with a key element to fight against AMR. So, of course, we have R&D. We have a commercial relationship or co-distribution
[indiscernible]
(00:17:13), that we keep on investing in that space. And also, we've got some priorities for 2022 linked to medical education, first, to train and inform all the different healthcare providers around the world; investment also in medical and economical outcome studies to support the adoption and the access of diagnostic; and also, partnerships with selected centers of excellence as vitrine to share our AMS best practices around the world.
The second topic which is important for us, of course, the success we have and the leadership we have with syndromic testing. With BIOFIRE, we'll keep on expanding the menu. We should be able to launch the new panel called the Joint Infection Panel in 2022. I've mentioned also, we doubled the installed base, so there is room to grow for the mid to long-term, also leveraging this installed base which has doubled. Growing also the non-RP panel, and again going international, meaning outside of the US remains a key priority for us.
But we're also very pleased to know that we'll be launching a new BIOFIRE platform which has been started to be submitted, I think in December to the FDA. And as you know also, during these last two years we have seen some movements in the field of diagnostic and, of course, the push for molecular solution but also the push for decentralized testing solution, targeting the outpatient and point of care. And this new solution will be
[indiscernible]
(00:18:54), will have its results in less than 20 minutes. So, we are very pleased to be the first one to bring syndromic testing close to the patients with this new solution which is under FDA filing at this stage. And I guess, more to come when we get to the launch.
Pipeline, we know, you know that we invest in R&D for today and for tomorrow, and that we should also be able this year to deliver important new products and new solutions. We are planning to launch a new VIDAS platform at the end of 2022, bringing scalability, connectivity, and traceability. In addition, on the VIDAS platform, we'll be able to launch two parameters of importance, so one being VIDAS TBI,
[indiscernible]
(00:19:45) to detect traumatic brain injury. And also, we increased our range of solutions to detect harmful viruses with the launch of VIDAS CHIKUNGUNYA.
Looking at the industry application also, both food and pharma, we'll have important launches.
[indiscernible]
(00:20:02) we are launching the INDUSTRY 3P range, bringing automation, software, integrity of the result also. And this is – we'll start working, implementing this solution with a 3P customer in 2022. And in the field of food testing and quality control, we had good performance in 2021 mainly on the molecular ranges. And we keep on, I would say, developing new assays running on our GENE-UP equipment, and also targeting new market niches for the food applications. So, a good pipeline of new solutions.
And maybe the next one. Also, we mentioned I think last year we formalized our CSR ambition which is really embedded into the bioMérieux strategy around five pillars, health, planet, healthcare ecosystem, employees, and extended company. And we have been able also to, I would say, deliver and agree on some key important KPIs that we will follow and that we'll deliver on both for 2025 and also for 2030.
With this being said, regarding 2022, we are also planning for, hopefully for a situation where COVID is becoming endemic, and with this we should see a decrease regarding demand for RP panels. So, we are targeting sales to be between €3.2 billion and €3.3 billion, reflecting negative gross between minus 7% and minus 3%, although this in a very volatile environment. Regarding the cEBIT, also we'll be targeting to be in the range between €530 million to €610 million, of course leading to the same decrease foreseen in term of sales, but also noting that we'll be able to invest more in the upturn in customer-facing activities, supporting our key launches, supporting the clinical studies. And also, like everyone, we'll be facing inflation on salary but also on raw material. So, all of this will be done by keeping strong investments in R&D and also in CapEx which would be around 11% of our consolidated sales.
With this being said, I believe, Franck, we can open the floor to questions?
Yes.
[Operator Instructions]
We will take our first question from Maja Pataki with Kepler. Please go ahead.
Good afternoon. Thank you very much. I have three questions, please. First of all, Alexandre, on the new BIOFIRE platform, can you tell us something about the panel? Is it going to be the full respiratory plus some sore throat pathogens on it or is it like a slimmed down version of respiratory? And shall we expect that you're going to put the full menu of BIOFIRE over time on the new platform with less than 20 minutes turnaround time? That will be the first question. The second question with regards to the new VIDAS platform. You talk about scalability. Are you increasing the throughput or how shall we think about that? And then, the last question is with regards to inflation. Can you please be a bit more specific? How much or how many millions, euro millions you're seeing as new headwinds in inflation that you couldn't anticipate late last year? And how much of that can you pass on and which part do you think you won't be able to pass on? Thank you.
Okay. Thank you, Maja. I will start with the new BIOFIRE platform which is not launched yet;
[indiscernible]
(00:24:26) with the FDA while waiting for reviewing and there is some backlog. But yes, for us, it's very important. It has been a key investment for us this past year. So, it's a way for us to enter into the decentralized testing space, bringing syndromic solution. And yes, to your first question, it will be with respiratory and sore throat with less than 20 minutes turnaround time. Today, that's what we know. We'll see, but usually we don't launch a platform with only one panel. But then again, maybe – I will say it's kind of exciting, but let's wait to have the official launch or when we'll be closer to the launch. But since FDA filing is starting, we felt it was important to share with you.
VIDAS platform, yes, the scalability, we'll be able to bring a higher throughput to the platform. And VIDAS also – we'll be able to transfer most of the VIDAS, parameters that you're seeing today on VIDAS on this new platform. Question on inflation, Guillaume, I'll let you answer.
Yes, of course. So, inflation, as every company in the world, I think we see an accelerated inflation since especially the last, let's say, four months. When I say accelerated, I mean, on the raw material but I also mean on the salary, on the tensions on some labor market that clearly are stronger than they were five, six months ago. So, what we took into account to try to summarize in the – let's say I'm talking about the midpoint of our guidance, is roughly €50 million on the salaries and the salary increase, which would be higher than usual salary increase, and about let's say roughly €20 million on the raw material, yeah. And, of course, the question, you are very right; it's a pass-through. So, we have stay taken and we are taking actions for some pass-through. But, of course, in our industry, there's some tenders, multi-year contracts, etcetera. So, even though we are quite confident on passing through, it's not a direct and immediate pass-through. So, there can be some time lag between our actions and the full pass-through of inflation.
Thank you very much. Maybe just a quick follow-up. Alexandre, on the decentralized placement of the new BIOFIRE platform, shall we think about it more like emergency room settings and clinician – clinics, like that? So, really take it out of the lab, put it into a clinic setting?
Yes, it could be the plan, yes, because it could be CLIA-waived. So, it could be used by non-lab professionals.
And sorry for another follow-up on that. But you did have the respiratory CLIA-waived a couple of years ago – I don't know whether it was four years ago or something – and it seemed like it never really made big inroads in the US in the clinician office or am I wrong? Can you talk about that and maybe say what it was?
No, but we're transparent. It was a way also for us to test the market as we see the adoption around this type of platform. I believe in COVID times, I think we have seen some good success also of this platform. But again, with this new one, we'll have a much shorter turnaround time which should be more fitting the needs of decentralized testing.
Okay. Thank you. I'll go back into the queue.
Thank you.
[Operator Instructions]
There are no further questions at this time.
Maybe we can take questions from the chat, and the first one is from Christophe-Raphael Ganet and talking about asking for how much BIOFIRE revenue comes from non-US sales.
So, non-US BIOFIRE is 27% in 2021. It was actually 23% in 2020, so we are continuing to increase. And Japan I think we mentioned is now the second country, of course, apart from the US, but overtook all the other countries, Europe, etcetera. So, definitely, a great success in Japan.
And what is your assumption on COVID test prices by 2022 compared to 2021?
I would say on the syndromic market where we are positioned, so far, we might see a slight pressure but nothing significant so far. So, for me, it could be more on the
[indiscernible]
(00:29:39) that happened already, so we – the plan is not to be too impacted.
Question from Louise Boyer. What is the chunk of your sales related to COVID?
That's a difficult one. As you know, of course, our competitors are very much committed on COVID/non-COVID. The difficulty for us is that you understand that syndromic testing, respiratory panel is not a single COVID test; it's a test that tells you if you have COVID, Flu A, Flu B, RSV, and I don't give you the list of the 28 or 27 pathogens in the panel. So, it's more as you say, it's a respiratory syndromic panel. So, we cannot really classify it as COVID-related sales even though, of course, COVID and COVID demand and the most severe cases of COVID was fueling the demand for this panel.
We hope that we're moving into an endemic phase for sure and COVID-19 market will decrease I would say drastically this year, hopefully. But we believe that syndromic is the right technology to address an endemic market, meaning that COVID-19 will be part of our – for many years will be part of the different assays that we have to test.
So, that being said, again, we don't classify respiratory panel as COVID because, again, it's broader. But yes, if you want to think about it, respiratory was 72% of our BIOFIRE reagent sales in 2021. And on top of that, please remember that we had also, and Alexandre mentioned it, some COVID-related additional demand on immunoassay in 2021 that if COVID becomes endemic will slow down, of course.
The second question from Louise is about the future growth drivers of sales and margin.
So, the growth drivers, we mentioned in terms of trends, you might have seen in the outlook. So, if we take you by segment or technology, microbiology is a market where you know we have very strong position. The market itself is probably 4%, 5% market growth, and we expect mid-single-digit growth, probably slightly higher than the market. That's what we've been able to do in the last two years. On immunoassays, we have, as you've seen, some positives and negatives, negatives being especially the PCT pressure; positives also are emerging positions, emerging market positions. So, overall, a stable to slightly above-stable outlook. We expect a very strong growth from non-respiratory panels as we have shown and been able to deliver last year and in the past years actually. And industry, expect mid to high single-digit growth that was, again, on strong fundamentals on top of all the, let's say, actions and portfolio as Alexandre detailed.
Still the next one is – the next one is you're working as a COVID name. What are you now? What is your quick story?
So, I will take this one. No, we are not a COVID company. We've been present for close to 60 years. We are a company focusing on infectious disease through the value of diagnostics, investing in R&D, investing in capacity, and manufacturing well before COVID, and we have a long story after COVID, even if COVID will stay for some time. And our story is about bringing innovation, time to market, time to results in the field of infectious disease.
Question still from Louise about expectations on BIOFIRE development outside of the US and number of units that we're expecting to install.
So, we expect to continue to grow and to grow strongly outside of the US, as we've shown in the past year. Actually, the growth in the US has been good, but it was even higher outside of the US. We mentioned Japan, but we can mention Europe as well in 2021, has performed very well on syndromic testing. I mentioned Latin America as well. So, we expect to pursue the growth of BIOFIRE outside of the US.
Question from Christophe.
Maybe also question from the line?
Is there somebody from the call?
Yes. We have Ms. Pataki again queued.
Okay. Great.
Would you like to take the question?
Okay, Maja.
Ms. Pataki with Kepler, please go ahead.
Yeah. Thank you. So, I keep asking if no one else wants to do. Just a quick question. Can you quantify the Field Corrective Action? How much was it in Q4 and how much of that was in China? And then, thanks for the elaboration that VIDAS is going to be a higher throughput. But can you may be compare it a bit to your competitors? Are you going to be closer to the LIAISON XS platform and, therefore, the latent TB competition starts to level out a bit? And then, the third question would be, I mean, I do understand that it's difficult to pass on this amount of inflationary headwinds. But in which areas do you believe can you easiest increase prices? Would that be BIOFIRE or would that be in your other businesses? And then for now, lastly, do you believe that M&A is now more a topic for you to broaden your offering or do you think you're well-established to deliver attractive growth going forward?
I will start with the M&A question. I will leave Guillaume the easy questions. No, M&A, we remain active in M&A. We're also lucky enough that now we are a debt-free company, so we have room of maneuver. And we remain active to look at technologies or companies which can bring – which can complement our portfolio or, what we like in bioMérieux, also new or emerging technologies which have the potential to improve patient care and also lessening time to results, so we stay open. At the same time, I believe we have a very
[ph]
strong (00:36:32) pipeline. We have a healthy pipeline coming from our years of investments in R&D, but we'll stay open and pragmatic. Guillaume?
Yes, of course. So, your question was about the Field Corrective Action.
Yes.
So, the various Field Corrective Actions in Q4. So, the overall P&L impact is €20 million in terms of EBIT in Q4, so it's a mix of some
[indiscernible]
(00:37:03) that we had to make to some customers, some scrap, and also some replacement of VIDAS products by new ones. It's more difficult to assess on the sales part because not all the revenues, it's difficult to exactly catch. But I would say ballpark, it's about €20 million as well on the sales, and I just reiterate that it's fully sold. I think we manage it well. It was a difficult topic affecting all of the assays from this quality issue of the supplier, but we managed it well and quickly to replace. It's now fully resolved. And your question about the price increases, I would say that it depends on our position in every country and every, let's say, product segment which are very different actually from one country to another. So, I wouldn't say there's one major rule, rule of thumb that we can give. So, our general managers are looking and pushing and acting country per country and segment per segment.
Throughput to VIDAS.
And the VIDAS throughput?
Yes. Throughput will be higher thanks to scalability. I should note that, to be frank, I didn't compare to LIAISON XS this recent launch. We did it because we felt there was a need or a demand for higher throughput, and by the way both for clinical and industrial applications. But we follow our path there and didn't compare to XS.
Okay. And maybe just one more that came up. I mean, you have doubled your installed base in BIOFIRE, but do you have any visibility or data that you could share with us? How many of the 10,000-plus have gone to new customers and how many have gone to repeat customers?
So, on the year, on the US, additional installed base, what we can really follow, we have about 64% that was additional capacity with existing customers and 36% that were with new customers overall on the increase. And we gained approximately 200 new customers in the US. These were US.
So, the 36% new customers is US as well?
Yes.
Okay. And then, international is obviously mostly new customers?
Yes. Mostly, yeah. We don't have the precise measure, but yes, of course, mostly.
Thank you.
Okay. So let's move to a question from the chat. A question from
[indiscernible]
(00:40:24).
Yes. We will use some excess cash flow to buy back. So, we don't have- we do stock buyback but only to cover our, let's say, free share programs, the usual free share programs. But we don't do – it's not part of the company policy to do stock buyback just for
[indiscernible]
(00:40:54) of the shareholders. So, only to cover management and employees and talent free share program.
A question from Christophe Ganet. How much of the OpEx were used due to the pandemic context by 2021?
So, thank you for the question. I think we have commented a number of times that it was a very significant reduction, so several tens of millions on the different lines. Overall, we always mention travel, congress, marketing. But it's also impacting other lines; for example, clinical trials which is actually costing the R&D line were postponed due to COVID, with difficulties to recruit patients for some clinical trials. And that's also significant savings, full- year savings in a number of lines. What we have factored in our 2022 guidance is actually COVID becoming endemic, a progressive comeback and ramp-up of these costs in a view that we want to invest as Alexandre said for the future of bioMérieux, be it in R&D and clinical trials I just mentioned, be it also in commercial activities, more customer-facing, pushing our new products and new launches with our customers. So, that's all factored in this higher cost, very visible higher cost base in 2022 guidance.
Next one still from Christophe. What level of CapEx shall we expect from 2022 and 2023?
2022, we gave it. So, it's 11% of sales or around 11% of sales; it's not exact. And beyond that, I will say that 10% is a good overall benchmark over time.
And last one from Christophe. Do you have issue on supply chain?
So, supply chain, we have issues for the last two years with all the difficulties that you read everywhere with the ports being blocked, much higher cost of transportation. Of course, the big topic today is about the Russia-Ukraine topic, but that's a very small part of our revenues.
We can say it is intense but managed.
[indiscernible]
(00:43:23)
Yeah, yeah.
And the next question is about Russia from Thibault Voglimacci. So, what is the percentage of sales of bioMérieux in Russia?
Russia, for us, is less than 1% of the revenue of bioMérieux. But we have a strong team over there, and we are not present in Ukraine directly. We have a distributor.
And another question from Thibault. Can you be more specific on your sales guidance? How do you identify the low and high range?
I think I won't surprise you saying it's a very volatile environment at this stage. It was not even easy I would say to a give a range for this year. It will depend on hopefully moving into endemic, but we'll see what happens. I hope there won't be more variants. We'll see if we'll finally have a flu season next year which was not the case this year, so it's a bit of a volatile environment. So, this is – I would say, the projections that we are making at this stage with the visibility that we have, it's not so easy I believe for us and for the diagnostics industry to predict what will happen. But I would say in our view, this is linked to endemicity of COVID.
Question from
[indiscernible]
(00:44:51). Any reflections from the Field Corrective Action? Key learnings?
No new learnings, but that's part I would say of what we do in our industry. Sometimes we rely on some of key components or small components or substrates that we have to deal with. Key learning, I would say, first, maybe internally, it was well-managed internally this crisis because it was a crisis, but the idea was not to impact too much the customers or mainly the patient. But I would say that's part of our life, but it means we have a strong scrutiny on the different suppliers at different levels but also strong scrutiny on the quality of the raw materials that we use, but no specific learnings. Maybe Guillaume?
Yeah. Just to add, on top of what Alexandre said, we also had good management internally but also good partnership with the supplier, really good work together. And beyond that, we have a number of raw material that are on single-source. And actually, we have launched, but not from this Field Corrective Action. That's a decision we took more than a year and a half ago, a three-year plan to really manage the most critical single-source topic that we can have in our portfolio and to find risk mitigation actions that can be sometimes diverse, I think.
Next one from
[indiscernible]
(00:46:20). Why bother with
[indiscernible]
(00:46:22) guidance?
Why do we make even an earnings guidance? Again, as Alexandre said, it's a very volatile environment. And it's true that I think one of our competitors did not make any guidance. We thought about it, but we thought that the best approach, even though things are moving so frustrating so fast was to give you our best view as of today. And again, it's a very difficult exercise for us but we share with you what we see today.
Maybe we shouldn't have.
A question from
[indiscernible]
(00:47:07). The top line guidance looks quite conservative. To get there, we almost need to assume that molecular diagnostics comes back 20%, I'm guessing 20% of overall sales, and other lines 50%. Are these two divisions benefited from COVID? What about immunoassay?
Maybe if I can comment. Yes, of course, we assume BIOFIRE syndromic respiratory to go down. I think it's not a surprise. It shouldn't be a surprise to anyone that it was boosted by COVID in the last two years. Even though, again, it's syndromic, it's a product and a diagnostics product that goes beyond COVID for other viruses that would be used for respiratory pathogens beyond. But yes, so in 2022, we do factor also down about 25%, 30% of decrease of demand linked to COVID, decrease of demand on
[indiscernible]
(00:48:15).
A question from Thibault regarding M&A. Are you looking at new technologies and would you willing to use leverage like in the past like the BIOFIRE acquisition?
Yeah, yeah, we are, sorry. Yeah, we are open. Again, we are pragmatic. We are also entrepreneurial. We know when to take bets. So, yes, we'll use the tools which are keeping bioMéreux, of course, secured, but we look at different options. Yeah.
Immunoassay, the other question about immunoassay guidance and more details about the headwinds. So, just to re-explain immunoassays, so you know VIDAS is a low/mid throughput platform, so we are not fighting on the higher throughput part. On the negative, we have first the lab consolidation that is going on in Europe and in other parts of the world that, of course, when labs consolidate, they go to broader or bigger, let's say, common platforms with higher throughput. And therefore, VIDAS tends to be displaced because it's a low throughput platform. That's the first negative. The second big negative is
[indiscernible]
(00:49:34) in US and China. We were, let's say, kind of alone in the US until 2017. Competition entered progressively, so we have volume and price pressure over time on this parameter.
On the positive, we have, first, our innovation as Alexandre explained. We launched and will continue to launch new assays to complement our portfolio and increase our sales. One of the good examples recently was the latent TB with TB-IGRA launched in 2021. And the second positive is that VIDAS has strong positioning in emerging countries for labs where the broad menu on immunoassay and the low throughput is adapted, and of course that's a growing position. So, between these let's say two negative and two positive, we expect some let's say stability in 2022 and maybe a bit better in stability beyond that.
[indiscernible]
(00:50:41) productivity supports future growth. Are you able to quantify the incremental spend?
I can mention one element which is, because we talked so much about travel, marketing, congress inside of sales and marketing. If you take the midpoint of our guidance, it's let's say roughly, to give an idea, about €30 million of additional spend on this kind of nature of cost that we expect. And again, we believe these are important spend to fuel growth for the future and to push our new products.
Question. Can you comment on M&A?
Yes. Question, can you comment on M&A? Where do you see the future of diagnostics? What about
[indiscernible]
(00:51:25)?
Oh, how I see the future of diagnostics. I will say bright, I would say closer to the patient, and I will say also with a stronger impact on patient care. And I believe this is what COVID has demonstrated, I would say the value of diagnostic and also our job, us and the other players such as QIAGEN [00:51:47], that it will be our job to promote and defend the value of diagnostic. But no specific on QIAGEN to make.
Question from Hugo Solvet. PCT testing, when could we expect price pressure to stabilize or annualize?
PCT, I think there is still a trend at least in the US on price pressure. But when will it stabilize, I don't know.
Difficult to predict.
But as I said, there is less and less pressure I would say now that we have more competitors. So, we'll continue to see pressure, but I will say less and less impacting than it was the last two years.
Still question from Hugo. The split of BIOFIRE sales between US, Japan, and Europe.
So, we gave US/non-US, which is 73% US and 27% non-US. We have not split the non-US between Europe, Japan, LatAm.
But I believe we said that Japan has become number...
Number two.
...number two market for us, also linked to the COVID-19 crisis. But end of last year, I believe it was number two country for us.
And your sales on VBP from China?
So, we have not had – so VBP is volume-based procurement. Some of you know that this was a new way to buy in China. That was tested in one province, Anhui Province in China that went through with pretty major price decreases, around 50%. It's a very small province. Hybiome, our local immunoassay company participated. We don't see any, let's say, extension or, yeah, actually rollout of this kind of policy to any other province yet. And immunoassay might be, compared to pharma, a very small market and complex to organize for this.
Coming back to price question but this time on
[indiscernible]
(00:53:57). Are you seeing any moves on RP and non-RP panels, continuing price pressure?
To be frank, not so much in the recent context. We cannot say there was intensified pressure both commercially I would say on price.
Any update on specific date deployment?
We started the co-distribution in September I guess, so we are still in a phase where we are I would say promoting and doing some pilots on this evolution of technology which looks quite interesting seen from a customer perspective.
Coming back to
[indiscernible]
(00:54:36). So
[indiscernible]
(00:54:38) you already answered
[indiscernible]
(00:54:40). But how do you think the current prices can impact the business?
Difficult to predict. It will depend on the embargo conditions, but we are there to serve the big clients, so we'll adapt I would say. But then again, very difficult to have a visibility on this very tough situation.
Are there questions on the line?
Yes. We have one more question from Maja Pataki with Kepler again. Your line is open.
Yes. Just a quick follow-up on that. I couldn't really understand. The VITEK MS PRIME, when are you expecting the US launch? Is it 2022 or 2023?
Sorry, Maja. We had a short disconnection, so can you repeat your question?
Yeah, sure. The VITEK MS PRIME launch in the US, is it 2022 or 2023? I couldn't acoustically understand it.
We expect it to be in 2022. But to be frank, there is some – FDA is quite busy, so there's some backlog linked to COVID. But our expectation is for 2022, but it's difficult to talk for now.
No, of course. But let's start with the expectation and we'll see where it comes in.
Expectation is for 2022.
Okay. Perfect. Thank you.
Maybe a last question from the chat, QIAGEN.
Yeah. We have a question on QIAGEN and the rumor that we had last year. So again, we have said already that we don't comment on rumors. Always the same, let's say, rumors on the big usual suspects. The industry has not many companies of size and mid-caps, QIAGEN, DiaSorin, bioMérieux. So, no special comments.
No more questions from the chat. Is there any questions from the call?
There are no further question on the phone.
So, I think we can end the call right now if there is no more question, okay?
Thank you very much.
Thank you very much for your participation and attention. I'll just remind you that the next release will be on April 27 concerning our Q1 sales performance.
Thank you very much indeed for your attention. Bye-bye.
Bye-bye.
Thank you.
This concludes today's call. Thank you for your participation. You may now disconnect.