Biomerieux SA

PAR:BIM

Good day, and welcome to the H1 2024 Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Aymeric Fichet. Please go ahead.

Thank you, Jennifer. Good afternoon, everyone, and thank you for joining us to review the bioMérieux for this H1 2024 finance performance review. I'm in line with: Pierre Boulud, CEO; together with Guillaume Bouhours, CFO.

Before handing the call over to Pierre for preliminary remarks, please note that this conference call will include forward-looking statements that may change or be modified due to uncertainties and risks related to the company's environment. Accordingly, we cannot give any assurances as to whether we will achieve these objectives.

I also remind you that today's call is being recorded and that a replay will be available on our website www.biomerieux-finance.com.

I'll now hand the call over to Pierre and then we will open the call to discussion and questions. Pierre?

Thank you, Aymeric. Good morning, good afternoon, everybody. So welcome. The agenda for today, I'll start by sharing with you a quick reminder on our GO•28 plan. Then we'll go through the business highlights for the first half of the year. I'll hand over to Guillaume, who will share with you the details of the financial performance, and I will close the first part of the call on the business outlook, the perspective for the full year 2024, so that we can open for Q&A.

Aymeric has already shared the disclaimer on forward-looking statements. So if we move directly to the GO•28 strategic plan that we shared with you on April 9. A quick reminder on the 4 pillars that we shared with you.

First pillar relates to going for growth. So the sales growth ambition that we have for the next 5 years. The second dimension relate to our cost of goods and operational efficiency improvement. The third pillar relates to our teams and the engagement -- and the engagement of our teams and the enhancements of our operating model. And finally, the CSR agenda that is part of our GO•28 strategic plan going responsible.

These numbers, what this plan is all about is delivering a profitable and sustainable growth. So we've indicated an ambition target of growing 7% year-on-year organically in the years to come to also generate an improvement of at least 10% of organic EBIT growth at constant exchange rates, allowing us to reach 20% in 2028. And why we maintain investments for the future in results and developments at 12%, we will keep strengthening our cash flow generation.

So we do with 10. Obviously, we'll spend some time on the numbers today for H1. But super high level, the sales growth ambition, H1 is showing very good traction with 10% sales growth versus 7% annual guidance. And this 10% sales growth comes together with also product launches in Q2, SPOTFIRE for source roads, both 5-plex and 15-plex. And VITEK REVEAL, being approved by the FDA in the U.S. So additional growth drivers moving forward.

Growing Simple. We have made significant progress with regards to COGS improvements. We have 3 examples here that we wanted to mention BioFire automation moving forward with the Phase II of the automation for respiratory panels now in place. Internalization of Vidacare manufacturing, also delivering cost improvements and value molecule in-sourcing for BIOFIRE is also getting started.

With regards to going stronger, we have conducted an internal engagement survey. That has demonstrated a super high level of employee engagement, very glad to report that back. So I is are fully engaged with a good ambition. And the Board that we had yesterday approved the alignment of the long-term incentive plan together with the GO•28 targets.

And finally, on the CSR part, we are on track to reach the 2024 CSR targets. And very quickly on this one, as you know, there is a set of indicators. We've just highlighted 3 here. Greenhouse gas emission. We have reduced as of June 2024 by 14%, cleanout gas emission versus 2019, very much in line with our objective for 2024.

We have a diversity ambition in terms of gender diversity. We are also improving and very comfortable with the ambition for 2024. And finally, at the of BioMed business model, obviously, making sure that we provide more results supporting antimicrobial ambition, significant increase, very much in line with the 2024 ambition.

So overall, very much in line with our GO•28 targets, but I think it's a good moment now to deep dive into H1 performance. So I'll share with you the business highlights.

Sales growth, as you've seen, H1, we are posting 9.9% sales growth, very much driven by a good '28 growth engines, BIOFIRE, nonrespiratory panels; SPOTFIRE, microbiology and industrial applications. Altogether, they are growing 11.4%, so faster than the rest of the franchises. As Guillaume will come back to that, is significantly telling 20% like-for-like to be compared with a 10% sales growth twice as a robust performance, however, negatively impacted by foreign exchange headwinds, EUR 44 million.

And finally, I said a word about it. We have launched new products to support the growth for the future. So codeine is obviously a significant progress in terms of complementing offering in point of care. VITEK REVEAL being now available in the U.S. and Proxim brain injury on virus. All 3 are now available in the U.S.

So if we go into the different growth engines. The first one, as you all know, is nonrespiratory panel. We are very glad to report H1 sales growth of 19%, which is significantly above guidance for GO•28, which is at 10%. As we shared during the Capital Markets Day, what is supporting this sales growth is on the one hand, a cross-selling effort, which are further increasing since December 2023. We have now 50% of the customers, 2 additional percentage points using at least 3 panels worldwide.

We have also increased our installed base with customer expansion. We have managed to have 700 new instrument installations in H1, which is striking that it's similar to H1 2023. So a very strong competitiveness for either new customers or customers that increase their capacity.

And finally, we keep internationalizing the sales outside of the U.S. As you know, historically, it was a 20%, 80% kind of split. We have now 40% of the installed base installed outside of the U.S.

The second growth engine is SPOTFIRE. As you all know, we are still on track to reach a EUR 80 million sales target in 2024. I won't comment on the whole slide, but the big news for us is as planned, the approval of the respiratory sourced panel, which allows to now detect rep, which was missing in our panel is also bringing to the market with SPOTFIRE not only nasal swab, but also a throat swap, which is a little bit easier to use. Both available in 5-plex, so mini panel and 15-plex. So we are very happy also in terms of timing because it's coming perfectly on time to prepare for the respiratory season that is coming '24, '25.

We keep growing the installed base. We have now close to 1,500 instruments installed in 1 year, 250 in Q2. And the reason sales are very well balanced between 15-plex and 5-plex, a question that we've had in past Q&A, which is actually 50-50, the split between 15-plex and 5-plex.

Final piece of good news on SPOTFIRE is the commercial element with McKesson is now running full speed. They are dealing with what we call pure point of care, while we are doing direct sales for the hospitals. We are also seeing very good traction in Japan, which is a market for point of care. It's now 15% of the installed base. And SPOTFIRE is available in 16 countries in most geographies.

Microbiology, very strong performance in H1, again, 9% ahead of our expectations, to be fair. We were expecting 6% to 8%. The growth is not only driven by volume expansion, but we keep increasing pricing. So pricing power is delivering again in the first half of 2024. And we have a similar price increase in the first half of 2024 with 4% that we had in 2023.

VITEK REVEAL, you already commented, was approved, and we are now in a commercial launch. And finally, VITEK MS PRIME that was launched 18, 24 months ago now is still ramping up with more than 500 instruments in the market.

Finally, industrial applications, facially little bit on the low range of the target with 7% growth in H1, where we have a good '28 target that is a little bit higher. However, our reagents are growing very nicely, 11% or a little bit soft on instruments in the first half.

Very good traction in the food segment, which was lower in the first half of the year and very good price increase, strong testimony to the quality of the solutions and the efforts made by the team with 6% price increase in the first half of the year.

If we go to the next slide, there are 2 additional segments that are not growth driver, but we want to obviously comment to share with you the objectives for H1. Respiratory panel that was expecting to be relatively flat, slightly decreasing, has been growing 14% in the first half of the year. Super impressive performance, definitely leveraging the installed base and we are by far the market leader also demonstrating -- I mean, as you all know, it's by far respiratory final panel where we have the most intense competition.

So in the context of the relatively strong epidemiology season, we -- I think we demonstrated in the first half of the year, the very strong competitiveness of our BIOFIRE system. And we have posted very limited price erosion, which again is a testimony to the competitiveness of the solution.

Immunoassay is probably the one that is softer. It's been the case in Q1. Q2 is slightly better. But as you can see, the low recover from low Q1. Still working on the launch of the new instruments, the next generation of the increment VAC, still working and complementing the portfolio with traumatic brain injury, but we don't see the traction yet, and we're seeing a bit of softness on bids.

And with this, I'm happy to hand over to Guillaume, who will go a little bit more granular on sales and on financial performance.

Thank you, Pierre. Hello, everyone. So maybe kind of a recap overall on what Pierre commented on the trend by range. So overall, you see here how the split of the 1.9 million, EUR [ 1.25 ] billion sales of H1 and 10% organic growth looks at at the group level. So overall, when we take BIOFIRE overall be it our on-port this overall range is now close to 40% of group sales, very close to 40%. I will not, let's say, recomment on RP at 14%. Non-RP continuing to be super strong at 19% and SPOTFIRE on track with EUR 33 million sales in H1.

Microbiology is obviously our second range, contributing to 33% of the sales. As Pierre mentioned, the 9% growth is actually 13% on reagents and some, let's say, softness on the equipment. And overall, important to resay that on the price increases, we were able to pass about 4% still in H1 on the microbiology ranges overall.

Immunoassay are now only representing 9% of group sales overall. Industrial Applications, same effect of stronger growth -- organic growth of 11% on reagents and softness on equipment is a bit more of the same as what mentioned for microbiology. And as Pierre mentioned, it's good to highlight again a super good performance on the price pass-through at slightly above 6% actually.

So with that, maybe if we look at it by region. So these are the major regions. So overall, Americas total is a 13% growth. You see slightly above 50% of Biomer sales overall. North America was 10% organic deficit driven by BIOFIRE respiratory and nonrespiratory performance as well as industrial applications.

Latin America was reported at 35% growth. This overall organic growth is boosted by the fact that we have price increases in Argentina to offset or to compensate for the significant currency devaluation. Without this effect, LatAm is actually at plus 11% over H1. And I mentioned that because we'll come back on FX and including -- especially Argentina.

EMEA overall, at 9% organic growth. As you can see, definitely a great performance on BIOFIRE non, on BIOFIRE respiratory as well as a solid performance on microbiology industry applications.

Asia Pacific is at 4% organic growth, so slightly lower than the other regions. China, which is, of course, our first country and based in Asia Pacific is doing very well, actually above the region average. India was on a high base last year, so is actually slightly negative but on a higher comp base from last year.

Japan is doing very well. And industry is a bit softer and maybe a bit difficult in this overall figure is actually negative in Asia Pacific. With especially the FX may be stronger in Asia Pacific of equipment sales softness.

With these comments, I propose we move to the P&L. I will comment mainly on the last column, which is the organic change on the P&L. So like-for-like at constant exchange rate and constant perameter, even though parameter-wise, we don't have a major effect.

So with the 10% organic growth on the sales, you see that we are able to deliver 12% organic growth on gross profit. So it reflects the fact that gross profit margin on a constant rate basis improved by 100 basis points. Thanks to the price increases that we mentioned earlier, especially on microbiology and industrial applications and as well a favorable mix effect, which includes the, let's say, quite obvious effect, less equipment, which have less -- lower margins on sales of equipment and more reagents in the overall revenues, so favorable mix effect.

Now moving to SG&A. You can see that the whole line of sales, marketing and general and administrative costs are up 9% on an organic basis, and this mainly reflects the investments in our sales forces as well as in our marketing and marketing capabilities overall to support GO•28, obviously.

R&D, plus 6% on an organic basis, and you see that we remain at, let's say, solid 12.7% of our sales invested in research and development and innovation powerhouse, as we said, in GO•28.

So with that, overall, our contributive CEBIT is spend at EUR 306 million for H1, 16% margin, but actually a 20% increase on an organic basis versus H1 2023. So significantly above our guidance, let's say, in the growth of the CEBIT as well as the organic improvement of CEBIT margin, which is 150 basis points.

There comes the negative exchange rate, and I'll come back and zoom on this negative ForEx impact of minus 44. And despite this minus 44 CEBIT on a reported basis, is up 5% overall in H1.

Below CEBIT net income. We have -- the main effect to comment is actually on this line of amortization of intangible assets pretty simple. Last year, this line was heavily impacted by the write-off of the evaluation of Hybiome acquisition, the Chinese immuno company. And now this line is coming back to, let's say, the normalized level of recurring depreciation of intangibles at minus 18%.

Net financial expense is slightly more negative than last year. We had some, let's say, favorable one-off on the hedging of internal cash positions that we had last year and we don't have this year. And income tax is, let's say, excluding the effect last year of Hybiome write-off is very similar around the 24% effective tax rate. So with all of that, net income at EUR 215 million and up, including everything, up 33% versus last year.

Let's move to the cash flow statement. Our EBITDA stands at EUR 424 million, 22.3% of sales and actually up on a reported basis, 8% versus last year. We had a working capital consumption of EUR 107 million, mainly driven by a further increase of our inventories in H1.

Why do we increase inventories? Because first, we need to build up -- continue to build up some inventory for new instrument launches, especially for SPOTFIRE. And also on the reagent side, we need to support the growth of BIOFIRE regions on non-RP, nonrespiratory panels, as well as building the inventory for the coming winter season that will, let's say, start from November, December for respiratory panels. So okay, the seasonal effect on top.

Receivables, we're pretty good and especially on the U.S. collection of Q4 last year sales. On the CapEx, so investment line, you see we are EUR 147 million, 8% of sales in we mainly invested in our U.S. manufacturing sites to increase capacity and automation.

Just to remention that Pierre highlighted that we have validated the Phase II of the automation steps of the BIOFIRE respiratory reagent manufacturing, and we will invest now that it's validated in the deployment of automation capacity for this in the coming years. We also invest in the new placement of instruments, especially SPOTFIRE as, let's say, the point of care segment is traditionally more replacements.

So overall, free cash flow of EUR 50 million, significantly better than neutral last year. And the net debt position for bioMérieux at EUR 286 million, which remains very low overall 0.3x EBITDA for the group.

Specific side, we wanted to, let's say, zoom in a bit together to try to give you a bit more, let's say, color as we can on this, let's say, complex topic of foreign exchange impact. So just to split the EUR 44 million negative FX impact on CEBIT in H1 can be split in 2 categories.

The first category is on hyperinflation countries. And there, we specifically account for Argentina, Turkey, and we also included Egypt and Nigeria. So 4 countries, only these 4 countries. And the rest, so all the other countries of bioMérieux exposure accounts for EUR 23 million, as you can see at the bottom.

Now when we zoom in on the hyperinflation currencies. The very good news is that we are able to increase prices in those countries to compensate for the local hyperinflation and going with it, of course, the huge currency devaluation.

What impact does it have in our accounts? So first, these price increases mean that we have very strong positive impact on the top line sales organic growth as well as the organic. So same constant rate CEBIT growth in our accounts. It also means that then when we look at the foreign exchange impact, we have a very negative impact due to the devaluation in those countries, and I'll come back with an example.

And, let's say, the rate of good news is that when we look overall, with a plus of the price increases, the negative of the cost and the currency effect, we are able in those countries to report and tell you that we have a neutral net impact on the reported segment. So I will not go into all the calculation below, but we wanted to give you all the figures.

But if you see the illustrative example on Argentina, typically, it means that on an organic basis, we are able to increase prices, representing EUR 31 million, and you have the figures for this example. The CEBIT on an organic constant rate basis is up EUR 13 million. But then we have a very massive negative effect in foreign exchange, minus EUR 13 million. And the net is actually 0. So reported CEBIT was EUR 4 million last year and EUR 4 million the year after.

Last comment on EUR 23 million or from the other currencies. What do we do? So first, we increased prices also when we can in those countries, especially as we highlighted before, micro and industrial applications. We try to have some localization actions and we can mention China, where we have a new plant for back bottles. Japan, where we have a repair center for BIOFIRE instruments. And of course, most importantly, we work and to drive organic growth overall of profits in those countries.

And with that, I hand over back to Pierre.

Thank you, Guillaume. So 2024 outlook. As you could see in the press release, we have decided to review our guidance. So on the right-hand side, you see the initial guidance. On the left-hand side of the slide, you see an updated guidance.

So we are comfortable based on the H1 performance, based on the innovation launches that we've done to forecast between 8% and 10% sales growth organic for the full year 2024. Profitability improvements, building again a very strong achievement of H1 and the good progress of GO•28. We review it upwards between 12% and 17% increase contention rate.

Unfortunately, as Guillaume was explaining, and as you could see in H1, EUR 45 million already in H1 of exchange rate impact. We have reviewed at also the negative impact of exchange rates to EUR 70 million.

With regards to capital expenditures, we are reviewing carefully the progress of the investment that we make. And we are now in a position to say that the 10%, 11% that we were giving is probably going to be between 9% and 10% for the full year 2024.

Final slide before we open for Q&A. Qualitative slide but just to share with you very comfortable with where we stand. As you could see, our growth engines are delivering, growing 11.4%. As you could see organic profitability improvement is very strong at the end of H1, 100 basis points.

We are also very satisfied with the corporate social responsibility progress that we are making with clean out gas emission reducing by 14%. And obviously, we've launched GO•28 plan in April. So we are very much in the process of deploying the different actions and initiatives that we are going to deliver in the next few months. But I'm glad to report back that 75% of the GO.Simple initiatives are already started that we benefit from a very high employee engagement levels I shared with you a few minutes ago, and innovation powerhouse is not slowing down.

We keep delivering. And as you know, we give you visibility on what we expect to deliver in the next few years, very much in line with our plans to keep bringing innovation into the heavy market to support our growth and profitability ambition in the next few years.

And with this, hand over to Aymeric to the questions.

Directly to the question. Jennifer, if you want -- if you can open the question session.

[Operator Instructions] We'll go first to Hugo Solvet with BNP Paribas.

I have 3, please. First, on the growth guidance. When we look at it at constant exchange rates, it implies actually no margin expansion in H2. So could you please discuss the moving parts behind that? And what would basically hold back margin progression in H2? Or is it just conservatism from your end?

Second, on SPOTFIRE, there is still EUR 47 million left to deliver for you to achieve your '24 target of EUR 80 million. So should we think about phasing in Q3 and Q4. I guess everyone would be interested to see if it's possible that you deliver another quarter of below EUR 20 million, which you had in Q1. And also within that target, can you give us a bit more detail on the expected contribution from Maison.

And lastly, on respiratory season, have you seen any impact on your sales in Q3 from the few COVID wave and a quick word on current trading would be helpful. What's reflected in your guidance in terms of intensity of the flu season.

So maybe, Guillaume, you start with the first question on CEBIT growth for H2?

Yes. I understand -- if I understand well the question, it's about comparing the margin of H2 versus H1. So yes, we saw this and actually really looked at it and recalculate. It's a bit technical, but it's back to FX. Unfortunately, it's linked to the effect you see -- you might see if you do only constant rate calculation in H2 that seems lower in margin than H1.

Actually, I think it's a technical effect due to average rate of the period H1 or H2 versus average rate for the year. When we look at it, they're looking at it at current rates or even at our, let's say, internal budget rates. H2 margins are the same in our forecast than H1.

Just a quick follow-up, sorry, on that. That means virtually you're expecting 17% margin at constant exchange rate on my math in H2, which is no margin extension, H2 '23 -- HS '224 of H2 '23. So just wondering what would about the margin here, excluding FX.

Sorry, on H2 '24 versus H2 '23 at current currency, right?

Yes.

You will recall. But for me, we are expanding the margin on an organic basis, of course -- there will still be some expansion of margin in H2 '24 versus H2 '23 in our forecast.

Your question on SPOTFIRE. So as I said, we have complemented menu on SPOTFIRE. We have now 4 panels, respiratory 5-plex, respiratory shift impact, so Rodelle. Our commercial setup is in place with McKesson in the U.S. so that the teams of Madison are working together with the teams of bioMérieux.

Q2 is a very low quarter in many regards for obvious reasons because there is very limited respiratory season. So it's the end of the respiratory season. It's usually a weakest quarter in terms of installations, in terms of sales.

So what we're actually seeing is strong summer, and we are very comfortable with confirming our target for EUR 80 million because in Q4 -- I mean, Q3 and mostly in Q4 talking about phasing, you will start to see the respiratory season ramping up. And obviously, our installed base in Q4 '24 is going to be significantly bigger than what we had in Q4 2023. So that -- yes, that we expect Q3 to be better. Q4 to be even better because it's mostly respiratory, so to reach EUR 80 million target for the end of the year.

And last question on epidemiology. Actually, we're seeing a respiratory season that has been relatively strong this year versus 2023. 2023 was actually very high in December, January, but then fell in February, march. And we are seeing a good dynamic that fully translate in respiratory again 14%. And actually, what we're also seeing, which is not reassuring, but which is confirming what we've been seeing in the last few months is the traction on respiratory panel doesn't come at the expense of SPOTFIRE. They are very complementary segments, and they are both doing very well. I hope that answers your question.

We'll go next to Maja Pataki with Kepler.

I have two, please. One on BIOFIRE. You have remarkable results in Q2. I was wondering if you could share some feedback from your sales in the field whether you can see the step-up in competition in the U.S. with your competitors are now offering also additional panels and DiaSorin in the market with respiratory? That's my first question.

And the second question maybe it's a bit of a weird question, but I'm nevertheless surprised that in Q2, you did not manage to place more SPOTFIRE instruments given the fact that you're in a ramp-up phase. I understand the seasonality impact and everything, but it's not like you have a very mature position in the market already.

I guess there are a lot of people you can be talking to. Is it that people are just -- or the hospitals are just not doing the investments right now? Or how do I think about that?

Let me start with your first question, BIOFIRE. I mean, like you, we are hearing a lot of the competitive noise, right. And like you, what we're seeing is a very strong performance of BIOFIRE. So it's probably early days to assess the impact of DiaSorin launch or GI panel in the U.S.

What I can say on the other side is we are still getting very positive feedback on the competitiveness of our solution. And what I can say is when there is a pendemiology, they are massively using our solutions. And what I can say is as I shared earlier, we managed to install as many instruments in H1 as we installed in H1 2023.

So until now, we don't see a massive disruption from a competitive perspective. That's the way I would say it. And of course, we're watching it and we are looking at it, but we don't see it.

The second question on SPOTFIRE, it's not a weird question. It's a good question actually. Yes, the number of installations in Q2 is lower. It's actually very consistent with what we expect. Q2 bioconstruction, the market is slow. So even though we believe we have a very attractive offering. There are very few clinic that equip themselves with respiratory instruments in Q2. They are just exiting the respiratory season.

So the installation come back, especially -- I mean as you can hear with my French accent, we are not a -- I'm not a U.S. citizen, but with the go back-to-school. It's really starting in August, September and Q4. Why we had maybe a lower level of installations. We keep building a very strong pipeline for '24 and '25.

So it's not for us a red flag or even a yellow flag. It's just a normal process. And as I said earlier, very aligned with our plan and is very comfortable with a target of EUR 80 million sales by the end of 2024. In the summer in station, even though we're commencing Q2 the summer installations are Q2, which is what is quite expected.

We'll go next to Aisyah Noor with Morgan Stanley.

Aisyah Noor from Morgan Stanley. I had 3 questions. My first one is on microbiology. Are you able to confirm if you want additional share of TEC placements in the quarter due to the competitor supply shortages and has this impact, if any, continued into September?

The second question is on the Industrial business. So some of your peers have seen a slowdown in order trends from large pharma companies in the quarter. And I noticed your equipment growth was down 17% in the first half of the year. Just wanted to know if you see any signs of slowdown or R&D budget tightening in the pharma segment of your industrial business and whether you've had to take lower pricing or discounting in this segment in the period.

The third one is a bigger picture question on 2025. I appreciate it's early days, but if you think about the positive market dynamics you're seeing right now, 14% respiratory sales is quite extraordinary. Pricing growth of 4% is quite strong and your new sales guide implies you will exit the year at around 9% organic growth, which puts you well ahead of this GO•28 target of 7%. Which of these elements do you think are sustainable into '25? And could we be looking at a similarly elevated growth for next year versus the midterm target?

Sure. Thank you for your questions. So I'll start with microbiology. So yes, as you point out, we have a competitor that has been dealing with supply chain challenges. Obviously, we have been confronted with that. we share actually a supplier for our robots in blood culture. The benefit that we have is that we have multiple shopping. So we have additional vendor help us to cope with the demand.

As we shared, we have a very strong dynamic. So we are -- and we've confirmed that with other clients. We are in a position where we can definitely supply the increased demand that we are seeing. And we are watching the situation to make sure that we don't put our customers at any point in time at risk. Very -- on our side, we are very comfortable with the capacity to supply the customers.

Industrial Applications, yes, we've -- I mean, to your point, we've seen a little bit of a slowdown in pharma. We had a very, very strong performance in 2023. There is a little bit of a big impact, but we are seeing a little bit of a slowdown. It shows in instruments. As Guillaume was mentioning earlier, we see a little bit of softness in instruments overall, not only pharma.

And we are seeing good traction on reagents, including in pharma. So to your question, we don't anticipate a massive significant slowdown that would be noticeable to you guys for our pharma applications.

And third question, that's an easy one 2025. Obviously, it's very early days that you point out. We've just communicated our GO•28 ambition in April. Very glad to report back a very strong H1. And I mean it will be definitely anticipated to make any change to the GO•28 commission. But let's say, we start with strong foot in the right foot to be able to deliver the ambition that we have.

We'll go next to Kavya Deshpande with UBS.

This is Kavya here from UBS. I've got two, please. The first one was just on the share of SPOTFIRE installations this quarter by setting. I think in Q1 that you said it was 75% of installations were in outpatient sites. Would you be able to provide a similar update for this quarter by insurance?

And then my second question was on the VITEK REVEAL. I was just wondering if you could give us a sense of how you're going to be approaching distribution, please? Whether you'll be leveraging your existing sales reps? And any kind of update on the early demand that you're seeing?

So can you say -- can you repeat your question on SPOTFIRE? What was your question exactly?

Yes, it was just the percentage of installations that were in outpatient settings this quarter. I think you said in Q1, it was 75%.

So I'm not sure we share that level of detail. But overall, we still have a blend of outpatients, and we still -- I don't know if it's a majority, but it's actually very well split between pure outpatients and lab settings. So no significant change in Q2. And again, Q2 is a bit of a long basis for -- because we have fewer installations. But it's -- more general answer to your question is we're still seeing an opportunity for SPOTFIRE in both segments, point of care and decentralized setting within the posture.

On your second question for VITEK REVEAL, it's actually a beautiful complementary solution into a microbiology. So we definitely want to leverage commercial go to market. It comes together VITEK REVEAL with VITEK MS PRIME with Vertex with VITEK. So it's very much the same team, very much the same marketing and the overall plan as we are launching is to leverage the resources that we have already in place to market the product in the U.S.

There is a recent question?

Yes. Jennifer, there is a written question. So from Arnaud Cadart, from CIC? So 1 question, please, on the audit, you are running on the U.S. activities, what is the problem and what should we expect management changes more process. I don't know, Pierre?

Yes, I can this one. Happy to take it and to give a little bit of color and context. So during the summer, while we were closing our accounts in the U.S., we have identified internally shortcomings on internal control and compliance matters. So we trigger immediately internal verification obviously, for obvious reasons, but also in the context of the closing of the accounts.

We have identified only nonmaterial impacts on midyear accounts. They have been fully integrated into our financial statements, and they were obviously reviewed by external auditors. So moving forward, while we -- the internal investigation are ongoing. We feel confident enough to revise the group guidance upwards as we just commented and stated in the press release.

And overall, I should say, in a spirit of transparency and trustworthy financial communication line with our shareholders, which is very much in the DNA of bioMérieux, we felt it was appropriate to mention it. So obviously, no comment on what we should expect because we need to run those investigations.

Are there other question?

No return question. Maybe one on VITEK REVEAL. You gave a bit of an update on here, but it's -- the question is would you confirm the P&L you are expecting for VITEK REVEAL following FDA decision i.e., EUR 20 million losses and equity bream in 2026.

What I can mention we don't follow a gene for REVEAL. What I can mention is we continue to invest in this solution. And yes, the EUR 20 million is approximately the amount of R&D that we spend to continue to support and develop the fast solution. We are very glad to have the FDA approval this year, which definitely opens the full U.S. market, of course, being the main one for this solution, but it's just been opened now for commercial launch. So we'll see how we developed.

We have given a target around EUR 60 million in 2027 back at the Capital Markets Day for the sales, let's say, ambition.

Any other questions from the call?

Yes. We'll go next to Anna Bain with Barclays.

I'm being with Barclays on behalf of Gaurav. I guess, if we could just stick down a little bit in terms of business lines, previously, you were guiding to comparator panels being slightly down this year and nonrespiratory by fire panels being up 15%. Just wanted to confirm whether the bulk of the upgrade of your guidance was being driven by biopharma.

And additionally, within industrial applications, your previous guidance of 9% growth this year, is it fair to expect that you're now looking at a slightly lower growth level this year. That would be my first question.

The second question really around price increases in micro and industrial. You've obviously continued to have prison pricing here. I'm just wondering how sustainable you limited into the end of the year and into next year.

So on guidance by the business line. So basically, our upgrade, and I think we mentioned it in the slide without being resetting each of the different guidance, but we said where is the upgrade to 8% to 10% coming from? Obviously, as we said, we are surprised by the very good performance of RP beyond our expectation for this year. So definitely respiratory BIOFIRE, we see today higher than we thought a few months ago.

Second, nonrespiratory as well is performing very well and slightly above expectations. Remember expectations for the year were around 15%. We are significantly above. Microbiology, as Pierre mentioned already, we are also slightly above expectations. These are all positives.

We should mention also a negative, VITEK, we had said that we would be flat. Now we see it probably slightly negative for the year. So VITEK the immunoassays for everyone. And it's a blend of all these slightly better on those and just a small effect, but immunoassays make this upgrade to 8% to 10% range for the organic growth.

Second question was on prices?

So the second question, can you say again what was exactly your question on industrial application in...

Yes, it seems like micro and industrial, we've continued to see quite strong pricing dynamics. I'm just wondering how sustainable you view this through the second half of the year and into next year. And maybe if I could just tag on one more. Respiratory pricing, I think that's also held up pretty well and being pretty strong fee by for sort of any thoughts around how you expect respiratory pricing in molecular to evolve going forward, especially given sort of increased competition would be great.

Okay. On the micro and industrial application prices, I would say, at least for H2, we see, let's say, similar trends to be pursued. And on the respiratory pricing, I can mention that we said slightly below 1%. So let's say, close to 1% negative overall.

Even the U.S. alone for RP is about -- is between 1% and 2% negative, so -- which is basically what we were saying for already several times. So it's similar, not less, not more. Yes.

We have time to take more questions.

And we'll go next to Jan Koch with Deutsche Bank.

I also have two, if I may. The first one is coming back to your new guidance, which implies a deceleration of sales and adjusted EBIT growth in isn't that your typical convertism or is there anything we should consider here?

And then secondly, on the increased FX headwinds to earnings. It seems like the situation doesn't really improve. Are you willing to exit some of your smaller countries where you faced hyperinflation such as Egypt? And I understand that your margin profile in Argentina is quite attractive. How attractive is it in other countries where you're facing a high inflation?

And then lastly, on M&A, there are some concerns in the market that you could go for a bigger acquisition in an area where you currently do not yet operate in. Could you remind us of your M&A criteria? And what exactly are you looking here for?

Okay. Thank you. So I'll start with your first question on the new guidance. I won't qualify a level of conservatism. But what we need to understand is that H2 is very much impacted by the risk respiratory season. We have a significant share of our sales that is impacted by the magnitude of the respiratory season.

And as I was sharing earlier, actually, November till January was very strong last year. So it creates a bit of a baseline that is a bit of a comparison factor. And we assume a normal respiratory season for H2. So obviously -- and that's why we give a range.

If the respiratory season is stronger, we would be in the higher range of the range. If the risk area season is longer than the normal season, which honestly at this stage of the year is possible, we would be in the lower end. So that's the way we approach it.

And you have to take that into account significant sales in Q4 and actually to be it's even in a way, even more painful. It's really November, December, that is moving the needle in terms of sales dynamics.

Second question on FX headwind and consequences in terms of geographic footprint, Guillaume?

Yes. On hyperinflation. So for us, it's important that we monitor that closely. It's important that we are able to -- especially on the hyperinflation countries, to actually be able to increase prices to offset the local cost inflation as well as the imports from our U.S. and European plants or products, which, of course, are much higher locally with the devaluation.

So that's why we monitor as long as we are able to, let's say, compensate and therefore, maintain overall, at least on a reported basis, a profitable business, we will maintain. But again, we keep open eyes and open mind. If there is a country where we see that it's not possible to actually have a reasonably profitable business, we could take other decisions. But at this stage, nothing to report in this category.

And on your third question on M&A, obviously, was a little bit challenging to comment on the M&A agenda in a public call. But I understand your question, we have a very ambitious strategic plan, as you know. So obviously, we are looking at any M&A opportunity in the spirit of it needs to make sense from a strategic perspective as in the spirit of what we described on April 9.

It also needs to make sense from a financial perspective. Impact on our sales growth, impact on the profitability impact on our debt level. So those elements are definitely in our mind. And this is pretty much where we are. And maybe just to add to that in the spirit of what I said because we had a little bit of a question on April 9, as the CEO of the company, my very first priority is to execute properly GO•28 plan.

So no -- I mean, I'm very happy to look into M&A opportunities, if and when they contribute to both what we want to do from a strategic perspective.

We'll go next to Marianne Bulot with Bank of America.

I have two, please. The first one is I just wanted to check that your midterm guidance of at least 10% EBIT growth is still valid for next year? I'm asking simply because you raised the guidance for this year, so it makes it a bit of a tougher comp for 2025.

And then the second question, I just wondered if you could talk a little bit more about the SPOTFIRE opportunity in Japan? And what are the expectations you have for this market?

Guillaume, you want to talk about the first one and the guidance, at least 10% for 2025 of the years to go?

Yes. And again, it's our commitment to go for this at least 10%. So we do confirm, of course, year-on-year improvement that we will target. So you're right, we'll have a higher basis and we're still committed to deliver at least 10% year-on-year.

On your second question on Japan, good question. It's actually -- it's probably the second biggest market in the world for point of care. There is a point-of-care market, which is reimbursed, which is organized. So -- and we were -- I think it's fair to say that our teams have been very successful in getting both BIOFIRE. By the way, for BIOFIRE, Japan is the second biggest market after the U.S.

We've been very successful in getting SPOTFIRE approved for respiratory, not yet source route. We are working and getting sort in Japan. We are seeing a good level of traction, as I said, significant share of our installed bases there. We have some -- a good pipeline with some deals coming up in Q3 and Q4.

We haven't communicated on specific targets for Japan, but it's definitely a geography that is an opportunity for us to deploy a SPOTFIRE solution internationally.

There is a written question on SpinChip, I'm being asked to answer it. So it is -- could you please give some color on your recent investment in the capital of SpinChip diagnostics?

And so we've acquired 20% of the capital SpinChip. It is company from Norway that is developing a point-of-care immunoassay system that we see. It's very promising, very competitive. We've looked at multiple companies and technologies in the field of point-of-care losses.

As you know, in point of care, you don't only have molecular. You have also a lot of immunoassay solution. So back to the strategy, M&A question that we had, we obviously look at this field with a high level of interest because complementing our SPOTFIRE solution together with an immunoassay point-of-care solution would make cement sense.

We are very glad with the product that is being made by SpinChip. They are running a clinical trial as we speak. We have 1 board member, and we follow up very well. We have a very close relationship with the team. So it's a financial investment, but it was very much a strategic investment. Nothing much more to comment at this stage, but very glad with the investment that we made and very excited, actually, by what they could bring to the market.

Maybe one last question, Jennifer, if you have one.

Yes. We'll go next to Shubhangi Gupta with HSBC. [Operator Instructions]

Maybe left the call? I have to confess we're on. We'll stop there.

So thank you very much. Very -- thank you for the good discussion and the good questions. We'll probably met some of you in the next few days in the context of the roadshow. Looking forward to future interactions and have a good day. Bye-bye.

Thank you. Bye.

This does conclude today's conference. We thank you for your participation.