Eurofins Scientific SE

PAR:ERF

Earnings Call Transcript 2021-Q1

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining Eurofins 2021 Q1 interim management statement. [Operator Instructions] Just to complete the typical disclaimer. During this call, Eurofins management may make forward-looking statements, including, but not limited to, statements with respect to outlook and the related assumptions. Management will also discuss alternative performance measures, such as organic growth, which is defined in the footnotes of our press release. Actual results may differ materially from objectives discussed. Risks and uncertainties that may affect Eurofins' future results include, but are not limited to, those described in the Risk Factors section of the Eurofins annual report. Please also read the disclaimer on Page 2 of this presentation subject to which this call and Q&A session are made. I would like to now turn the conference over to Dr. Gilles Matan. Please go ahead, Gilles.

[Gilles G. Martin, Chairman of the Board & CEO]

Thank you. Hello, everybody. And thank you for joining our quarterly call. We are very pleased to report on the outstanding results in Q1 of 2021. Not only have we had a very strong Q1 overall, but we have seen a strong acceleration in our core business, excluding the testing we do for COVID and the reagents we set around COVID testing. Our core business has been extremely dynamic. And beyond Q1, it's very encouraging for the future. We see very strong demand. Actually, we are in some cases, having to raise capacity. So this all looks very good. We have a presentation, and I will go on Page 3 of this presentation. I guess you have it. Some highlights of this first quarter. So we continue to see strong demand for COVID testing. But the type of testing is changing. We are increasingly looking for variants. We developed unique solutions to detect variants very, very fast, faster than what can be done with sequencing. We also continued to launch products to remove the bottleneck to testing because very often, people have to wait in long lines at laboratories or sampling stations to be tested. We have developed a range of products that allow home testing. And of course, not only with antigen testing, which miss half of the positives, in many cases, many situations and have a lot of false positives too, but with reliable PCR testing, which is what governments require. You also have to realize that the next phase of the pandemic will be tracing variants. And you cannot detect variants with rapid antigen test. And you are faced with the problem of having to resample the positives with PCR, finding those people. And then only once you have a specimen in the lab, you can detect which variant is present and potentially take public health measures. And so more and more countries, including the U.K., for example, as part of the requirements for people coming back to the country that are being set up are really insisting on PCR. So this variant tracing can be performed. The situation around the virus is still very hard to predict. I don't think anybody in the world can really predict what will happen. The world has been faced with multiple surprises, positive surprises with vaccines and unfortunately, negative surprises with variants. There's still a lot of worry at the moment about the new variants that appeared in Brazil, in Manaus and more recently in India. And nobody really know how more pathogenic or how more transmissible they are. We are getting very significant contracts for sequencing, also one of the largest sequencing companies in the world, and in Europe, especially. So we're starting to do a sizable amount of sequencing to help public health authorities trace the virus. And more importantly, connect the clinical characteristics or clinical outcomes of the patients with the genetic sequence of the viruses and the variants present. So this is why it's really hard to know how things will continue to evolve. We all hope that thanks to vaccines, this will all be brought to a better situation. However, it seems that public health measures will be there for a while. We see countries getting better at putting things in place to avoid new waves. Of course, there are still local waves active in different countries in Europe, and of course, in other parts of the world. And the whole problem would also revolve around travel. It's not really known if people that are vaccinated cannot still carry the virus back home, and potentially viruses that have mutated. And this is the main reason why we haven't changed our objectives, because it's really hard to know. It could mean huge demand for a long time or if we are lucky, everything could go back to normal by the end of this year. So we're stuck with our objective of Europe mass testing next year. It looks increasingly unlikely that they would be 0 COVID testing next year and the years to come and the following years, but that's where we stand. In the meantime, there's not only cost. The rest of our business is doing very well. We are developing new tests, very strong demand in environmental testing, for cold -- various range of contaminants. Our environmental testing business is still affected by the pandemic because we have to go and sample. So we still haven't recovered the 2019 level, nor have we had growth compared to 2019 in part of that business in some countries. That means to get to 10% organic growth, actually 11% if we correct it for public working days, it means the rest of our core business is doing very, very well. In biopharma, we're doing a lot. Actually, we would do a lot even without any work on vaccines and other therapeutics related to COVID. There's so much demand, that we have affected some of that capacity to have prioritized some of our capacity for the company developing vaccines, obviously, knowing how important this is for the world. So the other thing is we continue to build the company. So we -- while we help -- we do our little share in fighting COVID. We continue to build our network of laboratories, we have moved in our new food testing laboratory medicine now. It is the largest and most modern food testing laboratory in the United States. It's on par with what we have in a couple of locations in Europe, very high throughput, very efficient, very modern. And there, we can set the standards of quality and turnaround times. And on the level of M&A, we still see a low level of M&A this year. We stayed disciplined and disciplined in what we paid. We did mostly smaller acquisitions. So we continue to add the interesting capabilities or interesting locations to our network. But will probably not exceed our targets for M&A this year. We are prudent on that. Next slide would be Slide #4, please. So financially, as you have seen, we've had extremely strong growth, over 40% organic growth, almost 45% organic growth, with about 11% adjusted for public working days, growth of our core business in Q1. And I have to say this is not compared to easy comps. Our Q1 and contrary to many other companies, which have a strong presence in China, our Q1 results of 2020 were not so bad. We still had an organic growth of over 4%. And in Q1 of 2020, we had only start to be affected in Europe in March of 2020. So the comps will start to get better from Q2. But we already see some of the businesses that were affected by those lock down to have recovered and start growing beyond where they were in prior to the pandemic. And other businesses are going very, very well. We've had about close to EUR 400 million revenues from COVID, actually much more than we expected, a similar level, similar order of magnitude plus more than 10% of what we had in Q4 of last year of 2020. So -- and that is with many countries having much less cases and mostly virus prevalence. So our mark-to-market penetration is increasing. We are still not doing a lot of SAFER@WORK testing because events, workplaces, travel had not really restarted. A lot of governments are talking now. And hopefully, by end of May, we will know what the conditions to travel across borders in Europe and internationally. And in that context and what will be the conditions for people returning to offices and to schools and to events. And that will have an impact on how much testing we will do to support those activities. On the financial side, we don't publish full results for Q1, but will, of course, generate a significant amount of cash. So we decided to repay by anticipation or notes due in 2022 with a make-whole call, to reduce the cash on our balance sheet. We have too much cash on our balance sheet and as I said, we're not going to spend it on overpriced M&A at the moment. I will move to Page 5. I think I will not comment on all of those topics, but we've been very active to develop the right product for the -- to fight the pandemic, and they are changing. We have a range of new tests that we launching. We're launching serology tests that can differentiate if people have been vaccinated or have the antibodies because of a prior infection. We are launching very specific tests and a lot of new variant-specific tests because almost every month, the variants of most concern is a different one. And so we are very fast in our cycles. Since we have labs all over the world, we have labs in India. We have labs in Brazil. We are very fast to be access -- able to access specimens and develop those kits and validate them. We can develop the kit without having actual testing and to validate it back for a specimen. We're starting to win very significant contracts for sequencing and our biopharma continue to support the development of new vaccines and the release of vaccines. Some interesting things. We've had interesting partnerships with large organizations. We have partnered with IATA, the international airlines and air travel association to provide global testing. We are one of the few providers of clinical testing that have almost a global network. So we can test for passengers from departure and arrival. We are well positioned to know exactly what are the requirements of almost all arrival countries. Each country has specific requirements to test, how it has to be sampled, which methods. The same discussion as for vaccine, which vaccine will be accepted by which country for arriving passengers how the case for test, and we're well positioned to respond to that because we have labs in all those countries. So the partnership with Uber for having Uber driver bring the samples home to people, their test kits, so that they don't have to go anywhere, and they don't have to wait. So lots of things are happening. On Page 6, you see other things we are doing, and we have an increasing number of contracts, which are about to start. Some of them are starting, some events are starting. We're continuing to support Formula 1, for example, and other organizations. On page -- on the next page, talking about ESG. As we mentioned for annual level, Eurofins is a strong ESG enabler, all the things we do has a positive contribution to life, to health, to protecting the environment, all the environmental and food testing that we do. We didn't communicate enough about that. So we will do more about it. We have increased our team that is working on achieving our carbon footprint reduction by 2025, which is a fairly ambitious program. We have increased our actions on diversity and equality. All of our leaders, our objectives now for ESG goals, including a quality environment. And we are continuing to increase our contribution through Eurofins Foundation to -- causes that aim at protecting the environment and protecting the less fortunate. You will be happy to hear that we now have an 8 members Board with 5 independent directors and 2 new, very well-qualified and talented directors. One, bringing strong HR and leadership development experience, which is key for future development. And one, bringing very good industry experience, who was a member of the top leadership team of DEKRA, a large global [indiscernible] company out of Germany. We're also providing diversity, diversity of cultures, diversity of origins and equality of men and women in our Board. We'll move to the next slide. Our objective, just as a reminder, we presented them with our annual results. We should increase them, but we don't know what number to put, frankly, for 2021, especially. And the further out we look, the more -- the harder it is to really estimate what level of COVID testing will remain. But what is really a good sign is outside of COVID, our core activity is doing very well, and it could lead. I've always advised against doing long-term conclusions based on the results of one quarter, and now they are very good, and some of you might say, okay, if Eurofins' long-term organic growth target is going to be 10%, not 5%, and I would advise against doing that. We need to see more quarters. We need to see that our business has fully recovered. Once our business is including the environment and some clinical tests, et cetera, have fully recovered, we have a better view of the long-term growth potential. So we're sticking with our objectives. And as soon as we think there are some really more stable and more visible situation regarding COVID and recovery, we'll adapt more. We'll comment on our objectives. However, the general trend is extremely positive. So to conclude this short introduction before we move to Q&A. I will move to Slide 9. So very strong performance in Q1. And a lot of progress on the operational side, on building our global network, developing on a new set of IT solutions, developing new tests, new capabilities, reducing debt, generating cash. We will come out of 2021 with a very strong balance sheet. Big acquisitions are not really on the horizon for us. So this time, we have a lot to do organically. We are opening labs in Asia. We are also opening labs in the western world. A lot of innovation in COVID. And this innovation ability that we demonstrated in COVID, we do intend to apply it to many other types of testing that are a bit underserved or where the testing capabilities are too expensive or too slow or suffer from other limitations. So overall, a very good quarter, and I will be happy now to take questions. Thank you. Operator, we can go to Q&A.

[Operator]

[Operator Instructions] The first question comes from Patrick Wood with Bank of America.

[Patrick Andrew Robert Wood]

Perfect. I'll keep it to three, please, if I can. The first one, just curious if you give a few more details on the drug discovery business. Just sort of the trends you've seen there relative to size within the Group and the kind of growth. So that's the first one. Second one, similar question, but on the sequencing side of things. I'm just curious, how big is that business for you guys now, whether qualitatively or quantitatively and the kind of growth you're seeing there. And then the final one, just curious on the SAFER@WORK program. How are a lot of these structured, because a lot of events would need quite rapid results. There's no use going to the baseball game and only being told a day later, whether you do or don't have COVID. So are those on-site rapid antigen tests? Or how are those structured?

[Gilles G. Martin, Chairman of the Board & CEO]

Thank you very much. Yes, drug discovery is a dynamic business. It was always dynamic. It's -- but I think -- I don't have the figures in front of me because we have multiple labs, but it's definitely either close to double-digit or significant double digits. We've been adding capabilities. We've been adding footprint, that footprint recently over the last few years, and we definitely benefit from that. We think this will be a booming business for quite some time. It's pharma, biopharma and biotech is extremely well funded. And the first place to spend money is in the early phases, which our discovery business serves. And then this will flow through into the DPT business, which does all the development work or part of the development work, and ultimately, to our colleagues in the clinical world. We do a bit of clinical work in our central lab, which is one of the largest. But overall, our biopharma business is well, it's very well. It's growing very fast, and in some areas above 20%. And our leadership there thinks it's going to be something quite sustainable. And they are confident that they can replace the work that we do for vaccine or COVID therapeutic work with other biopharma work. Of course, time will tell. Sequencing was nothing last year. We launched product-specific sequencing products in June or July or May of last year. And then governments were accepting in the U.K. We're not really interested by this topic. And it's very literal. And now of course, with all the variants -- the whole world has realized sequencing is required. And so we're starting to test quite a bit. It's just early days because this realization should have occurred at least in December when the problems arise, it took 3 months for people to get their act together. So I think this was mostly growing volumes in Q2, order of -- and this could be for a long time, because monitoring of, for example, monitoring of viruses in wastewater is going to be also a large program globally and maybe forever. And I think the world will understand that doing this monitoring is important, both on patient samples and environmental samples. How big would that be for Eurofins, EUR 100 million per year, EUR 200 million, EUR 50 million, EUR 500 million, it's really hard to say at the moment. Probably, if I had to guess, maybe EUR 100 million on a sustainable basis. And -- but it depends on -- I mean, if the world did what should be done, it would be massive. Whether the world will do that, I don't know. And for SAFER@WORK, it's usually multi modalities programs. And they want us to know, those rapid antigen test, they don't really work. So you've got 2 problems. You've got half of the nonsymptomatic people that test negative are not negative, they're positive. And you have a large fraction of the positive that actually are not positive. And so in those events, and we're not only testing at events, we're testing also at offices at factories, et cetera. But even if you talk about events, you need to be able to do pretesting of people with PCR, you need to be able to test the staff. Usually, a staff will be tested with PCR and tested at frequent intervals on the athletes, if it's a sport event. Then you have to offer rapid testing. We do the rapid testing. And we even provide the kits. We have our own rapid testing kits. But then you need to be when do what it [indiscernible] PCR. Whenever there's a positive, you need to be able to confirm with PCR very well. Often, you have to do a random number of PCR test to check that the rapid tests are not missing too many positives. And so the fact that we have everything and the IT systems to run that and do it efficiently is very much appreciated by many partners. But then you've got the whole return to work topic, and this hasn't really started because in most countries, at least in Europe, people are not coming back to offices in great numbers. Now more and more governments are going to put the earners on companies to keep their own place safe, and there will be more discussions on liability because now it is possible to test and possible to prevent outbreaks. And so companies were more and more proactively, at least in many regions and countries, proactively set a program to ensure they are due diligence, and it's not only about cleaning the office but avoiding another outbreak and testing at some frequency, depending on the geography, is part of that. And then you got the whole travel scenario where, I doubt that people will be able to travel internationally without some level of testing, because otherwise, there's no way you can catch the variants coming in. And of course, it's all subject to other variants involved. If we're lucky and the vaccines work very well against all variants and enough people get vaccinated. And maybe we'll be done with this at the end of this year, as we all hoped, but that's just one scenario out of many. So we will see.

[Operator]

The next question is from the line of Edward Stanley with Morgan Stanley.

[Unknown Analyst]

I've got 3 as well, please. The 10% in the base business is obviously very strong. And you mentioned the vaccine work, for example, is included in the biopharma business and not in the EUR 400 million COVID revenue. So if we were being sort of strict on the definition of what's COVID and taking out the benefits of vaccine work or sequencing that falls in the base business, do you have a feeling of what the 10% number would have been? That would be helpful to know. The second question, travel, as you've mentioned a few times, is increasingly important topic and you've announced the IATA news. But what utilization is your COVID capacity now running at, such that if there were a sudden demand in travel, would you and the industry more generally, be able to cope with that surge in demand without prices rising or turnaround times extending. And then finally, I was hoping to get a tiny bit more clarity on the SAFER@WORK stuff. The EUR 500 million or EUR 550 million potential revenue, it sounds relatively certain like you know that number, but it sounds like it's based on a huge number of variables. Can you give a feeling of what the key variable is? Is it the number of people coming back to work? Or is it the timing of those people coming back to work? Just something that gives us sort of a greater understanding of why that EUR 550 million is possible.

[Gilles G. Martin, Chairman of the Board & CEO]

The base business. So if we get data corrected for public working days, which is maybe a better proxy. The sequencing actually is not part of our core business. And you put all the sequencing testing as part of the COVID testing. So the only thing that would be in our core business is our biopharma work. And our biopharma work, frankly, without COVID, it would have been, most likely what it is, because we just allocated -- we just said to some clients, we can't take your work because, to take some vaccine work. And that's the reality. And so -- and I think the vaccine works, the order of growth, it would mean is something like 2%. So you're talking -- maybe it would go from a -- if you remove that, and you make the hypothesis, which is not what we think, but we make the hypothesis, we wouldn't have done any other work with this capacity that wouldn't have been used for vaccine, it would be maybe around 9%, corrected for or something like that, for the -- and that's -- you have to also consider that, that's, in parts of Europe, it's not working. We still have some of our food testing for catering that has been restarted in Europe. We have our environmental testing, which is still significantly down, especially in North America. So that's that on growth. On travel, yes, we've built very much extra capacity. So we could cope with big surge and big peaks, and that could happen. And we are ramping up very fast. Where it has to be, of course, the travel testing will take place in different places and the routine testing. But we're also strong in Southern Europe. People will go to France and stay in Italy and other countries where we are present during summer. And then they will have to return to Western European countries. It's not really clear yet what the rules will be in the United States. Of course, we're getting ready for that. And -- but I cannot really comment. I don't have enough information. And SAFER@WORK, yes, it's very hard to estimate exactly the actual numbers. It will depend on also some government decisions as to what is required. And for example, things like, travel. Will travel will be allowed or not be allowed? If there is no travel, there will be very limited testing. It seems difficult for all governments to prevent their citizens to go on holiday outside of the country this summer, but that could happen. This way, it's just an objective. It's a target. And events are the same. The exact conditions under which events can occur are still not clear in every country. There are still regulatory questions. And as to offices, it's a bit the same. When will people go back to offices, it can depend, maybe companies will want them to return to offices, but they don't want to return to offices or governments don't allow that. And it's -- we have the same question in almost every country. So there are a number of variables in almost every country that could influence this both for up or down.

[Unknown Analyst]

That's very helpful. I was hoping for one follow-up. You've mentioned the revenue and since the full year results, you've obviously grown the number of contracts you have. Is the pipeline of activity of negotiating new contracts still growing in SAFER@WORK? Or is it leveling off?

[Gilles G. Martin, Chairman of the Board & CEO]

It's very active. It's very active. Very question is when will those things start. I mean some could never start. I mean we have to be clear about that. You never know, depending on the regulations. And also the content of those contracts can change. How much will be [indiscernible] ? How much will be PCR, how much will be pretesting prior, how much will be testing on site? That's really an open question. I think the world now has to figure out what they will do to avoid a fourth wave or to avoid those variants. And I think there will still be a range of responses by countries. Some countries will be very much necessary. And when things get really terrible, they might react if it gets terrible and others might be a bit more proactive. And for us, it's very hard to guess.

[Operator]

The next question is from the line of Will Kirkness with Jefferies.

[William Kirkness, Equity Analyst]

I've got 3 also, please. Firstly, just on the COVID testing revenue that fell in the first quarter, that EUR 400 million looks like it was maybe a touch down from the fourth quarter. It was maybe about EUR 450 million. Just wondered if you could talk about whether there's anything in -- difference between sort of the volume of tests you're seeing or the value of those tests? Second question linked to that is just the outlook for the second quarter. And then we have seen some price cuts coming through. So even if the volume stays high and if you have a view on what kind of millions, millions we should be looking at for the second quarter? And then the final question, just another follow-up around SAFER@WORK and the strong progress there. Is your sense that you've got a feeling that, that is a market leading product, you're sort of #1 in this? Because I can see other operators have similar sorts of products, but I don't think they've gained as much traction as you have. So if you've got any -- any view on the competitive dynamics there?

[Gilles G. Martin, Chairman of the Board & CEO]

First thing, COVID testing in Q4 of last year was a bit less than EUR 450 million. It's a touch below 400 million this quarter. I think it's higher in Q1 than we thought because really the number of infections is going down around the world. I mean, not around the world, but in the U.S., definitely [indiscernible] and in some parts of Europe. So that is not -- I think we were expecting it to go down faster for the clinical part of it, so testing to see if people are sick. For the surveillance part and the SAFER@WORK, it's just starting. And so this will be, as I was saying, up to discussions by governments and decisions what level of surveillance will be required or decided on a more long-term basis. And all the things around trial were going back to offices. So it's very difficult to see what Q2 and Q3 will be. Q3 will be the summer season. So it could be a lot around travel, depending on the exact requirements. Also for vaccinated people, I was reading what the U.K. seems to imply -- I don't think they have finally decided, but they probably -- they don't want everybody, including those that are vaccinated to take one to return to the U.K. So we are -- actually, we are trying to support that. We have offered a very cost-effective test because it's unfair that people cannot travel because testing is too expensive. And we are a testing company for the long term. So we don't want to take advantage of this type of situation where there's not enough testing for people. We think our contribution should be to make those tests easy, available to create huge capacity. So people don't wait for their results and that they can afford it. And so a lot of logistics, it's not really only testing, it's making sure people get their test quickly and get their results quickly and can return their samples [indiscernible]. I think our advantage going to your next question is our global network. And a lot of the clinical testing providers are somewhat local. We are at both ends of the travel. We are in the U.S., we are in Europe, we are in Asia, we are in Europe, we are in India, we are in Brazil. We're in pretty much all European countries. And so a German tourist that goes on holiday in India or in Spain, we probably need to test before they leave and test on arrival. And if they can use the same provider, the same app, the same portal, and they know that the results will be accepted on Rio because the sampling modality was right. Overall, it's an advantage, and the clients would be airports, airline government, also see the benefit. It doesn't make us unique, and there are others, but certainly can put together offers and others better in some local markets because they have a bigger network in that country or better connections or whatever, but overall, we do have an advantage. Our strategy has always been for clinical testing to be a specialty provider. We never wanted to do a routine test, which are subject to price cuts and on, but we wanted to have a global network to sell high-value specialty test, where we can innovate and where we can create value by being -- offering better tests that comes from our R&D labs. And of course, we were not finished. We deployed this global network of labs, which we worked so much along the way, and that's really useful for us now to be able to help the travel industry. And there are also cruise ships, cruise lines, that want to restart. It's also unknown when they will be able to restart, but they will need testing. There are lots of industries that would be testing to return to normal operations. And are, I'll also say that it's not so much a product. It's more of a footprint and then the way we deliver it, all the IT behind it. We are a strong company, with strong IT capabilities, all the apps we are developing, all the website where people have to log in and give their details. If it's done well, they do it faster. They do it only once. And it's not that we never have glitches or things don't work, but I think overall, on balance we're a bit further ahead on the curve than most others. And this won't be a business forever either. So it's -- we are in there. We have the experience. I mean, it doesn't make sense for a lot of people to start from scratch for something that might happen just one summer, and then will be gone after that, or maybe not. I mean, nobody knows.

[William Kirkness, Equity Analyst]

Okay. If I could just follow-up on the sort of the COVID run rate. I mean, the monthly implication is like EUR 130 million, so, do you know how April is looking versus that? Would you expect it to be to be down versus that, just given reduction in prevalence, et cetera?

[Gilles G. Martin, Chairman of the Board & CEO]

No, we're still testing strongly in April. I mean, I don't have the numbers on hand. You see, the prices are not coming down so much. We already gave discounts some time ago for March and lost contracts. So there is some level of erosion. Some of it we do ourselves because we don't want to gouge people and we're very efficient. So yes, I mean the level of April might be similar to the level of Jan to March. With ECR always in the same order of magnitude, let's say.

[Operator]

The next question is from the line of Andy Grobler with Crédit Suisse.

[Andrew Charles Grobler, Analyst]

Just 3 from me as well, please, a couple of which are just follow-ups coming from previous questions. You mentioned that pricing, you were already just discounting from large contracts. Some of the indications suggest that government prices are going to fall pretty sharply in the second half of the year. Would that be your expectation as well? Would be the first one. Secondly, in the full year results, you talked about EUR 250 million of revenues that were lost in food and environmental because of the pandemic last year. Have you started to see any of that catch-up yet? Or is that going to be later in the year as we return to work and going out and so forth? And then lastly, just a quick financial one. Given the debt repurchases during the quarter. What is your average interest -- interest rate at this point? And what are your expectations for full year interest?

[Gilles G. Martin, Chairman of the Board & CEO]

Thank you very much. Yes, there is some elements in pricing. We haven't seen it so massively. It's a mix of different contracts. We also have contracts that last a number of months or quarters. So I guess it might come later. The big uncertainty will be the volume over the next few months. I think that's going to be the biggest impact than any pricing impact. And this volume is going to be linked to the evolution of the pandemic and the variants and government decisions as to how to deal with the situation. The funny thing is when there is a lockdown, there is less testing, much less testing. The testing increases when the lockdown stops and people start to be contaminated again. And of course, with the vaccine, everybody hopes that the contamination then will be less, but the variants complicate that a little bit. So -- but we still haven't upgraded our objectives for this year for that reason. There's just too much uncertainty, but it's going to fall on the right side. It's going to be above our forecast in any case and maybe enormously above or maybe just significantly above. It's really hard to say. Yes, the EUR 250 million. We started to recover some of that in Q1, not all of it. I think maybe 1/3 of that is starting to come back on a quarterly basis. It's really, really hard to say. Q1 wasn't so badly affected anyway last year. But so in this -- so the -- it's really in March that we could compare. So -- but some of the things that we had in March last year, we haven't recalled because in U.S., for example, environment was affected later last year. Maybe in the last week of March, in France and was very badly affected in March last year. And the environmental products recovered the food part, not really because catering is -- there's still a lockdown in France. And debt repurchasing, yes, we will manage our balance sheet, and we have different projects around that, to overall lengthen our funding and reduce our interest rates. But we still are paying the interest rate that we had on previous instruments. So we will have -- if we do a make-whole or if we repurchase our existing debt, and we are actually bringing forward the interest cost that we would pay over the over period of the instruments. So it's a good thing overall, especially if we replace some of the shorter lines with longer-term lines, which would be carrying much lower interest. But the initial impact is not a positive one. But at the moment, we have too much cash anyway.

[Operator]

The next question is from the line of Neil Tyler with Redburn.

[Neil Christopher Tyler, Research Analyst]

Yes, 3 for me as well, actually. Firstly, your improved outlook statements. Do any of the factors that you referred to that improve that statement also alter your view of the level of investment required, either in personnel operating costs or capacity over the sort of shorter and longer term? Second question on biopharma product testing, specifically, and around advanced therapeutics. I wondered whether you could perhaps offer your insights into whether the clinical testing landscape for those products differs at all from the landscape and the competitive environment and things like contract visibility in more traditional drug development? And then finally, in food testing, your statement mentions an upswing in the rate of innovation in R&D, and I just wondered whether the source of that new innovation was any difference, namely is it coming from a different type of customer, smaller customers or traditionally or typically from the same, that even customer base that you've serviced previously?

[Gilles G. Martin, Chairman of the Board & CEO]

They are very interesting questions on that -- yes, we have targeted about 6% CapEx. We've always said 6% CapEx should enable us to do the maintenance CapEx of 2% or 3% and achieve at least 5% organic growth. If we were, and I'm not saying we will do it, but if we were to be convinced that the level of organic growth is going to be substantially higher than 5%, we might need a bit more CapEx, not a whole lot more. We're not a capital-intensive industry. This is -- but we are adding capacity as fast as we can. The main limitation, in fact, is finding the people in some of those areas. And that might create a limit to how fast we can grow. But if we go from 6% to 7%, and for our growth, that is if time is on our side, it still is totally manageable. But I'm not saying we're at 10% organic growth, it's definitely way too early, the view on how the whole of our business will perform post- COVID. We're still sticking to this 5% secular organic growth, which is, of course, 5% on a non-cyclical basis. So we don't have the down years. All the businesses would have upward cycle. ATMP? Yes. I mean, I think your question is specifically to the clinical phases on new therapeutic products alternative. This is early days, but what we see, we have a central lab that does clinical testing for many things, but we also are doing specialized testing for biologics in other labs in our central labs as part of clinical trials. For example, for the COVID vaccines, we did a lot of testing out of our Viracor company to help the team companies carry out their clinical studies faster. So there are different types of tests, indeed, that our specialized unit can be carrying out that are not typically in the traditional central lab. But of course, some central labs are adding those capabilities as they can. And food testing, it's more about the structure of the food industry. If you read a bit about the consumer trends, I think organic food is growing, is really booming, more than 10% growth for organic food, even very large companies like Nestle are trying to move more organic. But it's -- consumers are looking at this much more holistically as well as organic. We are looking at sustainable farming, regenerative farming, all the things that will make this agriculture more local and the food supply more generally more local and less impactful in the environment with alternative sources of proteins, insects, of course, vegetables, et cetera. And it's often smaller companies, there are smaller companies that can be extremely well funded. And you've got the giants of the industry, like Nestlé, which are also investing heavily to change their scope of products. They are often attacked for not being good enough and providing unhealthy product, but we also have all the aspects of the product being healthy. Consumers are also much more attached to understand -- not all consumers, but an increasing range of consumers understanding of food on our health. And want to have a product that will have as much transformed by bringing so much rapid carbohydrate, how much sugar, et cetera. So sugar is becoming more and more, as the sugar is also bad, not only health is bad, et cetera, et cetera, which creates a lot of innovation, a lot of new products and an evolution of the makeup of the food industry and retail and for distribution. And that tends to bring more testing, indeed.

[Operator]

The next question is from the line of Nicolas Tabor with Stifel.

[Nicolas Tabor]

The first one would be -- so first, could you give us an idea of the overall average PCR price you are charging right now based on discussions with the -- with the governments. And if we think a bit maybe one year down the road when we have dealt with the COVID crisis in Europe, in the U.S. have you already had insight from discussion with the government institution about how they will evolve the overall prices, not for PCR testing, but overall clinical diagnostic reimbursement? Will -- I mean, have they already said, basically, the budget was heavy on your side, supporting you guys during the COVID crisis. Now we'll have to shift it back to other places of the economy. And therefore, we could see the Clinical Diagnostics segment underperforming in terms of prices. Is it already in discussion or not? And then regarding the cost base, I mean the reagents were obviously hard to find and expensive last year. How is it evolving today? How much more investment are you making at the moment in the COVID testing capacities? How is that evolving exactly?

[Gilles G. Martin, Chairman of the Board & CEO]

Thank you. Yes, PCR prices vary between countries. I think now it's more like $50, EUR 40, something like that, on average, somewhat lower and some are higher. And you have to see what you buy, because if you have to deliver a kit with a driver to a patient, wait until the patient is taking this test and have driver drive the samples, right, direct to the lab, of course, this is more expensive than if we just ship a kit and people test themselves and drop it off in a box, depending on the return shipping option and speed. So there's a range of things, or if we get thousands of samples shipped to us by government where we have nothing to do but test, it's also a different price. Or if we have to organize our own sampling station and man the sampling stations, it's a different service. So -- and for antigen, it's the same. You can have people selling an antigen test for EUR 50 and others just selling their test to someone for EUR 5. So it's really a big range, which depending on the associated services and additional requirements of reporting to governments, et cetera, requirements to do reflex testing with PCR or requirements to do sequencing of the positives for the PCR test. So every situation is different. And it will remain different. And as to the pricing of clinical, the reason why we don't want to be big in routine is that routine is not innovative. Governments will always, before the pandemic and after, they will always try to bring this cost down. That's why there was this PAMA initiative in the U.S., already starting in, I think, 2017 or '18, where Medicare is bringing down the reimbursement. And similar initiatives all over Europe. And that's why we focus to be a specialist. And you see it with COVID. It's kind of interesting. I think for Q1, the sim lab just went public and reported the 40% growth and they're pure clinical. And we did also 40% growth, but we're not clinical. Clinical is only 20% of our revenues, which means our growth has been way more, way higher than the growth of clinical labs due to COVID and the reason is the mix of our work and our focus is more on advanced testing and less on the routine testing. We do some. We do some routine testing in France and a bit in Spain, a bit in Germany. But that's definitely not the majority of what we do and want to focus on. As to reagents, we make our own reagents. So we have -- we're fine on that level, and we always have access to reagents when others didn't. And we have enough supply chains, and we even make our plastics now because also plastics were an issue at some point in the pandemic. So we are -- we're average pace.

[Operator]

Next question is from the line of Allen Wells with Exane.

[Allen David Wells, Research Analyst]

Most of my questions have been asked. Just a couple of quick follow-ups. On the COVID side, private testing side, can I just quickly check, has there been any changes in Q1 from a regional perspective? I think when we talked before, you talked a little bit about kind of 2/3 of that revenue was European and about 1/3 U.S. I'm guessing U.S. activities has fallen a bit further. I'm just wondering if Europe is a bigger part of the COVID testing? And any comments you can make on country exposure? That's my first question. And then secondly, just following back up on environmental testing side, when you talked about -- you've seen a little bit of recovery in Q1. Is there an expectation that there's a bit of a backlog that will need to be cleared here? I mean a lot of this is kind of mandated type of testing that will need to be done, whatever. Is there kind of a backlog that needs to be worked through that kind of gives you maybe a bit of a boost as the market for sampling opens up a little bit now?

[Gilles G. Martin, Chairman of the Board & CEO]

I mean with COVID has been, indeed, as you mentioned, mostly -- I mean, bigger in Europe than North America. I think our European team simply did better than our U.S. team in contributing. And we are bigger in Europe. Historically, our other businesses in Europe have been able to help more. Our U.S. teams did maybe better in biopharma, contributed more in the biopharma part of the fight against COVID. And in the first quarter and the last part of the first quarter, yes, it's becoming even more heavily biased towards Europe, but also India, Asia, Brazil is picking up, unfortunately. And other third world countries where the virus is present. And the West should be careful because the mutations happened in India or if they happen anywhere else in the world, they will spill over. So in sequencing, we're also helping a number of countries outside of the core European countries and working with the European Union on that to provide those sequencing capabilities to those less affluent countries, because we cannot prevent the virus from traveling. It's going to be very, very hard, if there are some extremely dangerous mutations that occur anywhere in the third world to avoid -- to prevent them from spreading in the Western world unless we have measures that are as strict as Australia and China, which might not be sustainable in a continent like Europe. So it's yes, the spread -- the shift might change around over time. In Europe, we work for a large number of European countries, and the focus switches a bit from month-to-month depending on how governments react to the pandemic. And as to environmental, there might be some backlog, indeed, because there are annual contracts. And so we could see that in the second half as soon as we start. We have now in the U.S. very fast accelerating sample numbers in April. So that could be part of that. There is another thing to say is that we will be a strong beneficiary of the infrastructure programs. A lot of infrastructure program will mean more roads, more public works, more building, more energy saving. Energy saving means a lot of work in houses, and we carry out a lot of our testing mostly in that context, testing of toxic chemicals in materials, for asbestos whenever we are working in a building. So -- but that will be slower to pick up. The impact of these infrastructure programs maybe in 2020 to 2023. But that could have a long-term impact, also a positive long-term impact on our environmental testing business and other businesses that we do as well.

[Allen David Wells, Research Analyst]

Maybe just a very quick follow-up just to make sure I understand your comments around pricing. Obviously, I understand that when you look at the kind of regulated kind of public level pricing, you commented that there'll be some -- a little bit of pressure as that comes down, but there's some puts and takes there. But am I also right in thinking as we think about the rest of the year, you'll probably see a mix of volume coming more through from the private side with things like safe to work, et cetera, coming through, which is typically higher price. So actually, on a like-for-like volume, the pricing might not actually fall that much as the private side of your business probably picks up a little bit work as the market opens up. Is that a fair comment there?

[Gilles G. Martin, Chairman of the Board & CEO]

Yes, sure. I mean, each situation is different. And it depends on the services we are providing. And so maybe we'll provide a bit more elaborate services to private industry in need or to people traveling than we do for mass testing for governments. You add the sequencing, of course, sequencing is presenting a layer across the board of the testing because you have to sequence all the positives. And so the all-in prices, I don't -- we don't even calculate it, to be honest, because it's so much linked to the type of testing we do. It's a bit meaningless. We could do the pure lab test part of the testing and below that. We don't do it very much. And the U.S. was extremely generous initially at [ $100 ] with Sanford. We haven't participated all that much to that type of testing. And then we know there are still open questions. We could go to millions of testing if, for example, with pooling, we could test a very, very large number of samples at very low cost, and it could be a part of the instrument for reopening schools in September that there would be very regular approved testing. You can only do pool testing for incidence of the virus' load. If you have like, in many countries, are still at 5% positive. Now in the U.S. in California, they're back to 1.5% positive. When you are at that level, you can stop pooling and you can potentially create capacity for millions and millions of tests, which could be a good thing to detect outbreaks before they have time to spread. So the things that should have been done in the spring to prevent second and third waves are more possible with the testing capacities. And also the change in mind. The self-testing was not allowed. We only got -- FDA only approved our self-testing modality, the DTC, direct-to-consumer OTC product a couple of months ago. They were not ready to approve this type of products in the spring of last year. And those products are really important if you want to test millions of people on a daily basis. So those are part of the questions. And of course, if we do pool testing, which means we test only one sample in 10 and go back and test individual samples only if we have one positive. Obviously, the price per unit will be less, will be cheaper than antigen testing right way because it's much more automated and can be handled by machines and computers better.

[Operator]

The next question is from the line of Ray Kumar with HSBC.

[Rajesh Kumar]

It's Rajesh Kumar from HSBC. On the drug discovery comment you made earlier, can you give us some color on what type of demand is coming back? Is it more diagnostic work for clinical trials? Are you getting more work on lab chemistry? Just in terms of understanding what is the type of backlog you see with your customers who probably prioritize vaccine and COVID-related work over other types of work. So if you could give us some sense of backlog on the drug development side? The second question is on basically food testing. You mentioned that there are some incremental demand for new types of -- new development in the space. So compared to the historic run rate, how is the rate of innovation looking there? And basically, are we down 10%, 15%? Or more like 20%, 30% compared to, say, 2018 or '19? And finally, on -- you gave some very helpful numbers on the variables that are involved in cost per test. You referred to a EUR 40 cost of test, but that is for one type. But give or take, EUR 400 million of revenue equates to 10 million tests there. Now there will be pool tests, and there will be mix effects. But just in terms of headline volume trends of COVID testing, how have you seen that trend this quarter compared to the previous two?

[Gilles G. Martin, Chairman of the Board & CEO]

Thank you. Yes. In biopharma, we have a number of capabilities. The bulk of our testing is our biopharma product testing, where we have worked for a lot of the therapeutics developments around COVID, drugs against COVID in this COVID space, which is a tiny part of our biopharma and product testing. We did a bit of vaccine development work. Drug discovery is early. It's mainly other therapies, not necessarily related to COVID. We did a bit of clinical trial work for clinical testing, indeed, for the clinical trials of COVID -- of new COVID vaccines. I can be also preparing the kits that are sent to the hospitals and analyzing the results. And the backlog, yes, there is -- I mean, we cannot take all demand, we try to look for a place. There is definitely not enough capacity in the market to meet some of the demand as you have well heard for vaccine, for production of vaccines, the same applies to the testing. And food testing, it's very hard to put a number on the rate of innovation. It's more qualitative -- qualitive information. There is more demand. There are more products or supplements in the U.S. are growing very fast to dietary supplements and what kinds of botanical product is more interested for, a range of those products. And those products are lower volume very, very. If you go to a supplement shop, you will see how many varieties of products you have. And each of them needs to be tested. And whereas if you go in a supermarket, you have okay you have different cornflakes, but still each of them take a big part of the shelf. So that's a general trend, more diversification of food types and less transformed food products, more fresh food products, et cetera. And yes, the number of tests, we track it, but it's very difficult. I don't even know how we count the pool samples. I think in India, the government, for example, was mostly doing pool testing, but to reduce the cost, but now they are moving to having to test every sample, unfortunately, because of the high level of positives. And so I'm not even sure how we count it. I would say the number is high and it varies every week, every day, every month. So I don't really have it in memory. But the same orders of magnitude. We haven't seen massive price changes, frankly, and probably next quarter, we won't see so much of that. And again, I would like to reiterate, I think the main impact rather than price is going to be volume. And there are a range of scenario that can impact volume and because volume can change 30% when average price will change 5%. So that's why volume we are facing will be the main impact.

[Operator]

The next question is of the line of Suhasini Varanasi from Goldman Sachs.

[Suhasini Varanasi, Equity Analyst]

One, just as a follow-up to your previous comments, you mentioned potential benefit from infrastructure programs and environmental testing. Is that mainly in France? Or is it across Europe, please? And then the second one, I know it's not -- it's just a revenue call, nothing on profits, but I wanted to clarify some comments you made earlier, where you mentioned, I think, that you've fully written down the value of the machines that are used for PCR testing. Was that taken as a higher depreciation expense or was it taken above EBITDA line, just so that we can understand how the dynamics on margins will trend this year? And maybe the last one would be, what's the total value of the missions that you have written off last year?

[Gilles G. Martin, Chairman of the Board & CEO]

Thank you very much. Infrastructure programs, I think they will be global. I think it's not only in France or, I mean, it's all over Europe for sure. And I think in North America, there are also infrastructure programs about roads and public works and also green buildings, which will mean a lot of work. I'm not sure I understood the second and third question, if I could ask you to repeat it.

[Suhasini Varanasi, Equity Analyst]

Yes. Sure. Just at the full year results, you mentioned that you've actually written down the value of the PCR machines. You fully just expensed it almost. So I just wanted to understand whether it was taken as a depreciation expense over there. It was taken above EBITDA, the EBITDA margins benefited from it last year, so if we understand how the dynamics changed this year.

[Gilles G. Martin, Chairman of the Board & CEO]

Thank you very much. Yes. Well, what we've done is we've geared to be fully written down at the end of the pandemic and so this may be by, more or less, we targeted next summer, this summer to be done with writing off all those COVID tests, because our central hypothesis was no COVID testing next year. And the write-down is -- well, it's part of depreciation. So it affected EBIT. And the value -- yes, it was significant tens of millions of dollars that we invested in this one thing. We also wrote down some stocks to not have too much stock in case, so there is drop to change. But we see we also shift some stocks from areas where there is less testing to areas where there is more testing. And that is -- that should mitigate that to some extent, that we don't have too much testing reagents around if the testing stops, where it would stop abruptly.

[Operator]

The next question is from Pierre Fournier with Moneta.

[Pierre Fournier, Equity Analyst & Portfolio Manager]

The first question would be a follow-up on SAFER@WORK. Just to be sure I understand of how to understand the EUR 550 million figure. In the situation where, on the 30th of June, we all go back to office, school and airports, does it mean that Eurofins will achieve EUR 550 million of revenue in H2? Or is it more spread out figure? And maybe another on SAFER@WORK. Does it bear the same margin as the traditional business? And then on the 10% growth, which is very impressive. I understood there was maybe a slight catch-up effect in environmental from clients who could not do their tests in 2020. Is there another catch-up effect from another sub industry that you are serving other than environmental? And the last question is regarding France. I would just like to know how much is France in percentage of COVID related revenues.

[Gilles G. Martin, Chairman of the Board & CEO]

Thank you very much. I don't know exactly when those numbers would fall. We say for SAFER@WORK, mostly in the second half is what we think. And this contract is different than the event contract and travel depends on when travel restarts, and it could continue for a very long time, even beyond 2021, depending on government regulations. So that's the best guess we could give you of the magnitude of what we have. We don't see why the margin would be substantially different than all the things we do. And yes, I think there was a misunderstanding on catch-up. I don't think we have seen any catch-up of anything. It's more part returned to normal that we are seeing so far in part of the work that -- where our clients could not work at all. They are starting to work a bit more normally, and that the work that could not be done before in 2020 will be done now. I don't know. This is something that might happen in the next few quarters. But I don't think that we have much evidence of that right now. It's not like a certification where bids did have to be done and where -- I mean, a lot of comment -- other companies doing certification. There's a lot of work in Q4 of last year because things have to be done manually. And for example, in catering and so on, those things won't happen. Maybe a bit in environmental, but we'll see it in the second half of the year in the U.S., for example, for environment, how much of that happens. And all France is a proportional part of COVID of, I don't know, maybe for what we do in Europe, maybe 20%, I'd say. I don't have the exact figures in front of me, but it's not like, it's not everything. It is significant, of course, but we also do a lot of testing for other European countries, even countries where we are not so present with the lab network. So I think I will take one last question because we are running over.

[Pierre Fournier, Equity Analyst & Portfolio Manager]

So it's 20% of European Group revenues?

[Gilles G. Martin, Chairman of the Board & CEO]

No, of the COVID. But it's not -- I don't have the exact number. It's just an educated guess. I think it's around that. So we can take one last question if there is one.

[Operator]

There are no further questions at this time.

[Gilles G. Martin, Chairman of the Board & CEO]

All right. Thank you very much, and thank you very much for joining our call. Appreciate that we had so many questions. Of course, we can follow-up one-on-one or you can follow-up with [ Gary ] and Laurent and [ Roger ] separately. So to conclude, I think we've had a very strong first quarter. The most important thing is we see our core business doing extremely well, which is very encouraging for the years to come. We start to see the benefits of all the investments we made in IT and having a very state -- very big state-of-the-art network. We see the benefits of all the investments we made in opening new labs and opening labs in Asia. And basically, it makes us even more positive and bullish about the long-term future of Eurofins. So I would like to thank all of you and our investors here for your support for the many years where we're building the company. And I'm happy that now we're coming in a phase where you can see the benefit of all those investments and of your patience. So thanks a lot for your support and have a very nice day. And I hope that with all our work and that of many governments and testing companies around the world and vaccine companies, we can meet again in person in the second half of this year. And a very good afternoon. Thank you.

[Operator]

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.