Eurofins Scientific SE

PAR:ERF

Earnings Call Transcript 2020-Q3

[Operator]

Welcome to the Eurofins Q3 NM 2020 Interim Management Statement Conference Call. [Operator Instructions]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 are defined in the footnotes of our press releases. 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 question-and-answer session are made. Today, I'm pleased to present Dr. Gilles Martin, Eurofins' CEO. Please begin your meeting.

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

Thank you for the introduction. Hello, everybody, and thank you for joining our quarterly results call. I hope that you are all well and are not suffering too much from the current circumstances. So I want to start with my best wishes to all of you. I wish we can meet in person soon. So I'm happy to report a good result for Q3. I think the main thing, and I will jump to Page 4 of the slide show, and that maybe we cannot remember, is I think the result of Q3, above everything, demonstrate the agility of Eurofins and the Eurofins team. You are our shareholders, and you have been supporting, over the last 15 years, the development of what is today a very outstanding laboratories network. And Eurofins has been always long-term focused. We've invested not only in sites and facilities but in very competent R&D teams. And of course, when crisis hit, that's when you see the strength of your teams and the ability of the company to respond. And I'm especially pleased by what our teams have been able to do. Eurofins is not a big IVD company. We are not Roche. We are not Abbott. We are not Thermo Fisher. We are a very small IVD company. Our IVD product development companies are only since a couple of years in our group. Eurofins is also not a large clinical diagnostics company. We are -- compared to companies like LabCorp and others or SYNLAB in Europe, we have a very [ small footprint ] in clinical diagnostic. Yet, as you can see in the results of Q3, our company has been able to mobilize, to focus, to develop an outstanding range of solutions. We have an incredible portfolio of tests and capabilities. And I'm not even talking of what we do in our pharma labs, that we have vaccines developers and therapeutics developers just on the testing side, where we are basically a nobody in this EUR 160 billion global market for clinical diagnostics. This is maybe 15% to 20% of Eurofins' total revenues. We have been able to mobilize quickly, pool our R&D talent for all divisions, all business lines across the world from our genomics team, from our food testing teams, from our pharma testing teams to generate a very strong response. And we've done millions of tests, as you can see, and there are lots of patients that benefited from our R&D. So I think that the main point is that it has demonstrated that, thanks to all the investments we did in the past, all the money we spent that diluted our margins for many years to build teams that can develop IVD products. And those IVD products take 3 years of cost until we get them approved. Well, adding that infrastructure, having made those investments over the last few years, of course, in this time of crisis, we've been able to mobilize, and they have enabled us to really generate a response -- a capability to respond that is overproportional to our presence in clinical diagnostics and even more in IVD products. And I think that's the main message I'd like to convey with this Q3 result. The second message is maybe the resilience of our business. In my tenure as the CEO of Eurofins, I've seen many crisis. The one you will all remember, the one is 2008, where many, many companies saw negative revenue development. Well, Eurofins at that time in 2008 and 2009, continued to grow organically, unlike many other companies. And we're going to see that again this year. Our core business, even outside of the COVID testing, proving very resilient. Of course, we have some companies that just cannot operate. You cannot test restaurants -- food in restaurants if restaurants are closed. But the bulk of our focus on life science and testing for life enables us to overcompensate that. So that's the other, I think, learning that we can always see from those Q3 results, is on top of the agility and the capacity to innovate, that Eurofins has built over the years our focus on testing for life and markets that are basically not affected by the cycle. The noncyclical market is proving beneficial. And that's why probably over long periods, you're talking decade, our average organic growth or compound organic growth is, I think, very good for a company of our size. Financially, you can see the result, I will not comment on them. You have read them. What we will do, we haven't talked about much, many of our investors have started to -- since many years, in fact, to comment that our share unit price is a bit too high and liquidity is difficult. So we wanted to do something, especially for small investors. So we're going to propose to the General Assembly a stock split, 1 in 10. That's the second 1 in 10 stock split that we did. If we hadn't done that, our share price would be about EUR 7,000 worth today from something like [ 16 ] when we went public. So it demonstrates, I think, the benefit of investing for the long term. And that's what we intend to do going forward: invest in science to be truly an innovator in the market, to be the company that clients want to go to because the services we offer are, on balance, superior. It doesn't mean that we'll always be superior. We will always have a weak point here and there, but that's what we are striving for, through innovation, through R&D, through the best equipment and the best labs in the world in our market, to offer services to our clients that are truly unique. I will move to Page 5. I've discussed most of that, I think our companies are doing fine. We still have companies, unfortunately, that are affected, but this is now in Q3. It wasn't the case in Q2, but in Q3, overcompensated by those that are doing very well and continuing to grow even outside of COVID. One key event I would like to stress is what we announced earlier this week, that we received an emergency use authorization from the FDA for the Eurofins' At Home COVID Nasal PCR Test. We've done a lot of announcements on COVID testing modalities. I think this one is particularly important. We've all experienced difficulty to get tested. We've all experienced that it was difficult to get an appointment to a doctor to get a prescription. It was difficult to find a slot in the lab where we could be sampled. Or potentially, we could use less efficient, less reliable antigen test. We have to see that in all labs, the antigen test, they miss 20% to 50% of the positive depending on the situation. So what we all want to do is have something that is simple. And I think this test that we just got approved from the FDA and that others have been selling for a while, similar tests, I think our test is going to be particularly sensitive because we do it in a nasal swab, not on saliva. Saliva is much less sensitive because you can have -- lots of people were positive, whether -- you can be positive with an NP swab or a nasal swab. Well, all of that will come out with experience. The simplest thing that one can have is in a company, at work, in a factory or at home, a bunch of test kits. And when there is any reason to suspect that one has been in contact with a positive person or just one wants to go and visit one's grandmother and wants to be sure, it's very simple. You take the swab, put it out -- you can all go on our website of empowerDX and see how it works. You just drop it in an envelope, and the next day, you get an e-mail with your results, and you can print your own certificate. If you want to travel, you get a testing with the gold standard, which is a real-time PCR. That's the best that can be done on the current state of science. Okay. It doesn't take 1 hour, but you don't have to mess with the test that you have to do yourself or find a doctor to do it for you, even if it will be faster. You get the gold standard test from your home, and we think this type of test will really go a long way to increase the accessibility of the gold standard PCR test. Of course, we have to see how we distribute that, with which partners, et cetera, but we think with that, we can also make a meaningful -- from our R&D lab a meaningful contribution to society. So on Page 7, you will see some of the business development related to COVID. Of course, increasingly, we've been asked by government, by airlines, by cruise lines, by companies, by airports, to set up testing modalities. This is not our core business. Eurofins' core business is not to put containers in front of an airport like the one you see in the picture and have people sampling. We hate doing sampling, and that's why we developed this at-home test. And maybe this is also a modality that airports would want to use or where people get tested. Actually, in my opinion, the best way is to get people -- this is what Italy is doing. If you go to Italy, you have to get tested in the 72 hours that are before your trip, and you have to show that certificate on arrival. This is one of the best way to enable safety. And then okay, you can test people again on arrival, but that's -- and put them in quarantine for 5 days if you really want to be sure. But if you do both of that, people should be able to travel. And that is something we can do with our central labs. Eurofins' model is to build very efficient central labs to carry out testing. And we have invested, over the last 3 months, significantly in our central labs. And we'll be able to produce even more COVID tests at much lower, especially since we are virtually integrated. And this is one of the developments. On Page 8, you see a couple of developments. We have talked of the at-home test. We can all go online on empowerDX. And I think you can order it if you're interested. We are looking forward to launching similar tests in Europe. Of course, that requires some government approval in some countries. So it won't be available all over Europe immediately. But we hope to launch it in as many geographies as possible. Another important thing is we are launching multipathogen panel. And Diatherix is a company of the Eurofins Group that has been doing for a long time very broad respiratory panels with up to 20 or 25 pathogens. We've offered now smaller tests that include COVID, and we will be launching similar combined test in Europe because it's always good if somebody's coughing to know exactly why they are coughing, not only to know it's not COVID or COVID is not detectable. It's much more reassuring to find out or it's only respiratory syncytial -- IRIS or it's a flu. On Page 9, we have other things. I think we have a really good panel of offering because in high prevalence times like we have now, unfortunately, in Europe and North America, what you want to do is mostly test people. But in low prevalence time where most people are negative, you want to catch a new wave before it becomes too big, on a university, on a campus, in a city, in a factory. And for that, the way smarter testing that we have launched as part of Eurofins COVID Sentinel works very well. And this might be something that we could be offering for a long, long time. The other thing is once the vaccines become available, the question will be for many people, am I immunized? Do I have antibodies? And more importantly, are those antibodies offering seroneutralization? And we published evidence that our tests do that, and we are working on a range of tests that will do more in that direction. On developments on our core business, this quarter, we've had many. You can now read them. You've seen the press releases to stress that we are more and more asked by big pharma and smaller pharma companies and biotech companies to be involved in the development and validation and stability study of the vaccines and pharmaceutical products in the context of COVID. The other thing, of course, that we've seen is this will be a boom year for funding of biotech, and probably this huge funding of biotech will continue over the next few years. And this will also fuel the growth for many years to come of our biopharma laboratories, which represent about close to 1/3 of Eurofins now. On Page 11, M&A. So M&A, we've turned down a lot, which we're doing in M&A this year. We've only acquired a few small companies. Of course, Eurofins has achieved market leadership in Europe and North America and many areas, while we are still very small in Asia. So we are pivoting a little bit of our investment to Asia. There are 2 areas which we think will experience high growth in the future. Noninvasive prenatal testing is an area where we've become a leader in Europe. And now with this investment in Japan, we also are becoming the leader in Japan. We're becoming a leader in environmental testing in Taiwan. Another country, in Japan, we're very close to that. So it's steps we are taking to expand on that continent.On the outlook, I will go to Page 13. I think the main thing is that we are making very strong progress, in spite of the COVID pandemic, in building out our laboratory network. This was a major undertaking, a 5-year investment program to build this hub-and-spoke model and having very large laboratories that are extremely efficient, fast and productive that carry out complex assays and a network of local laboratories that carry out time-critical assays like pathogens in food and/or water, et cetera. I think with COVID and the cyberattack we had last year, we probably will be 6 months late or something like that, but we are getting very close to being done with that. And we also have a couple of buildings that we'll only finish building next year, but we'll make strong progress this year. We'll finish the integration of Covance this year. They will all be in their new Eurofins side out of the LabCorp side by the end of the year. All the buildings will be ready and they'll move in January for the last one. So this is all doing well. We've built very strong market positions in many markets that will be very high growth. You've seen what our small IVD business can do. Our genomics business is also a high-growth area with the advance of NGS. Agroscience, we're by far the market leader. We built a business in [ Diatherix ]. Of course, this business is a bit hurt right now because we cannot do patient testing or clinical trials for new cosmetics. But this is a high-growth business generally. So we're getting done. And the good thing of that is we will have less CapEx going forward and less reorganization costs because we're not moving people miles away into new buildings or new sites, et cetera. Objectives on Page 14 require a little bit of explanation. So what we've done to -- well, first of all, for 2020 and 2021, it's impossible to know what will happen. Obviously, at the moment, we are testing a lot for COVID, and it's likely to continue. But how much will we do exactly in Q4? How much will we do next year? I think nobody can tell. So therefore, I mean, if this goes away faster, then our food and restaurant testing or cosmetic testing or clinical trial testing business will pick up faster, and we'll do less COVID. If it continues through 2021, we'll do more COVID testing. But it's really impossible. So -- but what we think is, definitely, we can achieve the objectives we had set for those years when we set them at the beginning of 2020. So our objectives for 2020 and 2021, we are confident we should be able to achieve them as we set them. For 2022, we have never said anything. And what we did for that, we said, well, we had a big cyberattack in 2019. We lost a lot of revenues, and we have shown that as soon as our labs were able to operate again, that revenue came back. And so we believe once COVID goes away -- and we're making the hypothesis that by January 2022, the COVID dynamic will be under control. We hope that will be before that time because there's no certain this will be the case, but we think it's a reasonable hypothesis to make. Anyway, we can only make hypotheses. And the range of potential outcomes is very, very broad, unfortunately, as we all know. But we're making that hypothesis. If we are back to a normal situation by January 2022, then the few businesses at Eurofins that cannot operate normally should go back to normal, and therefore, we should catch up this 5%, which is missing -- we'll be missing this year, and next year, we have no idea what it will be. And therefore, we're just taking our revenues for 2019. We put them to the current FX rate. And on top of that, we had 5% we correct for the cyberattack and we had 5% organic growth per annum for 2020, 2021 and 2022. And we think it is a reasonable objective for 2022. Obviously, there are some hypothesis behind that, but we think it is something that is a reasonably likely scenario. There could still be a lot of COVID disruptions and testing then, we hope not, and that we could do better. We could -- business could pick up faster. So that's, I think, as good as we can set an objective right now for 2 years from now in those circumstances. So you'll see the breakdown of that on Page 15. There's more summary of this on Page 16. And overall, if I jump to the conclusion page on Page 17. I think we can be proud and thankful for what our teams have achieved. And I think there will be a lot of developments over the next few months. We have a big R&D pipeline on COVID and COVID tests that we think will be very useful in fighting the pandemic. We are working very closely with our biopharma and vaccine partners. We hope that they will be successful. We hope that some people can be protected. Obviously, achieving herd immunity with vaccines will require a lot of compliance. It would mean 90% of people accept to be vaccinated. If only half of the population accepts to be vaccinated, even if the vaccines work, that might not provide enough herd immunity. So there are still open questions. But we are working very closely with our clients and health authorities to contribute as well as we can. We've seen our core business has been very resilient. I'd like to conclude to say, okay, assuming the COVID goes away as we hope by 2022, what will our shareholders get? Well, by 2022, I think they will get a very strong company with a huge potential. We'll have the best laboratory network in the world in those markets, leading position in those markets, which are high-growth and very resilient, very strong capabilities that we have even strengthened during this crisis. We'll have an additional leg with big factories to produce our own agents for our labs, for clinical labs and for food labs and our environmental labs and our pharma labs. Of course, we increased the testing platforms in many of our labs. And probably we'll be in 2 markets that might grow even faster than we were used to because of the realization that came from the pandemic. Of course, this is a bit unknown, but I think we should deliver through this crisis a very strong company to our shareholders by 2022. No more reorganization cost, fully digital company, perfect lab network, both of R&D and innovation, and positioned in a very exciting market. So that's it for my introduction. And I think we can go to question and answer. Laurent Lebras is here on the call. If you [ have one ] question, we have slides in the appendix to explain our objectives and maybe answer those questions. Thank you.

[Operator]

[Operator Instructions] Our first question comes from the line of Edward Stanley of Morgan Stanley.

[Edward Stanley, Equity Analyst]

If I go one by one, it might be easier. We haven't talked very much in the call so far about the base business particularly, and I'm interested. You called out catering and hospitality. Can you give us a feel for how big those segments are together as a portion of the group and where we are on their recovery for those sort of worst hit relative to where they troughed?

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

Yes. Our base business, our base business is really a mix of so many different companies, which have a different profile. We've had some companies growing more -- significantly more than 10% even outside of the COVID area. As you would guess, biopharma has been quite dynamic. But also, we've had environmental testing labs doing extremely well. The areas that have been the most hardest hit are, I think, by order: Latin America; and we all see Brazil is really in trouble, I think that's where we had the biggest negatives; followed by France, and of course, Eurofins is large in France; and the U.K., the U.K. is not in a great shape generally. So France and the U.K. have probably suffered the most in Europe. And our environmental testing in the -- business in America is also suffering because of the sampling. It's basically certain things require people to go and pick up a sample, and with all the travel restriction, factories are closing access to external parties and contractors, et cetera. This presents some limitation. We also have a central lab, which is supporting biopharma in doing clinical trials. Well, in some part of this crisis, it has been difficult to enroll patients in clinical trials. So we had, here and there, some impacts. I don't have exactly the percent of the total group that has been affected. It's -- in food testing, the catering area is a small part, yes. Maybe, I would say, 5% maybe. Catering and travel, 5%, 10% or food testing, probably low 10% business, just to give you an order of magnitude.

[Edward Stanley, Equity Analyst]

Perfect. And the second question. On COVID, the testing volumes have obviously been very strong, but there's some evidence that price per test, particularly in the U.S., is moving lower by as much as 25%. Is that something that's impacting you yet? Have you seen any evidence of price deflation on PCR testing, either there or in Europe?

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

My opinion on this is that ultimately, we should do way more PCR testing at significantly lower cost. That's where the market should go. The availability of test is extremely limited. If you look at a country like the United States that is maybe only testing 1.4 million people per day, I don't know where Europe is, but probably not so far from that, this is nothing. This is absolutely nothing compared to the level that should be done to really enable people to isolate themselves or motivate them to isolate themselves. And so we have -- we still face a global shortage. And as you aptly pointed out, there are other modalities like antigen test, where -- for certain things, where it doesn't really matter too much if you miss some positives. But it's better than nothing. But yes, nothing I can bring into a street or an open air stadium and things like that. There will be a lot millions of antigen tests will be done. But frankly, what the lab industry should do is make the test faster. And that has been Eurofins' focus. We've always tried to make our PCR test within 24 hours, which you saw this announcement we made for France. We organize ourselves to do the older test or 99-point-something percent of the test within 24 hours. In my opinion, a test after 24 hours or after 48 hours is useless for most purposes. It's too late. And that's why actually Medicare decided to punish the labs who are too late. If they can't provide the result within 48 hours, they will -- instead of getting $100, they'll get $75. That's maybe what you're referring to. On the private markets, frankly, I think Eurofins on a business-to-business point of view, if we don't have to deal with uncertain insurance reimbursement, a lot of state bureaucracy, we don't have to do the sampling. If we just get swabs that has been collected properly to our labs, we can operate very efficiently at significantly lower reimbursement level than the current ones and still be profitable. And our view, we want to contribute. Of course, we're making investment. We're taking risk. So it is fair that we get a margin on it, but our goal with that is to contribute in helping countries, helping everybody to get done with this pandemic and return to our normal lives. We have to try to not dilute our margins, and so far, we're definitely not diluting our margins with COVID. But with all the investments we're doing in automation, et cetera, even -- I mean we -- our goal is we should be doing 4x more testing at half or 1/4 of the price, and I think our contribution will be even bigger.But anyway, we'll see what happens. We'll see how this develops. And more importantly, we'll see our government responds to it because it's -- the response of governance to COVID has been, let's say, let's put it this way, very diverse. And we'll see what the future brings.

[Edward Stanley, Equity Analyst]

Fair enough. And then actually, I think you touched on briefly there on turnaround times. You announced recently the addition of Biomnis capacity. Is that because your existing French capacity is near 100%? Or is this to preempt further growth in volumes? Because I'm just trying to establish, at Q2, you said you were flagging that these tests are being done at 30% EBITDA margins or maybe more. But the utilization of your labs at that point was pretty low. Has the rising utilization in Q3 led to better EBITDA margins of [ nasal ] PCR tests? Or is that not really how it's working?

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

Yes. Well, of course, volume drives profitability. It's hard for us to know exactly how much we do in COVID because we do it in many, many labs, and those labs also do respiratory panels, including COVID, not including COVID. How do we split the cake? So that's why we're not publishing exact results on COVID. And for profitability, this will be even impossible because we have shifted people that were doing something else to do COVID. How do we allocate our overhead to COVID to non-COVID? I mean marginally, of course, if you add revenues and we don't have to hire a lot of people, marginally, it is contributing. But in the meantime, we're not doing other stuff that we should be doing. So I don't know what our margin is in COVID. Our goal is that our margin in COVID is not dilutive. And we want to contribute to society. Don't want to be penalized by analysts who say COVID is diluting your margin. You guys understand that. And the Biomnis, yes, I think capacity is the thing -- the problem is -- with this pandemic is we don't know and the governments have not proven very good at guessing when the next peak will come, and more importantly, telling us how they will respond and prescribe testing, mandate testing, allow testing. All those things change all the time in every country. And therefore, we have to build extra capacity. In every geography, if we want to contribute our share, we have to invest to be able to test maybe 3 or 5x the actual volume that will come. And then there will be a peak, and then all of a sudden, within 2 weeks, all the labs are full. In France, it was the case in the end of August, beginning of September. There was a huge backlog and the labs could not test. And then as a result, the government said, well, they will reduce the applicability of testing, which is the wrong result. And I think our industry collectively is to blame the IVD industry, too, for not being able to ramp the production and capacity of testing fast enough. So that's why we've decided to significantly increase our capacity but do it in a way that we can maintain and guarantee short turnaround time. I hope that answers your question.

[Operator]

Our next question comes from the line of Suhasini Varanasi of Goldman Sachs.

[Suhasini Varanasi, Equity Analyst]

I have a few, please. On the first one, can you give some color on how the revenues, excluding COVID, have improved through the quarter? In the press release this morning, you mentioned that the core business returned to some small positive organic growth in Q3. Would it be fair to say that you saw sequential improvement and probably September was a low single-digit exit rate on the core ex COVID?

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

Yes. Thank you. Indeed, this is true. I don't know why because it's a mixed situation. It actually was better on the, like, level of virus in Europe. It was better probably in July than in September. But still, overall, we've seen a return to growth that it was improving through the quarter. Whether we can extrapolate that for next quarter, it is really hard to say. I hope so. But it's more or less one [ of you ]. We have activities that are pretty much stopped, and our clients that are pretty much stopped and others that are booming. So it's pretty much everywhere. All over the place.

[Suhasini Varanasi, Equity Analyst]

Got it. The next one was on the revenue benefit from COVID testing. I think at the time of the first half results, you mentioned that the July revenue benefit was EUR 55 million. And given the kind of acceleration we've seen in the testing through August and September, would it be fair to say that your monthly revenue exit rate in September was at over EUR 100 million from COVID...

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

Yes. I'm not sure I have the exact number, and I don't want you to extrapolate too much because the problem of this testing is it's -- I saw some of your reports on that. It's not necessarily directly, linearly proportional to the number of testing done on a given geography because it might depend on some government contracts that we get or some specific programs we're in. It can be a bit lumpy sometimes. But yes, I mean what I can say is in Q3, it's EUR 100 million of COVID testing. And that is erring on the safe side in case the cutoff is not done in a way that our auditors would approve. We don't want to put up a used bureaucracy to give you a 3-digit from any COVID test we did -- or revenues because some of it depends on payments that is deferred. And some insurance payments in America, especially, needs to be exactly -- we need to get the cash to know exactly how much we're going to get, and we're being careful with that. And the exit is definitely more than EUR 55 million, and maybe close to EUR 100 million is possible, and somewhere in that range, anywhere between EUR 55 million and EUR 100 million. But we're not a COVID testing company. We're doing that to contribute. Obviously, this will add to our margins. This will add to cover our fixed cost and our investments. The main thing with COVID is that we do our share of contribution. And the main -- the other thing, I think it's a good demonstration of what a small company like Eurofins can do. The fact that although we're a tiny IVD company and a tiny -- relatively tiny clinical testing company, we can create so much impact on the whole scope of Eurofins. So maybe 20% of Eurofins is not nothing. That's -- I think it bodes well for other growth opportunities that we'll be confronted with in the future. And that's why it's more recurring.

[Suhasini Varanasi, Equity Analyst]

Understood. Just a last one, please. You've done a few deals, announced a few deals in recent months. But just to better model for the full year, would you be able to clarify how much has been the total M&A spend and the total annual revenues from all the M&A that you've done so far this year?

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

What is signed and closed and so on, I don't have the exact number. But what we mentioned is we think we will close this year acquisitions that will generate EUR 150 million revenues. But they will be closed mostly towards the end of the year. So the contribution, about EUR 50 million, which we will consolidate this year. And the spend for that will be about EUR 200 million. Some are not quite signed yet, but we're very close to sign it or not quite closed or signed but not closed. But it's a lot of small deals. We don't announce a lot of them because they're very tiny.

[Operator]

Our next question comes from the line of Thomas Burlton of Berenberg.

[Thomas Edward Burlton]

I've got a few. I'll just start with the first one. On the SAFER@WORK initiative, you've signed 900 contracts mentioned in the presentation, and you mentioned another 1,100 under negotiation, some of which could be significant. Are you able to offer any more detail around revenue model or how the revenue contribution might look under an average contract, if that's possible, to get an understanding of sort of the potential materiality if you were to indeed sign another 1,100 of those? How do we think about that?

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

Thanks, Thomas. Well, that's unfortunately fourth in what I was saying about unpredictability of all this. We can have a contract with the government on the SAFER@WORK. It can be EUR 100 million contract or more. And we can have a contract to a food factory that is, I don't know, EUR 100,000 or EUR 50,000. So the range is very, very broad. And I don't know that the mean means so much. Maybe the median would mean something. I think on SAFER@WORK, people are still pretty much on the wait-and-see mode. The governments are still not 100% clear as to what they would recommend. There are still -- I saw yesterday something in Germany where people are afraid that there won't be enough tests. In Belgium, they are definitely saying there are not enough tests available, and therefore, they are not necessarily -- how do I say, governments are not necessarily encouraging to test their staff or to make it easy for their staff to be tested. I hope that with all the antigen tests that are going to be in the market soon and the increase of capacity of labs that they would relax that because, frankly, there's not enough accessibility to test right now. And so some of our clients are a bit waiting to say, okay, what -- and I'm not talking of the airline industry and the airports. The thing they want is to restart, and the only way for them to restart is to offer proper testing. And I think antigen, of course, will be a quick fix, like what they do in Italy now. But I don't think every receiving country will accept an antigen test that's being reliable enough for letting people in. So I think the answer will be to do very significant and frequent PCR test with self-sampling as we are offering, or sampling by -- that doesn't require a doctor to poke something deep in somebody's nose.

[Thomas Edward Burlton]

Okay. Just on that point, just as a follow-up, if I could, just looking maybe beyond the antigen test in terms of sort of the rapid tests that are out there, the lab test or rapid PCR testing, for example. I'm thinking about the Heathrow contract that's been in news in the recent days in the U.K. Just wondering on your views in terms of sort of the other rapid tests out, the rapid PCR testing, lab testing, whether you're positioned to offer any of those, either directly in terms of the testing or in terms of sort of primers, probes, reagents and some of the inputs into the supply chain. Any comments on any of those?

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

Yes, of course. Yes, we are using them. When we operate a testing station at an airport or [indiscernible] with the airport, for example, we offer 2 options: either the normal PCR test and you get the response the next day and it costs EUR 65; or you get the rapid PCR test and you pay EUR 135 and you get the result within 6 hours. Because, frankly, the problem is those rapid PCR tests, if you do one, you can do it in 1 hour. But if you've got a line of people waiting, to provide for each patient the 1-hour response time is logistically almost impossible if you've got hardest of people to test. And it could be done, but you need a massive overcapacity in machines. You need to know how many people you're going to get. You need to have a capacity for [indiscernible]. I mean for the producers, they are producing enough machines. They cannot deliver those fast testing machines fast enough. I'm not saying that 2 years down the road, they won't be there -- or 1 year down the road, they won't be there. And that -- for me, that's a better option, actually, the rapid PCR than the antigen testing because I don't think the world will want to rely on something that misses 20% to 50% of the positives -- of the positive that can be detected by PCR, by the way, because PCR doesn't always detect all positives because the virus is not always in the nose or throat. So yes, we're using that. We're working with those companies to develop primers and probes, also for multipanels. We are involved in that. But it's the same question in point of care. There had been a big push in 15 years to bring the testing -- a lot of clinical testing to point of care. But for that to work in point of care, the test has to be done in every case within 45 minutes. The patient stays 45 minutes at the doctor. And being at an airport or a stadium is about the same. People can wait maybe 1 hour for their results, but if it's longer than that, they will go home. If they're going to go home, then they have to come back anyway. Whether it's 6 hours, the average testing time or whether the practical one, not the technical time, but the time that really hundreds of people observe, if it's 6 hours or if it's 12 or 24, it doesn't make a huge difference. People have to be tested before they go to the airport or they have to be tested after they left the doctor office, and then they get an e-mail. And I think the solutions that are sufficiently easy to do, sufficiently reliable, sufficiently high throughput, that people can really be tested on us, hundreds of people, within 45 minutes, I don't think we're there yet. But it can be organized in a specific situation. If you employ enough doctors, enough people to run the machines and you have huge stocks of machines and kits, you can make it work. But not -- you can make it work at The White House probably when you have unlimited resources but maybe not at every airport or every other occasion where you don't want to do it.

[Thomas Edward Burlton]

That's very clear. Just one final question, if I can, just on the free cash flow bridges that you helpfully put into the presentation pack. Just to understand the sort of bridge into FY 2021, where there's still a column for the cyberattack. We would have expected that to sort of fully annualize by 2021. So I'm just curious, is that the insurance payment that you are still expecting to receive sort of going into next year? And if so, a, are you able to sort of quantify that? It looks like it's probably about EUR 35 million. And b, how confident can you be getting that, please?

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

Yes. No, I think if I understand well, but Laurent can answer, the -- what we have in 2020 is a positive. But then we compare 2021 to 2020, we compare to 2020, then there is 50% -- 50 or something like that, whatever, million less from the insurance. Laurent, is that correct?

[Laurent Lebras, Group Administration & Finance Director]

Yes, that's correct. That's a comparison between the 2 years. So you look at the variation of the cash needs, and this is a negative impact the year after. So no more reimbursement. I mean we didn't forecast yet reimbursement into 2021. But we might have collected all the reimbursement in 2020. We might have a few collections in 2021. But in these bridges, we didn't forecast this yet. It's a negative comparison to the year before.

[Operator]

Our next question comes from the line of Andy Grobler of Crédit Suisse.

[Andrew Charles Grobler, Analyst]

Just a couple from me and kind of building on some of the previous questions. Going back to your longer-term targets, so the 2022 targets, there's quite a significant margin increase through that period. And given the expectation by 2022, is that all the high-margin COVID work will have fallen through kind of help you balance out those 2 facts? And what is going to drive that margin increase? And then secondly, you talked earlier about the PCR test expansion, particularly in France. Just where are you at the moment in terms of capacity? And how does that -- and how does that compare to the 2 million tests that you talked about earlier in the year?

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

Yes. Thank you very much, Andy. Yes, it's a small margin increase every year. We've been investing heavily into our lab network over the years. We've been investing heavily into becoming fully digital. And this costs a lot of money. Of course, once it's done and we have it, we should have also less disruption for all the moves, and we think we can focus more on our clients. We have a lot of efficiency initiatives in our labs by specializing the labs. So I think we plan between 2019 and 2022, maybe 50 to 60 bp improvement per annum in margin. So it is -- of course, it is not done yet, but we think it can be achieved, mostly also by removing the negative. We have a lot of our start-ups that we bought back in our mature perimeter but that are not yet at the 20% margin level. So we hope as those start-up matures, the margins will increase, and they won't provide a dilution. Some of the acquisitions we did, like TestAmerica, they came in at a very low margin. And of course, you don't go from 6% or 8% to 20% within 1 year. So we think as we integrate their network -- next year, we're building a big lab in California to merge 2 sites. We're building -- we're consolidating in Texas activities. We had a couple of underperforming labs that we have restructured. So all those things over time should benefit our margins, we believe. And coming back to -- yes, sorry?

[Andrew Charles Grobler, Analyst]

Well, yes, I think you can answer. But just in terms of the COVID element, to what extent is that going to be a negative mix through that process...

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

I mean what could happen if -- and then I answer the 2 questions. You asked about our capacity. Our capacity, we said, I think, back in April or May, that we're going to build the capacity to test 100,000 tests a day. Times 20 days, that's 2 million a month by PCR. And the same for antibody, but there's very little demand for antibodies testing at the moment. We have, by the end -- I think by the end of October or mid-November, we will be -- we will have doubled that. We'll have capacity between U.S. and Europe to test probably 200,000 samples a day, which is about 4 million a month. But don't forget, this is peak capacity. And it will never be used all at the same time in all countries where we have capacity. That would be very unlikely. And if that happens, that would be very sad. That would mean the world is really facing a much bigger problem than we think today. But we need to be able -- if there is a surge 1 month somewhere, then we need to be able to cope. And soon, we're going to be able -- we're going to have to test not only for COVID but to test for COVID plus other pathogens, and it's not 100% clear whether this will mean just one -- using 1-test capacity or 2-test capacity because some governments will have different requirements. So that's why we need extra capacity. And I'll go back to the question from your colleagues about what should we expect or what is the exit rate. If you take this capacity and an average price, you come to an enormous number per month. We could be generating EUR 200 million, EUR 300 million, EUR 400 million revenues per month. That won't be the case. And I would not -- I would encourage you to not overestimate that. It could happen. I mean the problem with COVID is we have to deal with a range of scenario. And the range of the scenarios is extremely broad. Normally, you do a base case, your worst case and the best case and maybe the best case is 20% higher than the worst case. Here, between the worst case and the best case, you have factors of 1 to 10 -- 1 in 10, maybe or 1 in 20. So they have nothing to do with each other. It could also be that things come out and the virus proves not to be as lethal as we think, and we have a much bigger herd immunity than we think, and all the governments take it in-house or they decide that basically testing is not really required unless you're really very sick. There are so many unknowns in all those maybe 20 jurisdictions we are doing this COVID test that we can't predict it. In reality, it doesn't matter. So please you, as analysts, don't put it as a huge focus. And if next quarter, we do EUR 200 million or EUR 300 million or EUR 400 million or EUR 100 million, frankly, it doesn't really matter in the greater scheme of things long term. Obviously, if we do EUR 300 million and -- that goes for margin. Of course, the more we do, the more the incremental margin will be higher because it will be incremental revenue on a fixed base. And as I already pointed out, we will try to write down our equipment fast because we have no visibility on the long term of that. So that we don't go into next year with a lot of equipment that still need to be depreciated. Our goal is the margin is at least -- our average gross margin -- if the margin happens to be double for PCR, that's good. Then that will mean in 2020 and 2021, we'll have a margin significantly above what we plan for 2022. But yes, that's -- if you look at the company, I think the value of the company is what you will get post-2022 as a shareholder. You get a leader in very exciting market that twice in 2 decades have proven to be extremely resilient to crisis. We've had an organic growth CAGR over the last 30 years that's probably 6% or 7%. And if we look forward, we probably have a similarly good outlook for the organic growth of that company. The company will be very well invested, good laboratories, very digital, way ahead of many other companies. And I think that's the main thing we are building here. Of course, all the cash we get from COVID, we're using -- we're going to use next year to invest and get more R&D and get more test validated for our food business and our pharma business, strengthen our R&D team, strengthen our ability to produce our own kit for other divisions, other business lines, which it will help. But whether we do ultimately 50,000 tests a day in the next few months or quarters or 150,000 tests per day and whether the margin is 20% or 30% or 40% on those, I don't know. I don't think there is any way to know. And I don't know that it really matters so much in the greater scheme of things. I hope you're okay with that.

[Operator]

Our next question comes from the line of James Rose of Barclays.

[James Steven Rosenthal, Research Analyst]

If we could touch on the market post-COVID, what do you think sort of the longer-term beneficial impacts might have been? Because you run through sort of different divisions and sort of the impacts you might see there. And then secondly, on 2022, I guess, the M&A guidance is still fairly muted. What was the rationale for this? And then should we expect SDI and restructuring costs to be lower year-on-year versus 2021 as a result of that, as the business matures further?

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

Yes. I think the markets for post-COVID, well, if we have to look market by market, for biopharma, I think it will be obvious for everybody that biopharma can contribute a lot and that biologics, I mean, if you saw the antibodies -- and of course, it could still fail. All the new vaccines, those vaccines that are ahead, both the BioNTech vaccine with Pfizer and the Moderna, are really new modalities that were previously a bit unexplored and unproven. They could fail. If they don't fail or even if they partly fail and we learn that they could work, that's going to trigger massive investment in those areas. Biotech is -- from what information I get, and you probably are much better informed than me, there is a massive wave of funding that's already started, and that's going to roll over biopharma for the next few years. So that segment for Eurofins, I think, is where we help those companies do their work. And especially the biotech companies, they don't have their own labs. So they need to outsource more. I think that's going to probably be boosted for many years to come. On clinical testing, I think this COVID thing will bring so much massive investments that maybe things that were not possible or thinkable before will become possible, like massive testing for broad range of pathogens. We were selling that in America for $250 a test. And obviously, the insurances are not really happy to pay $250 every time somebody is coughing. Maybe after COVID, this will be possible to $25 or $10, I don't know, and even faster. And maybe then this will become part of the norm. So there will be more investments. There will be more solution. People -- everybody has heard of the word testing, and so clinical testing could advance in many areas because of that. Environmental and food testing, I think we're getting simply more aware of all the risk of viruses and contaminants, and we think there might be more surveillance and more requirements. And again, the innovation that we've gotten in this COVID area, we will bring to our food clients, and we'll bring to our environmental clients, to governments. We will propose solutions because, of course, you can screen for this virus, but you could screen for many other viruses at the same time. So those are some of the things, but there could be more regulations or not. Of course, there are also political elements. But generally, we think testing will -- from what I hear from every direction, clients, et cetera, governments, testing probably will retain focus for a while. The other thing, the guidance of M&A, yes, we just reverted to our historic guidance where we said we think we can do a few bolt-on deals, smaller companies that add either technology or entrants in the market for about EUR 200 million per annum without creating the need for a lot of restructuring, without paying too much of our management time and without paying too much because the larger deals are very expensive. And you know we've experienced the frustration of some analysts and some investors when we had leverage that we're above 3.5x, and I don't think it's a place we want to be. We now have the rating. So we would need to manage our leverage. Of course, if COVID brings a lot of cash, that will help us to deleverage even faster and will give more headroom on that account. But it's not really required. We can do a lot organically. I don't say something super exciting come our way that we won't do a little bit more, but then we'll ensure our ratios stay reasonable. So that could be the case. And yes, SDI should trend lower. I hope this year will be the last year where we have significant SDI. And even from next year, this should be much lower because we should be bundled. There's program of integration. Our start-ups are maturing. Of course, some of them are a bit delayed by COVID. If they happen to be in a sector where COVID is preventing operations or in a country with very strict lockdown, that might delay some of our start-ups by 6 months and hopefully not more. But overall, 2021, 2022, we should see, as we can judge now, much less separately disclosed items, be they from start-ups or restructuring.

[Operator]

Our next question comes from the line of Neil Tyler of Redburn.

[Neil Christopher Tyler, Research Analyst]

Two questions, please. Firstly, on the 2022 targets and the balance sheet leverage figure of below 2x. I understand that the EBITDA excludes any COVID impact. But just coming back to some comments, Gilles, that you made a minute ago about the cash generation from the COVID testing and the likelihood that some of this would be reinvested, would you, on balance, expect some significant free cash flow from COVID? Or do you expect to reinvest the majority? That's the first question. And the second one is on customer prospecting, really. When you think about the -- you expect your markets to grow more quickly. Have you put -- had to put any of your customer prospecting in terms of the trajectory that you're expecting businesses to grow at and fill those new laboratories? Have you had to put any of that on hold? Or how has the demand for your capabilities, I suppose, accelerated the rate of new customer acquisition?

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

Thank you very much. Yes, that's a good point. Maybe the 2x leverage is conservative. I mean if we only do that level of M&A and if indeed in 2020 and 2021, we end up doing very significant amount of COVID testing, that would be then higher margin. If we do a lot, the more we do, the higher the margin. Yes, we could deleverage faster. And if COVID continues, I don't think we'll do major M&A either because we can't travel. We can't -- it's very hard to integrate any company. So we will be -- and of course, our free cash flow and our leverage -- no, not of free cash flow but our leverage will depend on how much dividend we end up paying for next year and so on. So there are a couple of unknowns. But yes, you're right. If we do a lot -- if we generate a lot of revenues and cash from COVID, that we presumably won't use for anything. Okay. Maybe if we spend a lot more in our network than we planned, we're talking spending EUR 100 million more or EUR 50 million more than planned. It's not -- we're not going to spend huge amounts more. So that's a good observation. And...

[Neil Christopher Tyler, Research Analyst]

Prospecting?

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

Prospecting, yes, it's harder to prospect. But there, we benefit because we are the market leader. So we all know that people come to us. So I think in crisis like this, you're very right, it will be very hard to go and sell and find new customers. In online, you can do some, et cetera, but you really benefit from being a leader. Where it's harder, it's for start-ups. Indeed, if we have a start-up in a new country and we're nobody and we are not known, it's much harder to start a start-up if you can't visit customers. One thing I'd like to say, I'd like to thank you for your note and thank all of you who put a lot of work in initiating. I think one of your colleagues also initiated. I don't want to advertise for anybody, but thank you very much. It's -- for you, too, it's hard without traveling, without visiting sites. And I saw you. You all put a lot of effort in understanding our company and bringing also the biopharma a look from your experience of biopharma. So we're happy to have broadened our coverage over the last year. And many of you have joined also a good experience of peer companies that are mostly in the U.S., be it in biopharma or biopharma services or clinical. So thank you for shedding an additional light to the analysis of our company and all the efforts you put into it.

[Operator]

Our next question comes from the line of Allen Wells of Exane BNP Paribas.

[Allen David Wells, Research Analyst]

Just a very quick question. Most of mine have been asked already. Can you just maybe talk a little bit about the visibility that you have on the COVID side? And you talked a bit -- and you mentioned sort of government contracts now in place but obviously some lumpiness. I mean what sort of actual visibility that you have on revenue on either day-by-day or month-by-month basis? And how do we think about that into year-end, if possible?

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

By definition, nothing is visible in this COVID. I mean we have contracts. We have big contracts. We have a big contract to test pretty much everybody in the Netherlands, for example. But it still depends on how many people get sick or how many people want to get tested. And you can't force a government to test people that don't want to be tested. So yes, I mean it's pretty obvious. We'll continue to test. And whether -- but whether we test at the same level than we were testing in September, higher, lower, I don't know. I don't really know. And yes, we have quite some significant contractual commitments, but some contracts are for 2 months. Some contracts -- we don't have contracts for 3 years on COVID testing, obviously, as you would imagine. Everybody is hoping this will go away, including governments. So it would not be reasonable to commit for 2 or 3 years on that.

[Allen David Wells, Research Analyst]

But do you have like minimum volume requirements on those contracts as an example? Does it justify you setting up and investing in the capacity in the first place? Or is that not how it works? I'm just trying to understand on that side.

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

Yes, yes, we do. We have different contracts, obviously. But if a government or a client expect us to set aside capacity for them at low turnaround time, then they have to commit to something. And then, okay, they arrange, and they don't necessarily commit to the maximum demand they could give, but then they have to commit to at least a substantial amount. If they say it's basically based on availability, then they don't have to commit, but then we don't have to serve them if we are full at that time. That's how everybody, governments and others are trying to cope with this unpredictability.

[Allen David Wells, Research Analyst]

And just kind of interest, do you have any contracts that run well into 2021? Or are most people just getting to the end of the year and they'll roll over at the end of the year? I'm just interesting in how customers are looking at next year versus this year?

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

Yes. I think they're starting to be rather worried about the whole winter. I don't think we have contracts that go beyond this winter, but we have contract that goes through the winter, so into 2021, I believe. But it's -- I don't think I would want to force somebody -- or we have some take-or-pay contract. But this is a public service we're doing. I don't think we want to force anybody to take testing that they don't want to take. And I think it won't be necessary because the other thing is if -- assuming the world gets lucky and we all end up being either immune because we were immune already or the vaccines are incredibly efficient and incredibly well accepted by the population and this goes away, there must be some level of surveillance, and we probably will switch to more statistical testing, surveillance testing, sentinel testing, maybe at a lower level, I don't think it's going to go completely to 0 from January 1 even if we -- I mean January 1 is never going to happen, but maybe March 1, let's put it this way.

[Allen David Wells, Research Analyst]

And then just very quick follow-up question, Gilles. You mentioned about, obviously, some of this machinery that you've acquired. You depreciate it quite quickly given sort of, I guess, unknown useful life and the scenario you've potentially planned for with your 2022 guidance. Given the potential -- assuming recovery in the core diagnostics business, et cetera, would it be right that you'd still be left with excess capacity that you'd even have to sell the machines? Or is the view that you'll almost certainly just grow into the capacity that you've got -- you're selling up within these machines for COVID as well?

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

I think the Street has been thinking that Eurofins is not conservative in its accounting. I believe the opposite is true, and we've always been extremely conservative in everything we do. Whenever we buy a company, we realize that we depreciate stuff much faster than the companies we acquired, and many other aspects of our accounting are actually very conservative. Of course, we do disclose exceptional items and SDIs because we think it gives the best information we can to our analysts and investors.About the visibility on COVID being what it is, we will depreciate faster those machines so that we go into 2021 with very little left to depreciate. Unless we have, as you say, firm contracts for whatever usage next year, in which case, of course, they would be depreciated over the duration of those contracts. We don't intend to go into 2022 with anything left that was made specifically for COVID that is bothering us.

[Operator]

Our next question comes from the line of Geoffroy Michalet from ODDO BHF.

[Geoffroy Michalet, Research Analyst]

I have a first one regarding 2022 and beyond on the organic growth above 5%. I just wanted to know if you could share with us an idea of the price and volume effect split between the 2. And also to which time do you suspect you could have this sustainable rate without reinvesting more in a new start-up plan for instance? Second question is, well, you partially answered it, is which part of the business are negative organically speaking in terms of growth or below 5%? And the third one is, in the coming years, would you intend to modify a bit your dividend policies and increase it since your free cash flow will dramatically increase?

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

Thank you. Yes. Our organic growth, except for maybe 2009, 2009, where our organic growth was 2% or 3%, we're always above 5%. And so I think 5% is probably a reasonable objective. What is price? What is volume? Maybe price is between 1% and 2% and volume is between 3% and 4% to give you an idea -- or maybe 3% and 2%. We -- it's very hard to really calculate because we offer new test all the time. Because this year, we have COVID. We didn't have COVID before. So I wouldn't be able to calculate the price effect in this year, maybe on the -- on part of our revenues. Reinvest, yes. And for that, we don't need to do so much. We have indicated that with 6% CapEx, we're very comfortable, and the 6% CapEx allow for definitely those 5% organic growth and probably more. So probably if we were going to only stay at 5%, probably we'd need less than 6% CapEx, maybe 3% or 4%. So I think it's -- that won't require -- and the 6% CapEx will include some level of start-ups, obviously. Which parts are below 5%? I think I'll point you to our press release. I think we've disclosed a bit the areas, clinical testing. But basically, you look at it this way. If people need to travel to either take a sample or to get tested in some geographies, this is difficult. Or if they need to go inside, when you have a lockdown, they can't go inside the building, et cetera. And dividends, yes. A long time ago, we talked to our investors, and we were of the opinion that as a growth company, we should reinvest 100% of our profit. But they said, yes, but you have to show some commitment to investors even if the amount are modest. So we said, okay, we'll distribute about 1/4 of our net profit. We didn't do it in -- for 2019 because of COVID, and it would not come down very well in countries like France if we pay the dividend while putting people on [ chomage technique ] or furlough. But we -- I think we will revert to that from this year -- from the dividend for 2020.

[Operator]

Our final question for today comes from the line of Steven Goulden of Deutsche Bank.

[Steven James Goulden, Research Analyst]

I just wanted to ask on -- if you look at the figures that the NHS and the U.K. published, you can actually see the split of public versus private capacity. And over the last few months, there's been a big move toward private. And I just wondered if you could give us any kind of high-level -- I'm sorry, I'm talking about COVID, obviously. If you could just give us a feel for how various governments in your core markets are -- well, how the capacity between public and private really is building in core markets. And then you said earlier on that you hope to be at around 200,000 tests a day, I think, by -- I think you said by late November. Could you just give us a feel for how quickly -- I mean, that implies 4 million tests a month, how quickly you could take that to 8 million if the demand was there? What's the kind of practical reality? What are the bottlenecks? Is it just getting access to equipment? Is it logistical? Is it having the real estate, for example? Any kind of color there would be really helpful.

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

Yes. Thank you very much. This is a very good question. I think the world didn't do itself a service because initially, the testing was very limited to public labs. I think the worst was in the U.S. where CDC limited testing very strictly in March -- February and March of this year. But then they opened the floodgates and they encouraged every private lab to build capacity. The U.S. has been building massive capacity. So I think it will be millions of tests a day capacity by the end of this year in the U.S. market collectively. Europe has been traditionally more towards the public sector. France was very reluctant to push private labs. But then in April, I think, they realized that if they only ask the hospital labs to do testing, it wouldn't work out. But at some point, hospital labs are just too much, and they said, yes, we need help from the private sector. Belgium has been very much oriented to public because it's a small market. But eventually, they realized that maybe private labs were more efficient at doing very large volumes. And in the U.K., I think the private sector with the Lighthouse Labs was involved, I think it was Deloitte running those, it was maybe public/private partnership. And yes, the governments have to approve other labs. It's -- I think the -- if the government had asked the private sector from day 1 to deal with it, we will be much further. Especially if the governments have given a better visibility as to their long-term or, let's say, 1 or 2 years need would be, the capacity would have much -- been built much faster and more reliably than it has been. France was hit with a shortage of tests in September, which should never have happened, in our opinion, if capacity has been built in April -- from April. But anyway, now in the meantime, it has been caught up. Yes, going from 4 million to 8 million is not all that hard. Now we've got so much experience in developing, dedicated customer for it, in automating. We produce our own reagents. We have built factories to produce reagents. We're building factories to produce test kits. We could do it. I hope we don't have to do it. I hope that with 200,000 tests a day, that obviously, we won't use those 200,000 tests a day capacity. Maybe we're -- on peak times, maybe we'll use half of it. I don't know. I hope we -- my hope is we use as little as possible, so this thing goes away, and we can return to our normal lives. That's basically what we're doing at Eurofins. Now of course, since it is our core business, and we're good at it, we are in the countries where governments accept our help, we're doing what we can to help, and we're building that capacity. So if some governments say, okay, we think this will continue beyond the winter, and we need more capacity within 2 or 3 months, we could move from 4 million to 8 million. But we won't do it just -- and we're not the only ones. I think capacity is building all over. So I hope there will be enough capacity. The real problem -- the real bottleneck is in something, is in removing the bottleneck to people getting actually physically tested. And I think the biggest hurdle is that at the moment. And so if we get approval from governments to do self-sampling in most European countries, then we might need much more capacity actually because that would be the easiest for everybody, including for employers to test their staff. Because you'd have to bring a nurse, bring a doctor, that's why at these times, it's much more complicated.

[Operator]

Our final question then comes from the line of Nicolas Tabor of MainFirst Bank.

[Nicolas Tabor, Analyst]

I wanted to come back on your beyond 2022 guidance of further margin improvement. I wanted to see what's your long-term vision there. And where could approximately EBITDA margin go? I remember that in the past, we used the 20% pre-IFRS 16 EBITDA margin as more normative level, the adjusted one, I mean. So what would be a normative maybe EBITDA margin that we could reach over the long term compared to what we were looking at over the past years?

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

It really depends on the mix. I think -- and the mix and how fast we want to grow and how many start-ups we allow ourselves to open that might be dilutive. One big market that really is open is China. We're not investing massively in China. Others are doing it. We're a bit concerned as to where the long-term foreign companies will be able to have a large market share in China. But of course, this is an area where we could revise that and/or find ways to derisk those investments. We haven't invested so much yet in many Asian countries. So that would be more of a [ cursor ], too. In the bigger markets, once we reach maturity and we have all that network and we utilize it well, I think we can have good margins. That's why we're now setting as an objective something that's above 20% pre-IFRS. What we target for 2022 is already above that. I think if we do that, it's already pretty good. If you have a company that has already this level of margin and cash flow that is growing organically 10% per annum, that is little by little improving even if we improve 20 bps per year or whatever from there, I think it's already a pretty good company. And actually, if you can get that company at the current multiples now that are equal or lower to companies that definitely don't have the secular growth rate, I think it's already quite good. But that's for you to judge. It's not for me. All right. I would like to conclude the call now and thank all of you for all the time you're putting in analyzing our numbers, if you're analysts, or if you're an investor, for your support through those years of building the company. I'm very happy with what our teams have achieved in this year, in the first 9 months of this year, which has been incredible work in very difficult conditions. A lot of people have had to come to the office or to the lab when their friends and colleagues were staying at home and doing homeworking, so we could serve our clients, do our research, operate our labs. They've been doing a lot of work. And I think the results show what is possible, will be the strength of R&D and the commitment of our teams, and also what is possible because we are an entrepreneurial company made of many small companies that are very agile and reactive and entrepreneurial. So we'll try to continue to do our best. We'll try to help your respective governments to tackle the virus and get everybody tested quickly that needs to be tested. That hasn't been so great. The lab industry hasn't done a great job over the last 6 months to make that possible. Now we've all learned. We've all gotten better. And I think collectively, the lab industry will help, and Eurofins and the IVD providers will help, and we're definitely going to work hard for that. Thank you very much, and have a very good day.