Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the DiaSorin nine months 2021 results conference call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Carlo Rosa, Chief Executive Officer of DiaSorin. Please go ahead, sir.
Thank you, operator, and good morning or good afternoon to all the participants to the third quarter 2021 results. As usual, I will make a few comments about the business, more qualitative and then Mr. Pedron, the Chief Financial Officer of the company, is gonna take all of us through the numbers. Now, this is the first quarter where we also have Luminex including our numbers. In order for everybody really to understand how the business is tracking, I'm gonna make my comments without Luminex at the beginning, and then I'm gonna give some remarks on the Luminex performance. If we look at the business at constant exchange rate and without Luminex, in quarter three, the growth was 10% versus Q3 of 2020.
If we look at the different technology, CLIA vitamin D had an outstanding performance, +30%. We're gonna see that this is the result of a successful placement in all the different geographies, primarily U.S. and Europe. The programs that today are driving the success of our CLIA business are the specialty and the stool program together with the TB deployment and the program that we're running together with QIAGEN to convert and grow the TB franchise around the world. Vitamin D is down 8.7%, and this is clearly related to the Quest loss that happened in 2020 at the end of 2019. Now it's in full effect, starting from this quarter.
As far as molecular is concerned, the business overall grew 5.5% versus last year. Clearly, the vast majority of the business is COVID related, and I'm gonna make some comments about the COVID later on. Now, if we deep dive into the geographies and we start from Europe grew actually 20% quarter-over-quarter, sorry. CLIA is including vitamin D, so all-in is up 80%. COVID molecular is up 30% versus quarter three in 2020, and this is due to the fact that, as I think, many other operators in this industry have already commented about the European COVID business has been more flat and so less affected from volume increase or decrease over the last few quarters.
We do have an install base of MDX systems, which today fits primarily in Italy, in Spain, in France. This is due to the fact that when we had to launch the system during the COVID pandemic, we clearly gave to these geographies preference over other geographies due to the limitation in number of systems that we could manufacture. Today, that install base in Europe sits primarily into hospitals and it is used to triage patients. It is used on symptomatic and therefore today we are not at risk of losing some of the volume that typically was related to screening of asymptomatic that was happening in the high throughput platforms in the core labs.
When it comes to U.S. and Canada, the business overall is flat, but I think we need to read between the lines in terms of how technologies are performing. CLIA is up 36% versus quarter three last year. Again, deployment of the hospital strategy with the TB product and the stool again, and all the specialties that are really leading the charge is allowing us to penetrate this segment. If you remember, at the end of 2019, we had invested $5 million in creating a dedicated sales force for this segment. I think that today we are reaping the benefit of the fact that we do have a menu of products that fit very well the space.
The TB is certainly a product that is interesting in that space. Today, there is lots of send out in that space that, due to the availability of the diagnosis, now hospitals can bring in-house and save money versus the send out opportunity. Overall, the CLIA strategy is working very well in the U.S. That is becoming our primary geography around the world. When it comes to the molecular business in the U.S., it is flattish. It's actually decreasing, I believe, 1% versus Q3 last year.
This is due to the fact that there has been a softening of volumes clearly from the peak that the industry enjoyed in Q1 of 2021. I think what is noteworthy is that when it comes to the instrument sales, we are EUR 7 million down versus last year, and this is explainable by the fact that all the emergency funding that was available in 2020 to buy instruments and now it really dried up. Today we are converting CLIA. We're not selling systems any longer.
We are placing system under the rental business model, which is what, as you know, we've always been doing before the COVID pandemic and the emergency funds became available. Overall, the business is flat, but the CLIA is clearly very successful in the U.S. Now, if we move to China, year to date is +28%. Quarter three is +5%. We see that in China there is a recovery compared to the debacle of 2020, although I believe that there are a couple of things that are noteworthy in this geography. First thing is that there is volatility in testing volumes, and this has to do with the fact that in order to fight the pandemic, there are continuous lockdowns in different provinces and cities.
Every time there is a lockdown, certainly the routine testing is suffering. The second effect that is noteworthy is that we start to see, as everybody else, price effect due to the fact that these provincial tenders are entering into effect. There has been a report which has been issued a couple of days ago by one of the primary research firms in the U.S. that was actually saying something interesting about these tenders. DiaSorin has been one of the companies that has been on the winning side. We won a certain number of provincial tenders. Although it is very clear that the pricing structure for some of the routine assays, like the thyroid and oncology products, that today are really suffering the competition from local manufacturers.
The price structure certainly is very different from what we used to enjoy when we were going to each hospital offering our products. I believe that as far as China is concerned, and as other manufacturers have expressed in the last few days, I believe that the future for China is quite uncertain and quite difficult really to predict what is gonna happen in the next few quarters in this geography. I believe that from an overall geographical perspective, though, today the U.S. do represent 50% of the DiaSorin business.
Strategically, if you remember when we were commenting about the Luminex acquisition, one of the reason why we bought Luminex is because we strongly believe that the market today guarantees growth, good pricing, and reward for innovation in the US. DiaSorin is very well positioned to enjoy this opportunity again, through the Luminex acquisition. Now, I’m gonna talk about COVID a little bit, the elephant in the room. Today, COVID, including Luminex, and again, sorry for changing the perimeter, but I think this is important. COVID for DiaSorin does represent today 30% of the overall business. Year to date, the business has been growing nicely around 55%-57%.
When it comes to the last quarter, it's plus 5%, certainly with different dynamics about between the U.S. and Canada and Europe, which I've been discussing before. It is quite difficult to predict, in my opinion, what is gonna happen to COVID, as I think, again, other operators have been commenting in their quarterly results. Today, again, when it comes to Europe, we see a steady demand. When it comes to the U.S., we certainly see a decrease in testing volume compared to peak of around 30%. The demand is, at this point, relatively flat in the last two to three months. Okay.
We now need to really wait and see what is gonna happen during the upcoming flu season or respiratory season. Today, I always provided you with also volume, testing volume in terms of manufacturing. Today is a combination of DiaSorin and Luminex. We are shipping roughly one million tests a month of COVID products. I'm gonna make a comment about Luminex. As you know, we have incorporated now Luminex for the full quarter and roughly EUR 90 million of revenues in the quarter. The acquisition has been completed in July. Since then, we have started to work with the Luminex management on the integration.
We have recently announced the new organization, where we do have now a management team that is a combination of DiaSorin and Luminex managers that will have the responsibility to lead the company forward. We are completing the integration plan that will be presented to the board of directors in December, and it is going to be disclosed as part of the December 17 investor day, when in broad terms, we're gonna talk about what we intend to do Luminex, and how we intend to leverage all the assets that actually Luminex has brought to DiaSorin. I make one more comment about the VERIGENE II platform that, as you know, is one of the key platforms or key technologies that we acquired through this acquisition.
We are planning to have a soft launch of the VERIGENE 2 in 2022 ex-U.S., so in Europe, and then we're gonna have all the submissions in the U.S., where we expect to launch the platform in 2023. The platform is gonna be renamed, so the VERIGENE 2 name is gonna be soon abandoned, and it's gonna be substituted by the new name, which is LIAISON PLEX. Because this platform does complete the product portfolio of DiaSorin that I remind you is gonna be made of the MDX Plus, which will be the platform that can offer small plexes.
The LIAISON PLEX, which will be the one that will allow us to develop high complex panels, and the LIAISON NES, that will be the one that we are gonna use for a decentralization of molecular testing alongside the ARIES platform, which is a legacy from Luminex, the legacy platform from Luminex, that today has been successfully launched primarily in the U.S. with an install base of roughly 70 systems today placed in some European countries. One thing that is worth noting is the fact that when we look at the customer base in the U.S., what is very interesting is that Luminex is primarily offering its products, I'm talking about the IVD products, to the hospital market.
There are over 700 hospitals that the company is selling to in the U.S. DiaSorin has roughly 250 hospitals that we are serving and supporting. The interesting part is that only 70 hospitals in the U.S. are overlapping. We believe that there is a very interesting opportunity for cross-selling products in this hospital base. You know that DiaSorin made of the hospital segment one of its primary targets to develop the U.S. market. The reason why there is no overlap between the two companies is because DiaSorin did develop the installed base using the LIAISON XL. LIAISON XL certainly requires certain testing volumes in immunoassay, and the hospitals that typically were running this volume were large institutions in the U.S.
As far as Luminex is concerned, they've been serving this market really starting from a mid-low throughput system, which is the VERIGENE platform, the VERIGENE one platform and the ARIES. Therefore, they traditionally have developed their business in the mid-segment, midsize segment, in the U.S. This provides a phenomenal opportunity, in my opinion, to the LIAISON XS. As you know, we are waiting for the approval of the TB assay on the XS. We already have all the other products, the stool products and the PCT already ready to go. As soon as TB is gonna be migrated there, and we expect to hear something on the FDA by year-end, then we are ready.
We have an available market of over almost 700 institutions that we can go and sell the XS to. I'm very excited about this cross-selling opportunity that the Luminex acquisition has provided to us. I think now I'm gonna turn the microphone to Piergiorgio Pedron, and he's gonna take you through the financials, and then we're gonna open up the session, the Q&A session. Thank you.
Thank you, Carlo, and good morning, good afternoon, everybody. In the next few minutes, as usual, I'm going to walk you through the financial performance of DiaSorin in the first nine months of 2021. I would also make some remarks on the contribution of the third quarter and on the impact of the Luminex business, whose acquisition has been completed on July 14th. Again, please note that we are consolidating a full quarter of Luminex into DiaSorin financials. That said, I'd like to start with what I believe are the main highlights of this period. On July 14th, we closed the Luminex transaction for a total equity value of $1.8 billion, and starting from Q3 2021, Luminex financials are consolidated into DiaSorin ones.
Please let me remind you that the acquisition has been financed by a mix of a bank term loan for $1 billion, five-year tenure, and a zero interest convertible bond for EUR 500 million with 2028 maturity. Revenues, as reported, so at current exchange rate and with the contribution of about EUR 91 million of the Luminex business, grew by 41% year to date and 51% in the quarter. The growth at constant exchange rate and scope of consolidation in the nine months is at 29% and 10% in the quarter. These numbers, as we will see, are in line with the high range of the guidance we provided in July. Q3 2021 gross margin at 65% is below last year, which closed at 68% because of the expected dilution of the Luminex business.
The year-to-date margin at 68% is substantially in line with 2020. Likewise, Luminex consolidation has a dilutive effect on Q3 adjusted EBITDA margin, which closed the quarter at 41% vis-a-vis 46% of 2020. Once again, this is in line with our expectations and the guidance we provided back in July. Lastly, we keep confirming our ability to generate a very healthy free cash flow, EUR 224 million in the first nine months of the year with an increase compared to 2020 of EUR 71 million, 46%. The net financial position is negative for -EUR 1.5 billion with EUR 330 million cash position, positive cash position. Let's now go through the main items of the P&L.
September year-to-date revenues at EUR 859 million grew by 41% or EUR 249 million compared to 2020. The three drivers behind this variance, sales ex COVID and Luminex grew by EUR 65 million or 15%, 17% at constant exchange rate. We have the contribution of COVID sales, which grew by EUR 93 million or 56%. The growth at constant exchange rate is 60%. Luminex, which is a difference in scope of consolidation which accounted for EUR 91 million. September year-to-date gross margin at EUR 580 million grew by 38% compared to last year, closing the first nine months of 2021 with a ratio to the revenue substantially in line with 2020.
I said at the beginning of my remarks, the difference with the previous year is mainly driven by the inclusion of the Luminex business in the scope of consolidation. This is even more clear when we consider the gross margin ratio of the quarter, which closed at 65% compared to 68% of 2020. Let me please remind you that this variance again is in line with our expectation and the guidance provided. September operating expenses at EUR 243 million grew by 24% compared to 2020, with a ratio of the revenues of 28% vis-a-vis 32% of the previous year. The increase in the OpEx ratio of the third quarter from 28% of last year to 31% of 2021 is due to the very same reason highlighted for the gross margin, the consolidation of Luminex into DSR numbers.
Once again, let me remind you that this is in line with what we forecasted, and we are expecting this ratio to diminish as the integration process will move forward, and we will deliver the synergies discussed during the call we had when we announced the Luminex deal. Year-to-date, other operating expenses of EUR 23 million increased by EUR 12 million compared to last year. This variance is almost entirely driven by the one-off expenses related to the acquisition, which accounted for about EUR 16 million. As a result of what just said, adjusted EBIT at EUR 314 million, 37% of revenues, has increased compared to 2020 by 47% or EUR 101 million. Interest expenses at EUR 14 million are almost completely driven by the bank term loan and the convertible bond to support the Luminex acquisition.
Let me please remind you that this number includes about EUR 3.5 million of non-monetary interests driven by the convertible bond. This is just due by, you know, how the IFRS is dictating the way to account for interest on a convertible bond, even though let me remind you that the convertible bond was issued with a zero monetary interest rate. The tax rate at 24% is substantially in line with 2020, which closed at 23%. This brings us to the net result, year-to-date net results at EUR 229 million or 27% of revenues, which is higher than previous year by EUR 67 million or 41%. Lastly, 2021 adjusted EBITDA at EUR 383 million, 45% of revenues, is higher than 2020 by almost 50% of EUR 125 million.
The variance at constant exchange rate is positive by 51% with a ratio of the revenues of 45%. The adjusted EBITDA ratio in the quarter is 41% and is lower than 2020, which closed at 46% because of what we said before, the dilutive effect of the consolidation of the Luminex business. As I said before, for the OpEx, let me remind you that this is in line with our expectations. I want to make this very clear, and it's coming from the lower operating leverage in the Luminex business. Let me now please move to the free cash flow.
As usual, in the first nine months of the year, the group generated EUR 224 million of free cash flow vis-a-vis EUR 153 million of 2020, with an increase of 46% or EUR 71 million. As discussed back in July, I believe it is worth underlining that in 2021, we have had a much higher tax cash out compared to 2020, EUR 78 million vis-a-vis EUR 23 million. The difference has been driven mainly by two elements, the different phasing accounting for about EUR 15 million
About EUR 35 million driven by the higher profit compared to the previous year. Lastly, let me please move to the 2021 guidance, as usual at constant exchange rate. In light of the performance of the third quarter and what we expect for the remainder of the year, the guidance for 2021 has been increased compared to July. In order to make the numbers comparable with 2020, we'll also provide, as we did in July, a breakdown of the revenues between DiaSorin and Luminex business. The new guidance is calling for a total combined revenues increase at around 40%, and the total combined adjusted EBITDA margin at around 43%. Besides, DiaSorin revenues are forecasted to increase at constant perimeter of consolidation and exchange rate by around 18%.
For concluding, please remember that, DiaSorin financials are exposed to the US dollar, as we always remind everybody, and even more so now that, the United States represent about 50% of the total group sales. Therefore, as a rule of thumb for your modeling, consider that for e very $0.01 Movement of the dollar against the EUR, DiaSorin revenues move by about EUR 6 million on a yearly basis. Now let me please turn the line to the operator to open the Q&A session. Thank you.
Thank you. This is the Chorus Call operator. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Alexander Berglund with Bank of America. Please go ahead.
Thanks for taking my question. Actually, it's two. I'll start. I just wanted to get your thoughts on this kind of recent news on the COVID pill and how you think that might affect testing for COVID, if at all. I mean, I always assume you need to have a positive COVID test before you're taking any pill, but I wanted to check if you think that kind of maybe on the margin it could actually increase, you know, some testing as people get less cautious and/or if people that are kind of a bit more resistant to vaccine might consider not taking a booster shot. That was my first question, and I'll let you answer and I'll follow up with another one.
Yes, I'll take the question. Look, you know, the day they announced the pill, I think the whole industry lost over 5%. The company that is making the mRNA for the vaccine lost 19% that day. I think there has been a lot of overreaction. When it comes to testing, as you said, rightfully so, you don't get. This is not an aspirin, so you're gonna get it under medical advice, and you're gonna get it once there is confirmation that you have contracted COVID.
To be honest with you, I don't think that when it comes to volumes, testing volume, this is gonna have a positive or a negative effect, more than I believe the fact that, the, vaccination and, the fact that now the boost is gonna be made available certainly is going to affect, testing volume, I believe next year, especially when it comes to the asymptomatic, testing, right? Because let's not forget that a lot of, testing volume came from asymptomatic testing. There is a testing that will remain. It has to do with the fact that everybody admitted to a hospital is gonna get tested. You're gonna have professional, testing, you're gonna have airline testing, da, da, da.
Believe me, I'm not losing sleep on the effect that the pill is gonna have on the business. I think the COVID business, as said, is gonna be affected by other factors.
Thanks for that. Then just kind of moving on to kind of the base business. I mean, I had a couple of feedback today that you know, some people were kind of expecting a bit more kind of on the recovery of the base business, especially kind of if you kind of look at it compared to 2019, so looking at non-COVID. You know, I was just gonna get kind of your sense, and you kind of mentioned a little bit of what's been going on. You know, how are your kind of expectations of kind of non-COVID business recovery, and how are you kind of seeing...
Are you seeing kind of any inflection points in the trends, given now that we're already quite far into the fourth quarter? If there's anything you can comment on that, how it's doing right now.
You are referring to 2019. Look, if you compare 2021 to 2019, I think there are two elements that make the comparison, the overall business comparison, difficult. The first one, I said, we are missing a very large vitamin D contract that now the effect is gonna be felt throughout 2021 and then it's gonna go away, clearly. The second effect, though, that everybody is forgetting is the fact that in 2019 we had still an ELISA business that was coming from Siemens. The 2019 was the year when we are still shipping the ELISA that we did not convert to the LIAISON.
All that business pretty much evaporated in 2021. This is why I keep saying if you really look at the component of the business, which has to do with the CLIA growth. You need to look at vitamin D, and in the vitamin D element, as I said, minus 8.7%. There is a negative effect of Quest and a positive effect of the fact that some of the positive impact of COVID and COVID testing for vitamin D on patients. Then clearly you have all the molecular part which has to do with COVID.
I don't understand why you don't see the growth of the base business because to me it's exactly the opposite when it comes to the XL, 440 placements year to date. It's gonna be we're gonna be placing over 550 systems, considering a slowdown of China, which is telling you that replacements are not slowing down in the other geographies. Actually, they are picking up. The CLIA business is again and the success of some of the programs we are conducting together with some of the partners like the QIAGEN or internally developed products is growing very, very nicely. On top of it, when it comes to the base business, we are weeks away from launching the MeMed assay.
You know, we are the only company that will be able to carry that product on the platform, and very excited about that. Last but not least, as I did comment on the LIAISON XS, we have 700 hospitals in the U.S. that today are DiaSorin customers, and we are on the verge of launching the LIAISON XS in the U.S. with TB and the rest of the menu. I am very excited, to be honest with you, about the base business.
Thank you very much. Appreciate it.
Carlo, if you can just add a comment for the benefit of Alex. You know, usually we've always looked at the CLIA, vitamin D index COVID as a proxy of, how the base business, you know, is growing. I believe I didn't mention it in my remarks, but if I look at Q3 data, CLIA vitamin D index COVID over 2019 is growing by almost 20% at constant exchange rate, 19% to be precise. This just to confirm all of your comments on the growth of the base business.
Thank you.
The next question is from Hugo Solvet with Exane BNP Paribas. Please go ahead.
Hi, guys. Thanks for taking my question. I have one on VERIGENE II. Carlo, you mentioned in the call the 2023 U.S. launch. Can you maybe give us a bit more detail on the exact timeline and timing for this launch? Should we assume that similar to Europe, you will have a soft launch period in the U.S., during which you will probably upgrade existing customers? Just wondering when we should expect sales to kick in from the U.S. from the VERIGENE II. What menu would you expect to have by 2023 in the U.S. and in Europe? One question on China. China is up 5%.
Can you maybe remind us here what business lines are impacted and on, or should we expect the recovery? One last on the margin, you stripped out for us Luminex on the top line. Can you maybe help us understand what are the moving parts on the EBITDA margin and what would have been the margin excluding Luminex? Thank you.
Okay. In terms of colors on the VERIGENE II or the LIAISON PLEX launch, I think you will need to wait until the December 17th investor day because I believe we're gonna be more specific about this. Today, there are five panels that are in development. The respiratory included clearly, which has been extended to the COVID product. You have the blood culture, three panels. You have the GI panel, and then you have the CNS panel. That is the one that it was where Luminex started development later than the other. The bad news about the VERIGENE II is that the company intended to start launching the product starting from the end of this year.
Due to the fact that the manufacturability of the cartridge and the instrument is not where it should be in terms of being able to face the demand that we foresee for this instrument, we decided that we want to make an investment into bringing up all the lines that today are sitting in Chicago not validated, moving away from manual manufacturing into the manufacturing line that is validated and is the final manufacturing line. This certainly is generating delays vis-à-vis the launch, but we also believe by the same token it is guaranteeing a more robust product. As far as the good news is concerned, that product development has continued in parallel.
Now, rather than launching the system with just one panel, we plan to have the completion of the menu happening very rapidly after launch. Certainly, this is the benefit of the delay in the cartridge and the system availability from an industrial point of view. Again, in terms of positioning, in terms of expectation, I think you need to wait a few weeks until we unveil everything at the Investor Day. As far as China is concerned, + 5%. Look, I, as said, there are three things that are happening today, and they're not happening today, sorry, I think I already...
I heard few calls from other companies and everybody is pointing to the same direction, and it's price and it's protectionism of the government vis-à-vis the local suppliers. When it comes to price, we already did comment on that. There is an effect of provincial tenders, which is really resetting the base for some of the new two products. When it comes to the protectionism of the Chinese government, well, you can read the Financial Times, but it's very clear that today there is a preference of the Chinese government to the Chinese suppliers when possible. There has been an acceleration of a strategy that, if you remember, was set in place with a target date of 2030 of having 50% of the medical supplies made in China.
I believe that there is today a desire and an ambition to actually make this happen much faster than we thought. As far as we are concerned, as far as how this is going to affect the business, look, I think short term there is gonna be an effect of the business, Chinese business, because there is really nothing you can do if a provincial tender is asking you to be a Chinese manufacturer, and you're not. You are excluded from the tender. By the same token, I believe that we've initiated, as you know, over a year ago, the construction of a manufacturing site in Shanghai, which is proceeding.
I believe that what this is teaching to all of us is that you cannot be half pregnant in China, so you have to be perceived as a Chinese local supplier with products that are also directed to the Chinese market, which in some cases are different from what we offer in the U.S. and in Europe. Fundamentally, I believe that we are at a crossroad today, where either you decide that you develop a Chinese brand with Chinese products, or you're gonna be strategically excluded from that market. The discussion we're having internally is that we really need to develop now a strategy that goes behind what we had in mind in developing a Chinese set of products and Chinese manufactured product just dedicated to the Chinese market.
I believe, Carlo, there was a question on margins, so I will take it. For Luminex, we are not gonna disclose a detailed margin for the Luminex business going forward. If you just do some reverse engineering on Q3 numbers, comparing to Q3 2020, what you would see is that Luminex gross margin for the quarter is around, let me say, 55%-60%, compared to DiaSorin usual margin, which was 68%-69%. If you go down to the EBITDA level for the quarter, and you do a similar reverse math, you would get to a number which is around 25%. Again, this is quarter one.
This is without including all the synergies which we discussed about and which will come from the integration process of the two companies. One last comment. This is a touch better than what we modeled and what we used for our guidance. I believe you know we are absolutely comfortable with the numbers we're seeing.
Okay, thank you very much. Just a quick follow-up on those synergies, given that the VERIGENE II launch is now expected a bit more far out in 2022 and 2023. Should we expect the impact from those synergies to kick in a bit later than you usually thought? Thank you.
I believe, you know,
Yes, yes, I will take it, Carlo. I believe we would, again, we will be more detailed, and we will give more information during the capital market day, which is gonna happen one month from now. When we did our modeling in terms of synergies, we gave a number, which, if I remember, was $55 million on the cost side. We didn't put any kind of, we didn't share any kind of number in terms of revenues on the top line. I don't believe that, you know, any discussion we're having on VERIGENE II is gonna affect our synergies on the integration process side. Quite the opposite in terms of revenue side.
I believe Carlo commented pretty well about, you know, the good opportunities we see from the 700 or so hospitals to which we can go and offer our access with our menu, which was not included in our modeling and nor in the synergies we gave. You know, I don't think that this comment on VERIGENE is gonna have any effect on how we see the business going forward.
Okay, thank you very much.
The next question is from Maja Pataki with Kepler. Please go ahead.
Yes, good evening. Three questions from my side, please, if I may. Carlo, you are, you know, you're moving up the revenue guidance to the upper end of where we were in H1, and yet, you know, when I listen to your comments about COVID testing and volumes, it doesn't really sound like you changed your view very much. I'm trying to understand what is the reason that you expect now to come in at the upper end of the guidance, if you could just share some thoughts on that. The second question is, as usual, about the point of care rollout that you're doing in the in Italy. Can you give us some feedback on how it's going? What is the feedback? What is the demand that you're seeing for that product?
I'll follow up with the third one.
I'm gonna make a qualitative comment, and then PG can actually add to this. I believe that the visibility that we have today with COVID versus what we had when we actually gave a guidance is really allowing us to be more precise. I think it's fair to say that compared to a gloomy scenario that could have been possible, and we've anticipated with the COVID in this flu season, I believe that the quarter three was higher than everybody in the industry was anticipating. I believe, Maya, that the big question mark still is in Q4, but not necessarily whether Q4 is gonna be lower than Q3.
The question is whether Q4 is gonna be higher than Q3 or not. The impact of the differential diagnosis vis-à-vis the respiratory season, right? Everybody coping from now on with some fever will have to go through some sort of differential diagnosis. The question is, in those countries like the U.S. where there is an extended, I think, availability of over-the-counter testing, I believe that that volume is gonna be captured primarily by the over-the-counter test. In other geographies where the over-the-counter, like in Europe, did not really pick up because not sponsored by the government, you're gonna have an increase in testing volume because it's gonna be done in laboratories where all the traditional operators are operating.
This explains, in my opinion, now the comfort that we have on the upper end of the guidance. PG, do you wanna add more?
No, Carlo, that's exactly right. I mean, the rise in the guidance is coming from a better Q3, mainly driven by COVID. If you do the reverse engineering, what you would find out is that in Q4, what we are expecting in terms of revenues is a similar number to the one we saw in Q3 and EBITDA margin of around 40%-41% in the quarter. It's the visibility we have in Q3, I mean, is the actual, as you said, it's better COVID sales we had in Q3.
Maybe just a quick follow-up. I mean, Carlo, you have been fairly negative in the first half of the year on what you anticipate to happen with the COVID pricing. Can you just comment whether you start to see some pricing pressure on COVID testing or whether that still hasn't really materialized?
No. Up to today, we have not seen any price effect, but this is because in the primary geographies where we operate, there has not been a reduction in reimbursement. In the U.S., reimbursement continues to be same level as before. In Europe, in Italy, where again, the second-largest geography for us, the government with the emergency decree is actually the one buying the products at a fixed price from the different suppliers. That will guarantee us that there is no price erosion. Spain, very similar, where we have contracts where for the time being the price stays as is.
I do not expect in Q4 price effect, with one exception, which is on the overall one is the mix because as you well know, in Italy and in Europe, we sell COVID at 25%, 25% price discount compared to what we offer it in the U.S. This is, again, has to do with the different reimbursement system in the U.S. If I can move to the LIAISON IQ, which I think is your question. The program is proceeding in Italy, but I have to tell you that there is a problem, and the problem has to do with pricing. Because I believe that there has been overflow of products made in China that have been flooding the European market.
Since we don't have the EUA approval system that I believe has sheltered the U.S. from this, today you can go to a pharmacy and Chinese are offering these products, lateral flow without much sophistication at EUR 1.3. You're getting to a point where you need to make a decision vis-à-vis do you wanna make money or not on this lateral flow. If you just sell it in the European market, I believe that the situation is very different when it comes to the U.S., where I believe one of the primary companies providing this is using $9 as an end user price. If you operate in Italy, today you want to really decide if this is worth or not.
For the time being, we have been disciplined in terms of only providing this system to those pharmacies that appreciate the technology added value that we provide. Not a simple strip, but the instrument, the traceability and so forth. It's certainly the opportunity is shrinking unless you accept a dumping on price, which is not what, you know, we are famous for.
Okay. Thank you for that. Maybe my last question, now I remembered, I'm sorry. I was wondering if you could give us some qualitative statements around the growth in Luminex in Q3 for the various, you know, businesses. Just if you don't wanna attach numbers, that's fine, but just give us a bit of a feeling how things are going.
Okay. I'm not gonna attach numbers, and I'll give you a feeling. How about that?
Perfect.
Okay. First, you need to take into consideration that, when you are comparing a Q3 to Q3 in this company, you're really comparing for certain product lines, apples with oranges. Let me explain to you why. In quarter three last year, this company, as far as COVID is concerned, has three products, of which one is the ARIES, which is a single plex. The other one is related with VERIGENE one and VERIGENE II, which were plex panels. Certainly, these plex panels were very manual, and they do not stand vis-à-vis products which are offered by competition. But back then, remember there was shortage all over the place.
Hospitals that had the VERIGENE one platform or the NxTAG, they were actually taking whatever companies were making available to them. There has been a spike that back then, that today is not repeated. Notwithstanding the fact that there is a COVID testing volume simply because they migrated away from these more manual solutions to more automated solutions. Okay. As far as you need to clean the numbers of the company if you compare to Q3 last year from this spike effect that is not repeated. If you take that away and you look at the Plex business, it is fairly stable.
This one of the reason why again we bought this company because there is $120 million of business ex-COVID effect between VERIGENE II and NxTAG that is a nice solid business, and is a business where we tend to build clearly growth for with the launch of the VERIGENE II LIAISON PLEX. When it comes to the ARIES, I believe that compared to last year, we are miles better than where we were. This is due to the fact that the company has been able really to bring up the manufacturing volume and stability in manufacturing.
Today, we are really selling like around 230,000 tests-240,000 tests a month of the cartridge. Back then, I think we were at 50,000 tests. You understand that there is not because there was no demand, but because there was no ability to manufacture at that point. That component is doing well. Also we keep placing some of the ARIES system in Europe and in the U.S. That's proceeding fine. When it comes to the LTG business, it is booming. I mean, if you look at the growth versus last year is around 20%.
The reason is that there is. You know, this business is not a life science business. When we're gonna have the investor day, we're gonna clarify this. This has nothing to do with life science. This business is fundamentally has to do with the fact that the multiplexing technology that this company invented 25 years ago has been made available to partners like Thermo Fisher, Bio-Rad, Bio-Techne, and so forth, with instruments that the company makes. These beads and the system have been now utilized by these partners to develop products in the space of research, clinical research or like for Thermo Fisher One Lambda in the case of transplant IVD. The fact that clearly some of these programs have been very successful.
If I look, for example, at the Thermo Fisher business when it comes to all the protein testing business, antibody testing business is booming. When I look at the fact that in life science, billions and billions of dollars have been poured and will be poured into the U.S., especially by the past and current administration, that explains why this business is really growing significantly. I see this, again, as an opportunity in some of these fields to work with the partner and now launch programs, which will include also LIAISON technology in some clinical spaces where we believe the multiplexing plus the LIAISON technology can really offer an opportunity to the partner. It's a very profitable business, by the way, as you understand, is a solid business.
This company has been manufacturing now for 20 years. That component, I think is performing better than what we expected, and we expect this to be in line in terms of growth to so not dilutive vis-à-vis the group revenues growth in the foreseeable future. Again, Maya, we're gonna be discussing this better and more specifics during the investor day.
Understood. Thank you very much.
The next question is from Peter Welford with Jefferies. Please go ahead.
Hi. Thanks for taking my questions. I've just got two left I think, please. Firstly, just to try to understand with regards to the cost synergies, how much of that EUR 55 million cost synergies is, potentially, I guess, have to be delayed or slowed down, given the need, as you said, to invest in the manufacturing improvements that you're doing? Or should we regard that as any way of being, if you like, the just some of this investment you're doing in Luminex is more offsetting, if you like, upside or near-term upside to that EUR 55 million. I guess what I'm asking is the more expense than you'd initially assumed required in the near term, or is that to some extent anyway offset by conservatism in that original EUR 55 million aim?
Second question is just with regards to the Luminex platform itself. I think there's been a lot of discussion around one of the issues when you actually use these cartridges has been that there's been a reasonably high relative to some of the peers error rate initially using them. Just wondering whether you think the manufacturing changes that you're doing will that also improve the error rates, or is this purely focused on the manufacturing and the warning letter? What steps are underway to potentially improve the reliability, I guess, of the Luminex system before you roll it out under your name? Thank you.
Okay. As far as the synergies are concerned, we said EUR 55 million, and they're gonna come alive in the next three to five years. I'm very comfortable about the synergies. I don't think there's gonna be any delay. We actually took in consideration the fact that some investments are gonna be necessary in order to achieve some of these synergies, but very comfortable with that number, and I don't think there's gonna be a delay, and it has nothing to do with the delay on VERIGENE II manufacturing. When it comes to the VERIGENE II, the cartridge, I think you put it in the right term.
Well, this company, what I learned about this company is that it is still a notch away from being an IVD consolidated manufacturer, and this is clearly explainable by the fact that if you think about this company was actually built around a research, a very successful research products. Today still, as said, the hard core of this company, the Luminex, is that business. Then, the company tried to step into accelerate growth in diagnostics, buying technologies or buying other companies around the globe, around the US and bring in that IVD well-needed infrastructure to the company.
The problem, I believe, that some of the companies that have been bought were small and not necessarily properly structured, and certainly from a quality system point of view, I believe, behind what are the expectations in modern IVD. I believe the 483 that was actually given to the company had to do with some of these delays or the way that the company was operating that we are in the process of correcting. By the way, we have decided that we are gonna participate into...
Anyway, we've been accepted to participate to a pilot program that the FDA has issued in the U.S., where nine companies are gonna be enrolled into a program where the agency, together with a consulting firm that the agency has actually selected to use. They're gonna be working with the company for eighteen months. During these eighteen months, we're gonna redesign the quality system, and we're gonna redesign it in light of what are the most recent expectations by the agency. This to me is great because as far as Luminex is concerned, it's clearly focusing the people to the program.
It's giving free access, by the way, to one of the top-notch consulting firms that the FDA is making available at no cost to the company to redesign the quality system. My expectation is that at the end of this process, 18 months from now, we're gonna pretty much exit this program with a very modern, up-to-date, and FDA-blessed quality system. Okay. As far as the cartridge and what you said, again, I think you are very right. The problem is that the cartridge we found and the manufacturing system we found over here was not really ready to launch a product. It was ready for a prototyping launch, which is not a tradition of DiaSorin.
You know, being an IVD supplier, we look at products, finished products, launched to the market. Also, we are talking about a much bigger commercial infrastructure, so we would expect the ramp-up of volumes to be faster than prior with Luminex. We did not feel that we could really go to the market with the manual manufacturing lines and a process that was very cumbersome, prone to errors. Whereas, the company already ordered some fully validated, completely automated lines that now we are in process of validating and putting it into operation. We are gonna conduct clinicals then, with a much better process under control.
Long story short, it's very clear that when it comes to multiplexing, this is not a space where we're gonna be pioneering. It's a space that today already has good solutions. The only way, in my opinion, to make it to that space is with a system that is very solid and stable with the complete panel. What is very attractive of this system, in my opinion, is the Flex concept, the ability to utilize the Flex concept that provides flexibility of the launch of the panels, especially in the European countries where, you know all the reimbursement are different, and also in the U.S. where there has been recent pushbacks vis-a-vis the complexity of the panels that are offered by the competition.
Clearly, if you wanna make money with the Flex concept, you better have your manufacturing cost under control, because certainly there is a margin effect on the Flex concept, and this is why companies more established that today are selling products cannot really go back to that concept. They will be killing their business. As far as we are concerned, we wanna have all ducks in a row and the manufacturing cost under control before we launch it. When we launch it, we're gonna make money. Right? Sorry, I don't think. That's great. Thank you very much. Very clear.
The next question is from Scott Bardo with Berenberg. Please go ahead.
Good evening, guys. Thanks for taking my questions. I've got a couple of questions for Piergiorgio, please, and one high-level question for you, Mr. Rosa. Piergiorgio, I wonder if you can please qualify. I think at the last H1 update, you provided an implicit guidance for 15% growth for your base business, ex-COVID. I just wonder if you could now give us you know, an update on what your expectation is this year on that basis. Outside of the scope of consolidation, ex-COVID. That would be helpful, please. Second question for you, Piergiorgio, please.
The revenues coming in from Luminex, I think, were better than we expected, and I think you talked about performance being pretty decent there. Can you confirm, please, whether Luminex original guidance to the market of $480 million is still on track this year? And maybe give us a sense of what COVID was for Luminex last year, and roughly speaking, what you expect it to be this. That would be helpful. I'll follow up with Carlo in a moment, if possible. Thank you.
Let me start with the first one. I believe what we see, as we said before, increasing the guidance, the fact that we are now at the high in the high part of the range has been driven by better Q2, Q3 sales, and mainly by better COVID cases. I believe we have commented at length about what we see in the ex-COVID business, which is going very well. In terms of the ex-COVID sales for the business for the remainder of the year, I believe that what we said in H1 was 15%, and I think that that is still the right, you know, the right number, the way in which we look at it. It's there.
You know, 1% better, 1% lower, but that's the right number. In terms of the guidance for Luminex, the $480 million, I believe we said a few times that when we modeled the Luminex business, we didn't take at face value. That guidance, we didn't take at face value. The plan that they put together and which it was made public in all the filing that followed the acquisition. So, we didn't use that value at face value. We used a different one, a lower one. We are a little bit better than what we modeled for this year. For 2022 and so on, I believe you need to wait until the capital market day when we will be more specific.
In terms of COVID sales, I believe Carlo said that overall in the quarter, DiaSorin plus Luminex COVID sales accounted for 30% of the total quarter sales. The Luminex part of those revenues, you know, we said EUR 91 million of Luminex sales in the quarter. I believe a ballpark number off the top of my head, the COVID-related sales, COVID only, right? So I'm not taking respiratory panel, COVID only, is ballpark EUR 15 million out of those EUR 91 million.
That's very helpful. Thanks, Piergiorgio. A question for you then, Mr. Rosa, please. There's been some market speculation about a potential tie-up combination between bioMérieux and QIAGEN. bioMérieux, of course, having an immunoassay business, QIAGEN, of course, being a player in QuantiFERON. I wonder if you could talk a little bit about your current relationship with QIAGEN and whether any combination of these two companies could impact your ongoing relationship with QuantiFERON and Lyme and so forth. Thank you.
Listen, Scott, since I'm in Texas, I think I can use the Fifth Amendment, and I will not comment on this rumor and speculation because I think, again, today is a rumor and speculation. I can comment on the fact that the relationship today with my good friend Thierry is doing very well. I believe that in Europe the program today is almost to maturity because together we have been driving the conversion and the growth of this business. Today we are working on. Actually, QIAGEN still works on driving the demand, so testing volume now that we have almost 400 accounts today that are using the product on our platforms.
In the U.S., we are at the beginning of the story. We had a very successful conversion of one of the two largest labs in the U.S. to the technology. We have today a very significant number of hospitals that are using the XL. Together with QIAGEN, we are working and we are eagerly waiting for the approval of the Access because in the U.S. we see the mid-size hospital market as an untapped opportunity. A lot of these businesses send out, and we can capture that business at a price range that it really makes QIAGEN, both parties very happy.
I would like just to make one comment, Scott, to the famous EUR 480 million that you were discussing about. Look, if you look at those EUR 480 million, there are two components to it that did not materialize, and actually they were in the expectation of Luminex. When we look into it, we decided to de-risk. One is to do with the fact that in those numbers, we had a VERIGENE II launch in 2021, which we know we expected not to happen when we make certain decision as DiaSorin about the launch of this product. The second thing is the fact that in that assumption, there was a certain dynamic of increase in manufacturing capacity that eventually did not happen.
Today the volume is capped at 230-240,000 tests a month. I believe that plan was actually calling for an increase that would have taken the company beyond that number. If you really take out these two effects, and if you look at that number, we are thinking we are running pretty much to where the company was saying, with, I believe, a better mix, which does contribute to profitability, which is an LTG performance which is above expectations.
Mr. Rosa, there are no more questions registered at this time.
Okay, operator. Thank you. Take care.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.