Earnings Call: Q1 2021

May 14, 2021

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the DiaSorin First Quarter 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, CEO of DiaSorin. Please go ahead, sir. Yes. Thank you, operator. Good afternoon. Welcome to the quarter one DiaSorin conference call. As usual, I'm going to make some general comments about the business, and then I will turn the microphone to Mr. Pedron, the CFO of the company, that's going to take you through the numbers. Let me first start to say that, as usual, I'm going to comment numbers at constant exchange rate, because as you know, dollar variation has been significant and the product effect is very significant in quarter one. I will talk about the COVID business and ex-COVID business to give you a view about how we see the market developing. Let me start, for once, from the ex-COVID business. I believe that the company performed extremely well in quarter one. As you've seen, plus 6% versus quarter one last year. We introduced a couple of adjustments to allow us to understand the real trend. The first one, we took out the effect of some one-offs regarding the vitamin D contract with Quest Diagnostics. That, as you know, was there last year, is not any longer in our revenue this year. The Siemens Healthineers effect, meaning that last year, manufacturing of the Siemens Healthineers ELISA was stopped as per contract, and therefore what there was converted to CLIA was converted, and the remaining ELISA revenues have been dissipating throughout the last few quarters and now are almost nil because of the fact that product is not there. If you take out these two effects and you look at how the business performs, the growth is 6%, which is an indication that in several geographies, notwithstanding pandemic, the lab business and the hospital business is returning to a relatively normal course. As far as specialties are concerned, as you know, our revenues are skewed towards specialties. We suffered last year because none of the surgeries were actually not performing. Now with the clinical patients going back to get tested and to be monitored, and we see again, the use of specialties going up to where they were. Extremely comfortable with the way that this business is doing, specifically from a geographical point of view. As we have discussed a few times, U.S. is actually the lion's share of the growth, and this is because of the fact that the hospital strategy is paying out. The TB product line T-cell together with QIAGEN is working very well, as you also have seen from QIAGEN comments on the tuberculosis business. Again, that goes together with a series of specialties, primarily gastrointestinal that we have launched in the U.S., and they follow suit together with TB on the same customer base. Europe, same thing. Notwithstanding pandemic is clearly stronger here at the time. Notwithstanding that in all the main countries, the base business is returning to normality. Again, we are gaining from the fact that some of the TB business that was developed together with QIAGEN now with all this base and our customer gain is providing traction to our traditional ex-COVID business. Let's talk about the elephant in the room, about COVID. As you know, as far as COVID is concerned, we look at COVID in 3 different technologies, and I'm going to comment the 3 technologies. Molecular, serology, and COVID antigen title testing. Let's talk about molecular. When we look at molecular, we need to actually comment U.S. and Europe separately. As far as the U.S. is concerned, public data shows that the molecular testing has been significantly decreased volume-wise from peak time, which was actually Q4, let me say around December, January this year. Public data show that daily testing peaked at 1.6 million around December, and now we are closer to 1 million. The projection is that by the summer, it's going to plateau at 750,000 PCR tests per day. We see in the U.S. the trend of our business to follow pretty much the path, all driven by the fact that there is less request for the time being of testing volume. We don't see any effects so far on pricing, also because, you know, the reimbursement schemes under the emergency situation is still in place, allowing customers good reimbursement for all the testing which is performed. Now, if you look at molecular Europe, we see a completely different trend. We see a little bit of softening, but really not so remarkable, and this has to do with two effects. First one certainly has to do with the fact that pandemic is still in place. Strong demand in the major geographies where we play. I remind you that during COVID time, when there was a shortage of systems and reagents, we elected to give a priority in Europe to certain countries, namely Italy, Spain, and partially in France. Therefore, we built an install base primarily in hospitals in these three countries. Because of the fact that, again, testing volume in these countries continues to be strong and because of the positioning of our platforms, which have been typically used in emergency room or hospital admission of patients. We don't see today any decline. To the contrary, we see an expansion of the store base because there is more need of smaller system and conversely, less need of high-throughput system in these hospitals. Decentralization of testing now is becoming the relevant part of the COVID testing adoption. Combination of Europe holding and the U.S. declining according to market volume, we have now developed a certain view vis-a-vis the year-end guidance that I'm going to describe later. You understand from the time being, molecular-wise, this is what we see. Let's comment on serology. Serology for us is what we always said, the part of the business that we believe is going to take longer as a necessity to monitor vaccinia response, not necessarily in the general population, but in certain very specific populations. Lots of publications are now demonstrating that in immunocompromised patients, in dialysis patients or in certain populations, their response to vaccine is different from the normal population. Therefore, we see adoption of testing, of serology testing and monitoring. That is for us significant. There's now an extensive install base of the LIAISON XL. We see this volume growing on a monthly basis, high single digits. We also have serology used in secondary countries like in Brazil and India, where there is still a growing number of cases and lack of solutions or molecular solutions. Therefore, we see in these countries also the adoption of serology still growing. We continue to be positive about the fact that serology adoption will continue, especially in those countries like the U.S., where we believe eventually monitoring is going to be added as part of the annual physical checks provided by insurance companies. Very positive about that product and very positive about the opportunity of that product. Last but not least, the high-throughput antigen testing. High-throughput antigen testing has been developed by DiaSorin in light of the fact that we believe high volume of an expensive molecular testing was going to become an economic issue in several situations. We thought that a sensitive, high-throughput antigen test could provide a solution. For the time being, we have not seen that shift. We have seen antigen testing clearly being decentralized, as shown by many of our competitors who play in that field. By the same token, it's public knowledge that we are participating as a primary supplier of LabCorp to the national tender in the U.S. for returning to school. You know, the tender has been postponed already a couple of times, the opening of the tender. We are enrolled in the tender as a supplier of LabCorp, so depending on whether LabCorp is going to be awarded, we are going to get or we are not going to get certain volumes. Clearly, we are all waiting, I think everybody is waiting to understand what the Biden administration is going to do vis-a-vis implemented testing for school reopening. In the U.S. now, we are toward the end of the school season, so we're talking about adopting this kind of testing starting from August, when school reopens in the U.S. Now, if we look at our guidance for the second half, it's very clear that what we built in is uncertainty vis-a-vis COVID. We are confident about our base business, but when it comes to COVID, we design two fundamental scenarios. One scenario, which correspond to the high level of the guidance, is that we're going to be repeating H2, so the COVID revenues in the second half, similar to what we will experience in H1. That entails two things. That entails that we're going to have some participation, some revenues coming from the school contract with Apple, and a combination of robust respiratory system. Okay. Which means that COVID and flu and differential technologies will be needed in 2021 winter time, when clearly, symptomatic patients are going to show up. There are going to be debates about efficacy of vaccine, long-term efficacy of vaccine. Adoption of molecular testing will be there. That's the best case scenario. We have a base case scenario. The difference between two is roughly EUR 80 million-EUR 90 million, where we're not going to get pretty much contribution, significant contribution from the school reopening program. Together with that, the season, the respiratory season, is going to be lighter than what expected because vaccine will prove to be extremely efficient. Need of COVID testing adoption is not going to be as strong as somebody can foresee. I believe you will appreciate the fact that this uncertainty is clearly shown by all diagnostic companies. I think we're going to get better visibility when we enter into the second half. One more comment, or two more comments, before I turn the microphone to Piergiorgio. First one has to do with an announcement we made over the fact that we have initiated a collaboration with Lumos. Lumos is, I remind everybody, an American company that provides what I would call 2nd generation laminar flow technology. We are in the process of launching two COVID products, COVID serology, and COVID antigen testing in some target European countries, mainly focused on the Italian market. We are testing the pharmacy setting because we believe that, as you know, we have a strategy of decentralized testing with the LIAISON NES for molecular and now the LIAISON IQ for antibody or antigen testing. Therefore we are deploying the system through a set of large distributors in Italy. Italy has 19,000 pharmacies and we want to understand how the system is perceived, what's the story behind COVID testing, clearly using the COVID time opportunity to deploy an install base. For the time being, we have not built financial expectations because we want to see what the contribution will be. This is a program that to me is very important for the company because it's the first step into a segment that we've said it before, we want to play a strategic role in the near future. Last comment I want to make is, and I would like everybody to remember, is the fact that we have a series of initiatives with new products coming in the near term, these very specific products that are going to take us to a different level of diagnostic vis-a-vis the viral versus bacterial infection, which is largely today dominating space of clinical needs. Last but not least is the China plant. The China plant to me, which is on time, and I would like to remind everybody that strategically, companies today have to develop a China-for-China strategy because the message sent by the Chinese government over the COVID pandemic is that they clearly want to be independent from European or American technology when it comes to diagnostic and there is strong indication that if you want to be a player, you need to be a player perceived as a Chinese true contributor and not necessarily an exporter to China. Keep a note on that. Clearly, this is not going to affect short-term numbers, but midterm numbers, I believe any company that want to bet on the fact that growth will continue to come from China has to find a smart strategy to now move their selling into China. I remind you that the way I define smart for a company like DiaSorin, the fact that we are operating in China through a joint venture with the Chinese government, that guarantees us visibility on what's strategic for China these days and moving forward. With that, I'm going to leave the mic to PG, and then I'm going to take it back for Q&A. Piergiorgio Thank you, Carlo. Good morning and good afternoon, everybody. In the next few minutes, I am going to walk you through the financial performance of DiaSorin during the first quarter of 2021. As usual, I would like to start with what I believe are the main highlights of the period. We closed the quarter with an increase in revenues at constant exchange rate of around 60%. Q1 confirms the steady recovery in the ex-COVID business, as just discussed, in spite of the previously reviewed loss of the vitamin D business in Quest Diagnostics and termination of the distribution of the sequential diagnostic products. COVID-19 sales accounted for EUR 102 million in the quarter, slightly better than the last quarter of 2020 at constant exchange rate vis-à-vis four million EUR in Q1 2020. Q1 gross margin at 69.4% of revenues is a touch better than Q1 '20, which closed at 69.1%, and marks an improvement compared to the last quarter of 2020, which closed at 67.6%. Q1 adjusted EBITDA at EUR 130 million records an increase of EUR 65 million, or 101% compared to Q1 '20, with a margin of 48.6% on revenues, compared to 36.9% of 2020. The growth at constant exchange rate is 110%, with a margin of 49%. Q1 '21 reported EBITDA is EUR 118 million, the difference vis-à-vis the adjusted EBITDA is due to EUR 12 million one-off costs related to the Luminex acquisition. Lastly, we keep confirming our ability to generate a very healthy free cash flow, EUR 80 million in the quarter, with an increase compared to Q1 '20 of EUR 40 million or 100%. The net financial position is positive for EUR 394 million, with no debt and EUR 430 million cash, the difference between the two being driven by the right of use introduced by IFRS 15. Let me now go please through the main lines of the P&L. Q1 2021 revenues at EUR 267 million grew by 53% or EUR 92 million compared to last year. The growth at constant exchange rate, as we said, is 60%. The weakening of the U.S. dollar against the euro is the main reason behind this FX headwind. The increase in revenues is the result, as we saw, of a steady recovery of the ex-COVID business and of the COVID contribution. Q1 2021 gross profit at EUR 185 million grew by 54% compared to last year, closing the first quarter with a ratio of revenues of 69.4% compared to 69.1% of the same period of 2020. The margin increase compared to Q1 2020 is a result of a higher operating leverage driven by higher volumes, partially offset by different product mix, namely more COVID molecular sales, which enjoys slightly lower margin. I believe it is also worthwhile to underline the gross margin increase compared to Q4 2020, which recorded a similar level of revenues, EUR 271 million versus EUR 267 million of Q1 2021, and a lower marginality, 67.6% versus 69.4% of Q1 2021. This variance is mainly driven by a favorable product mix and lower instrument sales, and more importantly, by some efficiencies coming from cost reduction initiatives implemented in the molecular manufacturing processes toward the end of last year, which are now bearing fruit. Total operating expenses at EUR 68 million or 25.4% of revenues have increased by 3.3% compared to last year. During the quarter, all our subsidiaries have experienced a general slowdown in some activities, mainly driven by the lockdown measures implemented by the government of most of the geographies in which we do business. Q1 2021 other operating expenses at EUR 14 million increased by EUR 9 million or 150% compared to last year. This variance is entirely driven by the one-off expenses related to Luminex acquisition, which accounted for about EUR 12 million in the quarter. As a result of what just described, Q1 2021 EBIT at EUR 103 million or 38.9% of revenues has increased compared to 2020 by 109% or EUR 54 million. The tax rate at 23.8% is slightly higher than what we recorded in 2020, 23%. This increase is mainly driven by the fact that some one-off costs driven by Luminex acquisition are not tax deductible. Q1 '21 net results at EUR 78 million or 29.3% of revenues is higher than previous year by EUR 40 million or 107%. Lastly, Q1 '21 adjusted EBITDA at EUR 130 million or 48.6% of revenues is higher than 2020 by 101%. The variance at constant exchange rate is positive by 110%, with a ratio of revenues of almost 50%. This result is mainly coming, as we saw from the good gross margin and the operating leverage delivered by the increase in revenues, amplified by a neutral series in operating expenses, which in the quarter accounted for about 25% of total sales, vis-a-vis 38% of Q1 '20. As we have discussed, the only difference between adjusted EBITDA and reported EBITDA is the mentioned one-off cost related to the Luminex acquisition. Lastly, let me just cover 2021 full year guidance, already been explained by Carlo. As usual, at previous year cost and exchange rates, total revenues to increase between 15%-25%, out of which the business ex-COVID represents an increase of around 15%. The adjusted EBITDA margin between 44%-47%. In this definition of adjusted EBITDA, we mean without considering the Luminex acquisition, related one-off expenses that we will book from here till the end of the year on top of the one we booked in Q1. Please, like always, consider that DiaSorin financials are highly exposed to the U.S. dollar and even more so now that the United States represents about 40% of the total group sales. Therefore, as the usual rule of thumb, consider that for every $0.01 movement of the U.S. dollar against the euro, DiaSorin revenues move by about EUR 3.54 million on an annual basis. Now let me please turn the line to the operator to open the Q&A session. Thank you. Excuse me. This is the Chorus Call conference 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 receipt of an asking questions. Anyone who has a question may press star and one at this time. The first question is from Maya Pataki with Kepler. Please go ahead. Yes. Hi, good afternoon, thank you very much for taking my question. I have two right now, and then I'll go back into the queue. Could you please provide us a rough split of the COVID-19 revenues? How much was roughly molecular and serology, just as you did in Q4? That's my first question. With regards to the Luminex partnership and the rollout of the LIAISON IQ in Italy, I understand it's early days and therefore nothing is included in your guidance, but could you provide us maybe just a rough indication on how pricing is positioned and how we could think about the financial impact? Thank you. Hi, Maja. I'm going to take the second question, and then I'll let PG take the first one. Look, here the business model in the pharmacy business is completely different because you go through distribution, right? You don't have pretty much a lot of cost under, let me say, the transfer price to the distributor. Okay. Between the transfer price to your distributor and your pre-tax, there isn't much. What I'm learning is that good product should really leave you a margin that sits between 25% and 35%. Okay? The difference is that all that then goes pretty much down to your bottom. We are, again, learning the space, but my sensation is that, if you have a product that is generating that kind of margin, is leaving the rest fundamentally to the wholesaler and to the pharmacist that actually is taking the lion's share of the margins when it comes to these diagnostic products. By the same token, they're also taking the lion's share of the cost because they must now hire, especially in Italy, they have to have a biologist or a physician come and perform the test. My expectation is that we are going to have that kind of margin, but the contribution then to your bottom is going to be not bad. PG? Yeah. Hey, Maja. I believe you asked about the breakdown of COVID sales in Q4. No, Q1. Just like you did it in Q4. Q1. Okay. Yeah. Okay, cool. Not a big difference there. We never gave a precise breakdown, but I believe we discussed a few times that the contribution of the immuno diagnostic COVID products, so the IgM and the antigen, was between EUR 5 million-7 million per month. I believe you can use that as a ballpark number to get the Q1 sales of the immuno bracket, let me say, and all the rest is molecular. Okay, great. Maybe just quickly a follow-up. Carlo, thank you very much for the scenario analysis or the base case and best case scenario that you've given us with the guidance, and I do understand the difference. Just to double-check, so in your best case scenario, high level scenario, you are not assuming to see an acceleration in serology testing? You basically think it's whatever is coming from serology or antigen test is basically what we're seeing in Q1 throughout the year, and not that there is a higher adaptation of the antibody test with regards to the vaccine immunity? Okay, separate for one second. serology, you mean antibody testing? Sorry, yes, antibodies. Sorry, yes. Because we have the antigen testing. I believe that we'll continue to see this business trail up. It's not a bad business for the time being, as you have seen by what PG is saying. Certainly, it is dwarfed by the molecular opportunity. I believe that you will see a change in this when two things happen. First, more data are going to be generated with the different vaccine vis-a-vis the long-lasting, I mean, how relevant it is to monitor the antibody response. Because if long-term studies, and I'm saying about now 12, 18 months, are going to show that there is a response, and the response pretty much stays up, then the need for monitoring is going to be less. The second element you need to consider is that the initial clinical data set are demonstrating that that may be true for general population. You have lots of subpopulation related to certain clinical disease, that where certainly the vaccine response has not been as strong and not related clearly to a clinical situation. When you talk about the old age group where you know that immune response is not as strong as in younger people, but those are the ones that are susceptible to the infection, and we need to understand how long that response will last. The second element you need to consider, as it happened, I already, I think, did comment on this one, as it happened with vitamin D in the U.S. specifically, which is going to move the needle because it provides immediately 40, 50 million tests per year, is the fact that the SARS-CoV-2 serology is introduced into the yearly checks provided by the insurance companies. I believe all this is going to be more a 2022 effect, right? By year-end, you're going to have more studies to understand immune response of vaccines, and then decisions about monitoring are going to be taken next year. As far as we are concerned, as PG's saying, it's a business that is fluctuating between 5 million-7 million per month that we expect to continue to trail up between now and the end of the year. Okay, thank you. PG, just a last question on the guidance on the EBITDA margin guidance that you're providing the range of 44%-47%. Is it as straightforward as to think that if you hit 15%, we're going to be at 44%, and if you hit 25%, you're going to be at 47%? Are there several layers of cost savings that could put you anywhere in the range, loose of the fact where revenues come in? You know there are many moving parts. There are projects, cost-saving initiatives, which, as I said, for which we're already seeing the results. Some others are going to be kicked off pretty soon. There are many moving parts. Think about OpEx, for example, right? We need to make some assumptions in terms of travel coming back because people will start go back and going seeing customers and so on and so forth. Ballpark, short answer is yes, but with some flexibility. Okay. Thank you very much for that. Maja, if I may make a comment, which I think is a general comment about this, which is to me fascinating, is the fact that think about our overall industry that was able, within 12 months time, to express a testing capacity of 4 billion tests, right? I think that the estimate today is that worldwide today there is a manufacturing capacity of roughly 4 billion tests. All that capacity came with investment and hiring people, right? I think what is going to be interesting vis-a-vis margins is that you're going to have now all that cost, that if you've not been building that cost as a variable cost, then it's going to eventually hit your P&L. As far as DiaSorin is concerned, I believe, and we have been extremely careful and disciplined about making sure that that cost is a variable cost, and we are taking out that cost when we see manufacturing volume going down. Just reflect on the fact that I see, and it is incredible, you see companies saying that they've been investing hundreds of millions EUR into infrastructure, and I really want to understand what is going to happen to all that cost when the volume, and we all hope it's going to happen, is going to pretty much go back to almost zero. Just a reflection. Thank you very much, Carlo. The next question is from Peter Welford with Jefferies. Please go ahead. Mr. Welford, your line is open. Hi. Sorry. Yes. Thanks for taking my questions. Can I just ask first, we're just sticking with the outlook, just to understand the base outlook for the base business of 15%? Is that on the same basis as the 6% number that you provided this quarter? In other words, it's excluding the Siemens ELISA, the flu business, obviously volatility and the Quest contracts, or is that 15% on an absolute reported basis for 2020 numbers? Secondly, if I could just ask just with regards to antigen testing in particular. I know you commented about the economic alternative of LabCorp in the U.S., which I think is fascinating, but I wondered if you could comment at all on the emerging markets. In places, for example, like Brazil and India, are you seeing any adoption of antigen testing there as an alternative to the sort of more costly and infrastructure-intensive PCR testing, or has that really not materialized to a significant extent either so far this year? Thirdly, if I could just ask just on the Lumos product again. Just curiously, is Italy a test market, which I know obviously is a market you know well, but I guess just thinking beyond Italy, can you just give us some thought into which other countries, I guess in Europe could be attractive, but equally which ones perhaps have other unique challenges that we need to consider just to consider longer term? Thank you. Okay. I'll take the question about the antigen and then the question about Luminex. As far as antigen is concerned, look, the only market that today has been engaging on high throughput antigen test is Russia, where we do have an extensive installed base. There's been adoption, as in the other, what we call primary markets, where we serve direct of antigen testing. When it comes to India and Brazil, I believe that these markets have been flooded by cheap Chinese-made products, rapid antigen testing. There has been a very interesting, I don't know if you didn't follow it, but one of the last flights that actually flew into Italy from India, carrying 200 and some passengers, 90, and they all had results done with an antigen test in India that said they were negative. I think 90 of them, eventually, when they were retested over here, they were positive. That tells you a lot about the quality of some of the stuff that unfortunately goes around the world when it comes to these antigen testing. In the secondary market, you are facing with the reality of markets where they don't have the FDA on one side, or they don't have the European authorities. The quality of some of these products is not there, but the price is very cheap. Positioning a high throughput, quality product like the LIAISON XL has been complicated. To the contrary, what we have seen, though, is that in some countries, again, India is a good example, we are having a good success with serology IgG and IgM because those tests have been adopted on a high throughput scale to monitor patients because they are now becoming more monitoring tools in some of the clearly class A larger institutions. As I said, antigen testing is unfortunately today all cheap stuff in these geographies. The second question is, which other markets? Look, we said in 2019 already that we would follow decentralization. We started the LIAISON NES molecular development together with TTP. The COVID hit. The major issue pre-COVID about decentralization and testing in setting outside the lab was the fact that in many countries, it was not legal to do such testing. Pharmacists did not have a license to perform this test. Italy was not an exception, but with COVID, they made an exception. In the U.S. also it was complicated. I don't know if you followed recently, a week ago, a bill has been filed to allow CMS reimbursement for diagnostic testing in pharmacies. Okay. We believe that where are we starting from Italy, because we don't understand the market and because of proximity, Italy is a good place where we can learn the space, learn how to market, learn the distribution. I keep saying that strategically, the U.S. is the place to be, because in the U.S. is the only country in the world where they are starting to understand that the pharmacy business, which as you know, is pretty much private business between Walgreens and CVS. They have understood that the business with Amazon competing on home delivery is doomed, and they are thinking about transforming their business model from a generic supplier of drugs and food, as any pharmacy is today in the U.S., into a health service qualified provider. In that model, then diagnostic will play a role, especially now if government is opening to reimbursements. Long story short, Italy, good way to understand. Strategic is certainly the U.S. market. Peter, I guess I'll take the question on the 15% guidance. It's all in. It's considering the whole ex-COVID business of 2020 and what we project we are going to reach in 2021. Please remember that Q2, Q3, Q4 of 2020, and the ex-COVID business of those quarters in 2020 was affected by a decrease in volume caused by COVID. Just on the top of my head, I believe that Q2, for example, the ex-COVID business was down give or take 35%, not only for us, for the whole industry. I believe this is going to give you more down to understand why we think 15% is a sensible guidance for the ex-COVID business in 2021. That's great. Thank you very much. The next question is from Scott Bardo with Berenberg. Please go ahead. Yeah, thanks very much indeed for taking my questions. Thank you for providing some guidance framework for the full year, which I think is helpful. First question on the group level guidance of 15%-25%. I just want to understand this a little bit better. I think I understood your comments that at the upper end of the range, you're assuming that COVID remains broadly stable. With that in mind, I think you're suggesting that both serology and antigen compensate for the anticipated decline in molecular. I want to understand a little bit then, please, with respect to this LabCorp tender. Can you give us some sense of potential magnitude for the size of this opportunity and whether you include all of this opportunity within the upper end of your guidance framework or just partially? That would be helpful. Underneath this, your routine business or your normal business growth that you're highlighting to be around 15%. I just wonder if you can help us better understand the beginning, the start to this year. A 6% adjusted growth seems relatively low in the context of the sort of recovery growth that we've been seeing in the context of the rest of the industry. I wonder if you can talk to any specific special items that would mean even that adjusted growth where it is at right now. Lastly then on this 15% growth guidance for the routine business, help us understand whether this is all simply recovery from the declines last year, or whether you're now starting to embed any material contribution from new product launches like LIAISON XS, and others. Thank you. Okay, Scott. I will try to take the first question. I'm not sure I understood the second question, to be honest with you. When it comes to the first question and the upper range of the forecast year, I think that, as said, what we are saying is that we now have visibility on H1, and the upper range means that we're going to have H2 in line with H1. I think it's undeniable that you're not going to go back to one, okay, unless disaster happen, right? You're not going to go back to 1.6 million tests per day in H2. Okay? We forecast that the molecular is not going to be as strong as in H1, but we believe that you're going to have still a growing demand. Over what we are projecting of 750,000 tests per day, which is what today's consensus says about the current volume driven by respiratory. Certainly not going back to the 1.6 million. The delta there would be actually filled by a tender that, as you know, has been public information, is a tender asking for 25 million tests per month. U.S. is divided in four quadrants, and LabCorp clearly is looking for a chunk of this business. They're going to be providing a solution with a combination of molecular and antigen. In the upper end of the curve of the guidance, we see that you're not going to have a same contribution of molecular same as H1, but what is going to bring you to the same level of overall COVID revenues is the fact that antigen will fill in. Hopefully, I cannot tell you what to expect because then I would be talking about LabCorp numbers, which I cannot do. Okay. That is the way I interpret it, or we try to figure out the upper range. Second question, you're saying 6% is low. Well, let me tell you that I'm reading, I think, the same things you're reading about what other competitors, other companies are reporting. I think it's very difficult to compare notes between companies Because in my opinion, if you look at last year, in Q1, you had two effects. You have a relatively stable U.S. business because the U.S. was not in the same situation as Europe. You had Europe going, especially in certain geographies, because of a stock effect. Customers, especially private labs, were buying lots of goods expecting a disaster in delivery and moving forward. Because remember, we were closing borders, there were no flights and so forth in Europe, which was not experienced in the U.S. Then you had China, and China was actually tanking pretty much starting already from February, March. Depending on the weight of revenues of the different companies in these three environments, you would see that you have a different effect on what is called base business. Okay? This is why I try to compare what we do versus others do, because I don't understand how they define base or the comparison vis-à-vis their base business. Let me just give you a number, which is to me very interesting. I now look at 2019, Q1, and you look at now 2021 Q1, now we are talking about an improvement on the base business around 6%-8%. Okay. In spite of Quest, in spite of everything. Don't do the carve-out. The 6% to 2021 versus 2020 is different from the 6%-8% improvement I'm talking about versus 2019 with all-in. I look now at that number, now I'm saying that my base business is actually doing not bad. Got you. That's clear. Thank you. It's rather better. That makes sense. Given your 15% growth guidance for the base business, is that just purely recovery, Mr. Rosa? Or are you expecting contributions from new launches already in that number? No, I believe Look, you look at new launches, you're talking about the LIAISON, which where the effect, we are launching the product in Europe, and we are still at a lot of uncertainties about adoption guidance and so forth, so we don't see the effect this year. Then new launches, we are talking about MeMed. That's the contribution in 2021, is going to be very low. The 15% is built on the fact that, as I told you, the U.S. is doing fantastic for us. On the LIAISON business with the gastroenterology and the play with QIAGEN, and the fact that now LabCorp has started to use our own LIAISON XL solution for the T-cell, for which us and QIAGEN are extremely fond of. The growth that is coming is actually coming from the current business and current programs that are actually taking place, especially in the U.S. and with lots of emphasis on the hospital strategy, which is staying out, as I said before. Understood. Thank you. Very last quick one from me, just to be entirely clear. Is your new guidance framework now superseding your previous guidance for 40% or so growth in H1? Are you still confident that you can achieve this sort of 40% H1 expectation within the context of your new guidance? Scott, this is Carlo Rosa speaking. Superseding. This is the new guidance. Even though, back of an envelope calculation, I guess H1 will land pretty close to what we said in the previous guidance. Very good. Thank you, guys. I'll hop back in the queue. Gentlemen, Mr. Rosa, there are no more questions registered at this time. I turn the conference back to you for the final comments. Okay. Thank you, operator. Take care. Bye-bye.