DiaSorin S.p.A. (BIT:DIA)

Investor Day 2017

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Jun 26, 2017

Ladies and gentlemen, good afternoon, and welcome to the DiaSorin, this event where we are going to discuss the next 3 years. And let me say you're going to see 4 presenters today. I'm going to give you a broad overview of what is the diasaurin strategy. So we'll go behind the plan that is going to be discussed later on. And then, I have Chen Evans, the Chief Commercial Officer, who is going to talk about the implementation of strategies for the plan. So what stands behind the numbers? And then Esther Shihabi, who is responsible is she just joined the company. She is the Vice President of Marketing for the diagnostic products. And she will spend lots of time to talk about molecular, the strategy and what we intend to do there. And then finally, our Chief Financial Officer is going to drive you through the main numbers, and then we're going to have a Q and A session. Okay. So what do we do? We should be I think everybody should know about it. We sell products to labs. So every time a patient feels sick, goes to the doctor, the doctor is pretty much ordering a series of blood tests. And then those so the blood is collected, sent to a lab, tested with our products and then the doctor get the results. And with the results, then he's able to assess the disease treatment and so forth. I think that it is very important to understand that this company is going through went through 2 cycles and what is opening today is I believe a 3rd cycle of the life of DiaSorin. Now the first two cycles are between 20,021,016. And for those of you who have been following the company, our mantra has always been one segment, one technology. So we said we need to focus all we have in immunoassay since it is a very competitive environment and then put our resources to excel in the immunoassay. So between 2000, 2008, we acquired the CLEAR technology and we converted all our product from all the technology, RIA and ELISA to cheminuminescence. We developed lots of products in the infectious disease segment and also we got very lucky with vitamin D. You know in diasporin, there is a joke, whoever claims that if anything to do with a successful vitamin D gets fired on the spot because we got very lucky when it comes to the vitamin D. But once vitamin D was there, then we serve the wave extremely well. Now from 2008 to 2016, it's a very important cycle because we have, for the first time, developed systems. So the LIAISON XL was actually designed and it was developed by Diasorian. The LIAISON, if you remember, was coming from an acquisition that we made in 2002. So we have proven the ability of this company to design an instrument and have it manufactured by our partner that is Stratec, a German company. We expanded the menu into unique specialties. And so between 2008, 2016, we developed 45 products, enriching the menu and the differentiation of the company. Because of that, so menu and Excel, we were able to sign very relevant strategic alliances with Roche and with Beckman to name 2. And last but not least, we have invested over $400,000,000 in acquisitions. The biggest acquisition certainly was Focus, as mentioned by the Chairman, but we also bought other 3 companies, providing us content to our market access, okay, very successful cycle between 2,008 2016. Now I feel that in 2017 and behind, we are going to start a new cycle. And this new cycle is actually is important because we left behind the concept one segment, one technology, and we started to challenge the company with molecular diagnostic. So now the way we look at the business is we have an immunoassay company and we have a molecular diagnostic company, and we kept the molecular diagnostic company well separated from the immunoassay. So when it comes to strategy in the next few years, for the immunoassay, I believe that there are 2 things that are going to be very relevant for us. First one is the launch of the Eleisonics S, which is what you see in the room. Again, this is a system that is allowing the company now to go after a different market segment, which is the segment of the smaller labs and the physician office lab. And in the next hour or so, you're going to hear a lot about this segment. The second one, which is, I think, new and if you have seen last week, we have announced a partnership with QIAGEN. It's related to the fact that we believe that our technology, our product, our customer can provide a very nice base for products and technologies that may come to other companies. And the QIAGEN Alliances, I think, is one of the first endeavors that we started started in this segment. And again, we're going to cover it later. When it comes to molecular diagnostic, certainly, we decided to get into it, buying a very nice company, very nice technology. I don't want to anticipate anything, but fundamentally, we see molecular as an opportunity to provide more and more innovation to our platform and to our company. Now if you allow me to go back to 2015 when we presented at the Stock Exchange as the last plan, And now we are at the end of that cycle, so 2015, 2017. I'm very glad to see that whatever we promised, we pretty much delivered. So from a financial point of view, all the indicators actually were overachieved. From a technology development point of view, we developed products, we brought to the market the excess and we did whatever we said this company was going to deliver in 3 years. And from product development needless to say, we added 6 new products per year to the catalog. So I have to say when it comes to the last plan, mission accomplished. Now let's look at strategic settings. So I'm going to discuss about immunoassay, and I will discuss immunoassay not necessarily looking at the next 3 years. So all the comments I'm going to make may go behind the plan, but it's very important for shareholders and stakeholders to understand how we view the mid- long term future of this company. Now if you look at immunoassay, which started in 1970, so is almost 50 years old. And if you look at the ability of this industry to innovate, fundamental innovation in immunoassay was achieved following 3 different concepts. The first one was automation, right, and simply because labs did require simple system to address increasing volumes. And so this industry went from benchtop, radioactive, small analyzer to the very complex, what they call total automation labs, which is what you see to the far right. And my point today is that this industry, when it comes to its ability to innovate more in automation, pretty much we reach what the customer wants. So I honestly don't see for the industry the ability to innovate more on the automation spectrum. 2nd one has been technology, which has been stepwise. Everybody in the industry started from using radioactive labels, phenomenal labels but too complex. We moved to ELISA, a colorimetric, which is simple but still cumbersome. And then finally, we go to chemiluminescence, and chemiluminescence has been with us for almost 15 years. And today, there is nobody in the industry making any effort to change technology. So from a signal technology, pretty much we are where we are. We cannot innovate more. So what is left to innovation is menu and content. And this is why DiaSorin has been significantly investing in product development. And by the same token, this is why being so successful in product development, we've been so successful as an organization, and we are perceived by customers as a very innovative company. So you will continue to hear us talking about product innovation. And we have been, I think, very good in that. If you think about it, this is a very interesting slide. Starting from 1998 to 2017, so almost 20 years, 45 times, diasporin has been first to the market or first with a product. So for 45 times in our life, we have launched a product in a new market as first company or we have launched 1st app product on the market, okay? So this track record, which is phenomenal, is illustrating the ability of this company to continually 20 years is a lot of time, but continually in the DNA of the company, there is this ability to be innovative and introduce new products to the market. Now how do we see ourselves vis a vis our products? We believe that our products can be actually clustered in 4 main clusters. We see Me Too test. So the definition is products that everybody has, not much differentiation. High volume specialties, which means that we're not unique in our ability to launch these products. Differentiating specialties, these are the unique products we carry and nobody else has. And then we have the so called investigational markers, which means products that they are not products yet. No, they are idea concepts and we need to prove clinical validity. And I'm going now to go through each of these buckets and explain to you how do we see growth in each bucket. Now let's start from Me Too. And if you look at Me Too, I think there is I think to no surprise of everybody, vitamin D became a me too. And it is hard to admit, but when you have 7 competitors having an FDA approved product and you have now in Japan 3 companies carrying vitamin D and 10 companies in Europe. Differentiation over vitamin D clearly is not there any longer. Now what's a me too test? No research and development effort, no manual differentiation, everybody has it and no marketing cost required because everybody pretty much is aware of the product. So how do you grow with Amitu? Well, difficult, but we plan to grow into 2 different segments. We grow with this product where the market grows. And that I think China is a vivid example of a market that is still growing 15% because adoption by doctors is increasing. So even a me too company can grow in China with this product, just following the market. India is another good example. When it comes to market share, so you can grow getting market share, which is more difficult because you have no differentiation. But in this case, for us, the LIAISON Excess is a differentiator. So we bank on growing in the U. S. Not necessarily because we have differentiating products, but because we have a differentiating system, okay, carrying those products. So the POL strategy that is going to be discussed by Chen later on, it is actually gaining market share with me too products in the U. S. Then we move to the following bucket, which is high volume specialties. High volume specialty in our definition means those products where you're not alone as a company. So other companies may have it, may have some of it, but none has the multitude of products that we have. So what makes unique Diaspora in this sense is the fact that we carry all of them. Certainly, there is a limited research and development effort required. Most of the menu has been already developed by Daisooren. There is menu differentiation here simply because we have it all. And there is a limited marketing effort required to support this because these products now have been known to clinicians. And how do we plan to grow? Again, we plan to grow with these products where the market grows, China, again, another good example. We plan to grow where still these products are adopted in older technologies like ELISA, for example, China, India, U. S, still countries where these products are used but are used with aging technologies. And we plan to grow exploiting the customer base. So we have over 1,200 Liaison XL installed. Lots of these XLs are installed with customers that are running this product. And every time we add a new product, we then go immediately to the customer base and is the adoption is very simple by customers. The 3rd bucket is the one that is unique. So we have 25 products that are unique to DIAZORI. Nobody has carried. In this case, this product require relevant research and development, but they provide lots of differentiation to the market. So, here is where quite usually we are first to the market. And they require marketing cost because we need to promote the use of these products. Now, how do we grow here? Again, we push for more adoption. And a good example is Calprotectin, Chen is going to talk about it, is a marker for inflammatory bowel disease, known but not used enough. We carried it. We're going to be the only one having it available in the U. S. And is an assay that is unique to DiaSorin. We plan to grow through technology conversion. So vitamin D125, very good example. It existed like an RIA assay, very cumbersome. We went from in 24 months, we capture 100% market share, right, as soon as we made it available. Last but not least, we grow here because we develop more unique products. Zika is a good example. First one to the market, first one to be approved. We have been financed by BARDA. We have been asked to develop it by the CDC and the FDA, and we are enjoying today the launch of this product to the U. S. Market. The last bucket is if you are looking at the company in the next 2 to 3 years, don't waste your time looking at this because this is a long term investment. We are talking about investigational markets, which is a bet in our industry. So markers where there is no clinical use are very, very limited. And so what we do here, we invest research and development money in order to create these products. When we succeed, we get lots of differentiation and we get IP protection. But certainly, there is a very high cost when it comes to marketing and clinical studies. And I think it's very obvious. From a regulatory point of view, we start in Europe and we follow in the U. S. And if you remember 3 years ago, we said CKD, so kidney disease, is an area where we want to invest and be recognized in number 1. It's a €100,000,000 market today. We enjoy 25% market share. It's clearly an area where physicians lack the ability to use diagnostic products to diagnose the progression of the disease. We identified 5 products that we need. We launched already 3, and there are 2 in the pipeline. And we are investing significant amount of money in clinical studies to support this. So what you're going to see in the next in the plans and financials is cost, but not revenues. If you look at the companies 5, 10 years from now, one of these products can become a blockbuster, okay? But it's not nothing you should bank on because it's a bet. Now where do we plan to invest R and D money? If we follow the same logic and you look at the slide, you see the 3 the 4 buckets of products. Now let's start from the one to the right, the Me Too test. Certainly, the gray bar, just for explanation, is what top competitors can provide. So take Roche, Siemens, Sabot, this is what they carry on their box. So the top competitors, which are focused on Me Too, they have 62 products on their box. We have 43. We still plan to invest in R and D and develop 4, which is very important for our U. S. Strategy in the physician office lab. But certainly, this is not an area that is distinctive when it comes to diaspora. If you move to the left, the second bucket is the high volume specialties. Here is where we have differentiation. So, 42 products versus 29, 6 more coming in the next 3 years, right? So this is where it makes sense to put R and D money for the company. 3rd bucket to the left is the differentiating one where we are leader, right? So 24, we're going to add 3 in the next 3 years and everybody else has nothing. So 2 products just carried by some of the competitors. Here is where we will continue to invest and continue to enrich the menu. And finally, the investigational ones, which we covered before. In the next 3 years, we're going to develop the last two remaining and then we have a full panel for CKD testing. Okay. Now I'm going to cover 4 strategic projects before I turn then to Chen, and he's going to talk about implementation. First one is LIAISON XS. You heard it many times, but no, I continue to repeat it. It's a phenomenal instrument. It is a phenomenal instrument for a very simple reason that is taking us to a market segment where the other people don't go. It is very, very reassuring when we meet Roche, which happened 2 weeks ago or we meet Beckman, And we asked them, what is your strategic direction? And they keep saying big, big, big. We're going to be bigger. We're going to make bigger systems and we're going to go after consolidation. And I think that when I ask us, so how do you guys put together your strategy, I always say with Chen, first we hear what you do and then we go the opposite direction because competing with Roche and Siemens, you lose from the get go. They have an extensive represents exactly that. So it is allowing us to differentiate our company going medium low. And fundamentally, in 2 main markets, U. S. And in the U. S, there are today 75,000 labs. These are physician office labs, they are Clearwave, so they cannot operate Aliazon Excess. But there are 16,000 that are CLIA certified and they can operate Aliazon Excess. Now what is happening in the U. S. Because of PAMA and complexity is that these physician office labs that are not clear, that are clear with are consolidating, too expensive for a physician to run its own lab, Consolidating, creating more clear certified labs. So and this is where we plan to go with the LIAISON XS. So there is a market we estimate that there is a market of 4000, 5000 of these labs where we can go with Aliazon Excess. And these customers have not seen innovation in years because they've always been considered by all the big companies as secondary tier. The second geography we're going to be covering is China. And China is even more phenomenal because it's going through a transformation, as you know. And the transformation means you have 100 of millions of people that are moving from villages to cities. If you've been to China, it's the only place where you go and they build cities, right? We rebuild cities usually or and actually what we're seeing in our in Europe is a completely different phenomenon, no, where people are also trying to move out from the city because it's too expensive. China is exactly the opposite. And today, one of the problem of the Chinese government is that there are smaller hospital that they build in smaller city or in the periphery and there are no systems because these labs, these hospitals cannot afford a very large fully automated system. And that is where we envision the LIAISON XS opportunity and we are talking about 20,000 hospitals. So very, very large opportunity. Just for reference, in Italy, there are 800 hospitals decreasing by the day because we are consolidating, we cannot afford all these hospitals. The second strategic element for us, which is partially new, is certainly the fact that as we said before, we want to develop differentiating products. And but what is new is that we have always been banking on our research and development team to come up with new products and Zika is a very good example, was all developed in house. But then we decided that since we have an installed base, we have 3,000 customers, very happy customers that on a daily basis are asking us if they could use more of specialty products because you walk in these labs and Roche, Siemens, Abbott are not taking care of their needs, are taking care of their company needs, pushing for automation and consolidation. We decided that we can speed up and leverage on the installed base through alliances. And QIAGEN, which was announced 2 days ago, is a perfect example of this. So what is a good alliance for us? It's an alliance that allows to our product that can generate between €25,000,000 €50,000,000 of revenues, okay? We decided that we can dedicate time of our commercial people, marketing people and R and D people only if that is the opportunity. When it comes to QIAGEN, was simply an alliance made in heaven because they do have very nice products, immunoassay products. They are ELISA based. They are very successful with these products, but they are not an immunoassay company. QIAGEN is a molecular diagnostic company. And their customers are asking for, give me a platform that can actually automate all these assays. And so it was very simple to discuss, come to an agreement. Chen has been very important to this because he's been driving all the negotiation with CAGR. But eventually, last week, we shook end and we have initiated a relationship where we are going to be launching few products on the adjacent excess, extremely differentiating and extremely high value to customers. So stay tuned because we're going to do more of this. Last but not least is Beckman and the U. S. Look, if I understand that you guys don't you're not in this business, then you cannot appreciate what it means to take an HIV product for a company of our size to the U. S. Through the FDA. It's a humongous effort. It's an effort from an R and D point of view. It's an effort from a quality point of view. And it's an effort that companies of our side have not achieved before. In fact, if you see just for HIV, the big guys have it and then there is nobody else. But this endeavor, what it does, forcing the company to go to the U. S. Through the FDA and developing all these products is changing the DNA of the company because the requirement by the FDA are so high that you need to invest in talent, in automation, in quality, in education, in know how. And so the net net effect is which is an intangible of this project is that the company improves, improves in the way it does business. And this is why we decided to do this. It is a $500,000,000 market. It's a big market. You acquire lots of muscles in the U. S, and this is why Beckman is a very good company to work with. There is a strategic interest we can fit very well together. And certainly, this is a project that you're not going to see the results in the next 3 years, but you're going to see that this will change perception of U. S. Customers of DiaSorin. And as you know, strategically, we said many times, we want to grow in the U. S. Because the U. S. Is the market at the end of the story. And we gave ourselves the objective to have 50% of our business in the U. S, today it's 33%, 34%, and then the rest split between Europe and the Far East. Now one slide for Molecular and simply not because I'm shy about it, but because Esther is going to cover it for you. Now let's go back to the 3 axis. Now very different from what we have seen for immunoassay. These are much more recent business. If you think about it, PCR, which is at the base of this technology, was discovered in the mid-80s and the guy who invented it and invented it while he was smoking marijuana got a Nobel Prize, okay? Now, if you look at how you can be innovative in molecular, same thing. Automation, it is just moving. New platforms are coming to life and you can be you go from the left side where you have very small portable system designed for the doctors, You have center field where you have products like ours that are bench top, designed for midsize hospitals. And then you go to the far right. Actually, we should correct this slide because you can see to the far right two system. 1 belongs to Roche, just launched. The other one belongs to Beckman, they just killed it. They announced last week that after the Cepheid acquisition, they're going to stop any activity on this one. But still, when it comes to automation, there are plenty of things you can do in this space. When you look at the 2nd axis and at this point, you have the technology. Technology is plenty. I mean, we tried with LAMP, we tried to compete with PCR, but at the end of the story, PCR is the winning technology. And PCR is used has been used initially for single target detection and then multiplexing like BioFire and then sequencing technologies, which are PCR based. But and we don't foresee that as far as technology is concerned here, you can really innovate more. So PCR is as good as it gets. And then the last axis, which is where everybody competes for, is menu development. And here, we are at the beginning of the story. Think about it. We have 115 products. Cepheid in the U. S. Is 23, right? So we are talking about lots of research money going into targeting therapy, identifying genetic targets. And all this basic research, which is fueling then diagnostic, is going to generate a lot of target opportunity. So why did we get into molecular exactly for this? Because we see an opportunity to innovate with platform and we see lots of opportunity to innovate with menu. And Esther is going to cover this. Now I'm done with my speech, and I turn the microphone over to Chen Evan, who's going to take you through the 3 years implementation plan. Thank you. Thank you, Carlo. Thank you, Chairman. It's always exciting to present after the Chairman and after the CEO. They usually take all the good stuff, but I assure you that Esther and myself and PG still have a lot to share with you. And I will start my presentation. Welcome to the commercial segment of our presentation. I will focus on the immunodiagnostic part and Esther will follow with the molecular piece. There you go. DiaSorin focused its commercial efforts within 3 strategic geographical markets: North America, namely U. S, Europe and APAC, namely China. North America represents about 34% of our group sales with additional 42% in Europe and 17% in APAC, starting with the U. S. Market. The immunoassay part of this IVD market was USD5.6 billion in 2015 and is estimated to grow to USD7.5 billion by 2020, representing 6% growth, CAGAR. Looking at the pie charts, the market is segmented with 2 very large reference laboratories, LabCorp and Quest, capturing 14% 30%, respectively smaller regional labs with 27% of the market hospital labs with 35% and POLs with about 11% of the market. Following the pyramid of customer segmentation and the table that demonstrate where Dia Sorn is participating today, our strategy for the future and the relevant menu sorry, again. Following the pyramid of customer segmentation and the table to demonstrate where DSO is participating today, our strategy for the future and relevant menu is deployed, you can see the following. Starting from the top, DiaSorin has high penetration into the laboratories in the U. S. With long term agreements for a selected menu. You already know about the ID and infectivity that we have in LabCorp and Quest. We intend on continuing with this relationship and extending them with the launch of Zika assay and about to be launched calprotectin, both differentiating specialty assays, which typically are send outs from hospitals and smaller reference laboratories to the largest reference sites. In addition, we now have our molecular leg with ASRs, which are now a part of our offering to the large reference laboratories. Within the segment of hospitals and smaller reference labs, we have lower level of penetration. We intend to accelerate our presence there by targeting the 1,000 hospitals with more than 300 beds and by continuing to turn ELISA ID users to CLIA technology with opportunity, which we estimate to be around USD 100,000,000 The key assays to allow this effort are calprotectin for the diagnostic and follow-up of inflammatory bowel disease, IBD and PCT, procalcitonin, which is used in the diagnostic of sepsis and the follow-up of antibiotic treatment. An additional aspect of our strategy is to initiate cross selling customers, which until recently purchased only one part of our menu. We are targeting about 100 customers in the U. S, which until now purchased other DiaSorin products or only MDx products and now can be offered both. Historically, the LIAISON and LIAISON XL had a marginal presence in the wide segment of the POLs, which is where we are now to enter with our new LIAISON XS, which has a smaller footprint and a targeted me too menu, as Carlo mentioned. As we plan to focus on 3 main additions to our specialty menu in the U. S, let's review their market opportunity. Calprotecting testing with automation and clear guidelines is projected to grow by 30% per year from current value of USD5 1,000,000 to USD30 1,000,000 Zika, which came upon us 2 years ago, is now representing about USD2 1,000,000 with experts guiding for market potential value north of USD60 1,000,000 As you recall, DiaSorin has the first, the only fully automated FDA approved Zika IgM test. In addition, we have developed this test support of BARDA, government agency, and now is considered by the CDC as best in class assay. With our long term collaboration with Brahms, DiaSorin was a pioneer with PTC with PCT Automation in Europe and we are now poised to enter the U. S. Market as well. Current PCT testing in the U. S. Is around $40,000,000 with automation and new clinical indication can get to 300. PCT fits well with our high volume specialty strategy and with our fully automated ID menu. Let me talk a little bit about Calprotectin and then Zika. Unfortunately, there are over 1,700,000 Americans which are suffering IBD, inflammatory bowel disease, with over 70,000 new cases per year. The matrix for the test is stool and it is done in large reference labs and hospital laboratories. The current testing uses manual labor intensive ELISA. As we stated in our previous slides, the opportunity with full adoption of IBD testing can reach $30,000,000 annually. For reference laboratories, which will experience higher volume, we offer automation and consolidation of technology. In hospital labs, we offer automation and increasing efficiency, which allow them to keep in house testing. Also, it allowed us to reach the Gasco, the GI labs, where stool is normally handled and where competitors are smaller companies competing with manual ELISA technologies. Zika. There is almost no day without news related to mosquito borne infections and Zika. As the case for all emerging disease, CDC testing guidelines take time to develop and are currently cumbersome. Today, the market is about USD 2,000,000 but as experts recommend increased testing and if this becomes part of the prenatal screening panel, it will grow rapidly by additional testing of 4,000,000 annual pregnancies in the U. S. To over USD 60,000,000, Our plan. The test is currently done in large reference labs and in the public health labs. We are first to automate the test, which fits perfectly the CDC guidelines, already locked deal with the 2 main lab chains in the U. S. We are now following the smaller reference laboratories. In parallel, we now can enter the 100 public health laboratories in the U. S. With both automated Zika and with other tests from ID menu. Turning to Europe. The market conditions are flat since several years. Lab consolidations and pressure on volumes are seen in all countries. For example, French reduced the number of testing labs by 69% in the last 5 years with Italy reducing it by 31% during the same time, following the pyramid. In the segment of large labs where full lab automation is needed, we formed strategic alliances and connectivity relationship with all the major companies, which have the ability to provide full automation. We currently have already over 100 such automation projects implemented in Europe. We plan to continue exploiting those opportunities by leveraging on our fully automated ID and specialty menu. The midsize lab is our core bread and butter segment in Europe, where we continue to expand the LIAISON XL base, leveraging on menu differentiation. Starting this year, we also have the ability to add molecular solution to our customer base. Key drivers of our menu will be QIAGEN Infectious Disease, the exciting agreement that was announced on Thursday the full stool panel with stool based elastase and the addition of anemia panel. Like in the U. S, we have limited presence in the small labs, which we would like to improve on. The strategy include hub and spoke, the emerging need of lab chains to have same technology in their main and satellite location, consolidation of ELISA and CLIA technology and upgrading Liaison customers to the Liaison XS once launched. The menu driver of those strategies are the Specialty ID and GI stool with elastase. A bit on TLA with Roche. Our main strategic partner for total automation in Europe is Roche as part of our best in class initiative. Our aim is to be connected to 50 of their systems in Europe within 2019. Currently, we are validated and are connected to their cobas 8,100, which is positioned in large hospitals. And we have extended our agreement to also include connections to their CCM, Cobas connection model for larger privates, which is more flexible, scalable and includes front end and back end modules. As part of differentiation specialty, our strategic decision to enter the world of stool testing by automating this complex matrix have resulted in tremendous success and the expansion of our customer base. Customers appreciated the easy to use fully automated solution and the expanded menu of 9 assays with Calprotectin as its latest addition. To support better guidance, standardization and increased testing adoption, we initiated a large multicenter European study. As you can see from the graph, the number of stool customers more than doubled between 2014 to 2016 to over 250. And from the table of GI infections, you can see our 1st in class automated menu with stool elastase under development and is next to be launched. Last but not least, China. As always, the Chinese market is never short of news and the latest involve the concept of 2 invoice policy. I would like to first explain the policy and its possible implication on the market. The objective of this government initiative was to control distribution channel and curtail cost to the health care system. As in many cases of new government initiatives in China, 2 provinces were chosen for early implementation and to study the implication. In Shaanxi province, the policy affected the number of distributors and the requirement to show the 2 invoices between the manufacturer and the distributor and between the distributor and the end user. In Heilongjiang, there is no limit on the number of distributors, but the 2 invoices must be presented. The implementation of the full policy is projected to be sometime in 2018, but it is not for certain. The implication may result in creation of GPOs, Group Purchasing Organization, and consolidation of dealers into a small group of key suppliers that can adapt to the new requirement. Time will tell, and we are following closely. The Chinese market. The IVD market in China was €2,300,000,000 in 2016 and estimated to reach €4,000,000,000 in 2020, showing 12% CAGR. Following the pyramid of hospital segmentation into Class III, II and I, 64% of our revenue in China are in Class III hospitals, which are the largest and most completed and complex in their services, showing 25% growth on revenue year on year. In such hospitals, we plan to leverage our TLA collaboration with Beckman and continue to push conversions from ELISA to CLIA technology. Men assays are hepatitis and HIV, which are part of the Beckman relationship, our new HEV, which represent a solid opportunity in China and our specialty testing of TORCH, EBV and PARVO. Class II hospitals represent 29% of our revenues and are growing at 25% year on year. Our strategy is to continue addressing the maternity and children hospitals and pushing for further conversion from CLIA from ELISA to CLIA. Again, the main drivers are our hepatitis, HIV, HEV and the full ID offer. Class 1 hospitals are now emerging as a new opportunity. They currently represent 1% of revenue, growing by 9% year on year, but will present a new opportunity in China in the mid to longer terms. An interesting development in China are the private labs. The segment which was already worth $870,000,000 in 2015 is expected to double by 2020 with a CAGR of 20%. The top 4 players representing 70% of these segments are KingMed, Dian, Eddycon and Dun On Jan. The number of such labs are growing rapidly with 100% nucleated in 2015 alone. As we have achieved in the U. S. And Europe, our strategy is to strike corporate level collaboration with the main private players with a focus on high volume and differentiation specialties. We have already started to make the rounds. I've mentioned in my previous slides our plan with infectious disease and HEP retro clear technologies. When it comes to ID, the Chinese market is worth €45,000,000 but it is still 62% ELISA and only 33% CLIA. We have 28% of the CLIA marker, which has 18% annual growth. So there is still plenty of room to convert and grow. We plan to continue pushing ELISA conversion by CLIA, by leveraging our installed base of 130 Liaison at maternal and children hospitals with add on assays such as EBV and parvo. PCT and mycoplasma will be launched in China as soon as the registration clear. For hepatitis and retrovirus, the IVD market ex blood bank is about €400,000,000 As a reminder, the U. S. Is about €500,000,000 showing you that Shaniz market is growing rapidly. Again, only 31% of this market is clear technology with 62% still ELISA. Our share of this market is 2% and this market is growing at a 15% annual rate. Clearly, also here we have room to grow. We continue to push conversions from ELISA to CLIA with both Beckman TLA solution and with standalone LIAISON XL. As mentioned before, a new differentiation assay which will be added to our hepatitis CLIA menu is HEV which is currently available from local manufacturers and only in ELISA format. In summary, our bag is full. Our strategy is clear. So with this slide, I conclude the section of our planned immunodiagnostic execution and turn the podium to Esther with our molecular execution plans. Thank you. Chen is quite a bit taller than I am. So thank you, Chen. Good afternoon. So when we speak about molecular, we're actually going to be referring to the kits, the reagents and the instruments that are utilized for clinical testing. So worldwide, molecular diagnostics is one of the fastest growing segments within the IBD market and there are multiple applications of testing that we see generally spread across 6 different categories, collectively worth approximately $6,000,000,000 And as Carlo mentioned, some of the technologies actually include PCR or nucleic acid amplification tests for single targets such as HPV and hepatitis C, tests that include multiple targets that have been combined together into mini panels or large 20 to 25 target multiplex panels and next generation sequencing for complex genetically rooted diseases such as cancer. DiaSorin's focus of course will be in the first two technology categories. So when we look at strategic considerations, the molecular market actually contains different geographic regulatory reimbursement and testing dynamics that actually influence assay selection. So factors that could actually enable a particular strategy in one region may actually wind up being a limiting factor in another. So therefore, this has led to us actually intentionally developing 2 distinct strategies, one for the U. S. And one for the international market. And we will be discussing each of these factors and how they actually influence strategy in more detail later on in the presentation. So differences in the market have also led to different geographic opportunities for kits and ASRs or analyte specific regions. So as you all know, kits are tests that have all the components that are packaged together, whereas analyte specific reagents are sold as separate components into the marketplace. So we believe that there is geographic opportunity in both the U. S. And EU market for kits. However, there is a much greater opportunity for ASRs in the U. S. Market. And this is due to the fact that the U. S. Is one of the leading industrialized nations in terms of wide utilization for laboratory tests, laboratory developed tests. And the reason for this is because you have certain instances where there actually isn't an approved test available on the market or you may actually have an assay that for whatever reason is unable to go through a regulatory approval process because it has, for example, low volumes in the case of rare diseases or it may simply be because there is an approved kit that is actually available out on the market, but it just simply doesn't meet the laboratory's needs. So therefore, we will actually continue to develop and manufacture analyte specific reagents as we know that there are LDT or laboratory developed test assays that have a really high regulatory burden. So it's less likely that they will actually go through a clearance or approval process. In addition, we will also bring ASRs to market for rare targets or those analytes that have been found by research. And once those analytes have actually been established and well known within the medical community, we do have also the option of commercializing and bringing them through a full FDA regulatory path once they actually surpass a certain volume. So we are actually well positioned for growth in the molecular market. We already have 11 approved kits available worldwide 57 ASRs that actually span multiple clinical testing categories. So when we look at instruments, these platforms can actually be segmented into 3 categories, as Carlo mentioned earlier. You have number 1, your point of care systems number 2, your bench top systems and then number 3, your high throughput systems. So now your point of care systems typically run your CLIA waived assays, generally one assay at a time and they have currently today a limited menu. Whereas your bench top systems are able to run single target, dual target assays as well as the multiplex assays. And your high throughput systems offer total lab automation, but currently have very targeted menus for viral load and for women's health. Where we fit with our Liaison MDX is squarely within the bench top system category. So we are able to run single target, dual target and 3 target mini panels on the direct amplification disc. We are currently in the process of developing a multiplex disc to handle multiplex assays or larger panels, and we are able to handle higher volume assays on the universal disc. And I'm sure as you all saw a few days ago, we have entered into a collaboration with TCAN, to adapt their newly launched Fluent platform to be able to add automation to pre analytic sample processing for high volume assays. So the Liaison MDx was actually developed by 3 ms. It currently utilizes, as we mentioned, the 2 discs, the direct amplification disk and the universal disk. The direct amplification disk is an 8 well consumable that runs mid to low volume assays. It is sample to answer with no extraction required, whereas our 96 well universal disc accommodates high volume assays. And the instrument itself is truly versatile in that it can actually accommodate low to high volumes by simply swapping out just the consumable. So it's truly the flexibility of the instrument that our laboratory customers appreciate today. In addition, with it being as scalable as it is, because you are able to just swap out the actual disc, our customers appreciate that the instrument can grow with them as they themselves grow and their volumes grow. So with the flexibility and the actual menu that is currently already available, we are in use across multiple lab segments. So this is just a snapshot of some of the customers that we already have today. So we are present in national reference So we are present in national reference laboratories, small regional reference labs have a presence in academic medical centers in addition to children's hospitals. And our sweet spot really is the 300 plus bed hospital segment going to the small regional reference labs. So as we look to strategy for the U. S, the main driver for growth will be test menu expansion. So in an approximately $3,000,000,000 U. S. Molecular market, we will be expanding our content by driving forward and delivering both ASRs and kits in parallel. So as mentioned previously, there are several factors that actually contribute to pipeline strategy. So taking a look first at market dynamics and trends, the molecular market within the U. S. Has actually decentralized across multiple lab segments, meaning that molecular testing is actually run all the way down through your physician owned labs and clinics. And that's due to the fact that you have small bench top instruments that have come and in the U. S. Market, you do have a mechanism for coding coverage and payment. Hence, why the actual availability of molecular tests has actually decentralized across multiple different segments of labs. So you have in regards to kits and ASRs, kits are typically run generally in all labs and the kit that is selected is based on the laboratory's So the bottom line is, is within the market, there is a mix of testing. So laboratories need a system that have the capability in order to do both. So secondly, as we look at where assays are actually run, you have clinical categories of tests that wind up and their targeted menus of viral load, women's health, transplant, STI. And within the hospital segment, we see it's an extremely competitive environment with multiple vendors, a ton of instruments and different assay menus on each instrument. So these hospital labs actually run a variety of infectious disease assays ranging from your respiratory assays all the way to your large multiplex syndromic testing panels, whereas the regional reference laboratories actually run a combination of the menus found in the core lab and in the hospital lab. So the 3rd consideration for pipeline strategy would be the regulatory landscape, which is a critical component because differing regulatory pathways are accompanied by varying levels of costs and time to clearance and approval. So as we look across the scale on the different regulatory pathways, ASRs is a product and then 510 and de novo pathways would actually be the most appropriate option for us to bring these assays to market quickly and experience growth in the quickest amount of time. So as we look across all of the different categories of assays that we could actually include in our pipeline, it becomes very clear when we take into consideration all of the factors that we just spoke about. Viral load monitoring, transplant, HAIs and certain women's health assays have a high regulatory cost burden or market dynamics or pricing implications that would make it very limiting for us to actually include that in our pipeline menu. However, there are certain women's health assays and other infectious disease assays that offer a lower regulatory burden, and acceptable price points and differentiation that would be beneficial for us in our menu. So our path forward in terms of our pipeline is actually listed on the screen in front of you. So we know that there is a competitive intensity within the hospital and reference lab segment, and therefore, there are me too assays that we do need to develop in order to have menu parity. In addition, you see in the green differentiating specialties in terms of assays and categories of assays that we will also be driving in parallel. So our first priority will be to deliver those assays that are in blue and that are also in green, because our strategy is to first protect the core and then expand our specialties. So in terms of our ASRs, because we know that ASRs in the U. S. Market are still a viable segment for us. We will be actually leveraging our current 57 ASRs that we have already available and adding to the pipeline by adding targets that are additive to those 57 targets that we already have available. These targets will be able to be used in combination with current reagents today. So as we look to Europe, in an approximately 2.5 $1,000,000,000 European molecular market, we will have a distinctly different strategy in terms of a post transplant strategy. So as we look at the actual factors or dynamics in contrast to the U. S, the EU has a one common regulatory directive that will allow clearance of multiple kits through the CE IBD clearance pathway. However, reimbursement dynamics have actually now driven cost containment measures where your laboratories are actually looking for efficiencies and therefore you have more consolidation and molecular testing actually driven to centralized services in Europe as opposed to the decentralization that we see in the U. S. Market. So your central service laboratories run not only your high volume parameters, but they also run specialty testing as well and need system capability to do both. So in order to actually grab a foothold and growth in the European market, we know that we have to establish our presence within these central core laboratories. And as we look at the options of menu for these core laboratories for the high volume parameters they are viral load monitoring, women's health and post transplantation. And due to market dynamics and pricing considerations, viral load monitoring and women's health would not be appropriate for us. However, the post transplantation assays actually offer a path to entry. And this is the reason why. So if you look at the actual competitive market landscape for post transplant, you'll see that there's no clear owner. It is fragmented. You have multiple different vendors that are offering different instruments, but they don't actually offer a full total solution. So you may actually have your newest competitors that are over to the left as you go up the actual automation line that do offer full automation. However, they do lack a full post transplant menu and also lack the ability to be able to accept multiple different sample types that come into the lab from post transplant patients. However, you do have those competitors that do actually have a larger post transplant assay menu is noted by the size of the circle on the graph. However, those competitors that do actually have post transplant menu are limited in their throughput capacity. So the post transplant strategy will be 1 in our collaboration with TCAN to bring automation for extraction PCR setup, have the Liaison MDx for amplification and provide a complete transplant menu of 11 different will offer not only automation, consolidation, flexibility in terms of multiple different sample matrices, It will offer a full transplant menu and the ability to standardize results. We believe that this strategy can be executed very well and that in the market you do have that centralization and consolidation. Therefore, the same labs that actually run immunoassay relationship and existing customer base in order to actually cross sell the molecular post transplant assays as well. So in conclusion, there are 2 distinct strategies, what we affectionately like to call our 3 in 3 strategy in the U. S, which will expand our position by developing menu content on 3 discs in 3 segments. And in the European market, a post transplant strategy for targeted expansion into the core central lab with automation and full transplant menu. Thank you. And at this point, I'm going to bring up our CFO for the financials. Okay. Okay. In the next few slides, I'm going to walk you through our long term guidance. Let me please remind you that some of the programs that have been presented so far will have an impact on our P and L over the 3 years, whereas for some others, the economic benefit will kick in after 2019. In the next slides, I will try to clarify which is which, and I will also share with you some major assumptions on our financials. Please let me start on the top line. And let me remind you once again that these numbers are expressed at 2016 exchange rates. This is an important assumption to us to keep in mind since the Australian sales are exposed to currencies different from the euro and mainly U. S. Dollar and Chinese RMB, which together represents 50% of total DiaSorin sales. On the left hand side of the slide, you can see the revenue guidance by technology, whereas on the right hand side, we have a pictorial qualitative summary of how these initiatives will hit the 3 years covered by the plan and beyond. Since the presentation, what we have seen so far also cover programs that will start hitting our P and L beyond 2019, we have thought to add this graphical representation to summarize and help you understand what is covered by our revenues guidance and what is not. So let's now move to the numbers. We forecast to close 2019 at about 7 €35,000,000 with a compounded growth at constant exchange rate over the period covered by the plan of 9%. CLIA sales, and let me be clear here, we include both vitamin D and CLIA X vitamin D in this category, should deliver a compounded growth for us of about 8%, reaching €500,000,000 by 2019 and so accounting for us 70% of our total sales. On top of the ordinary course of business, we will have the contribution of the Roche and Beckman China deal, whereas as we saw, the Beckman U. S. Deal will start to kick in, in 2019. We foresee additional revenues coming from the Keyagen partnership and the U. S. Gastrointestinal program starting from 2018, with an increasing impact as time goes by. Lastly, revenues from the excess instruments will start in 2019, year in which we will launch the platform. To increase and have the full effect beyond the 3 years covered by the plan. Eliza sales, which will represent almost 10% of the total sales at the end of the period covered by the plan, will decrease at a compounded rate of 3%, so to reach €70,000,000 by 2019. This trend is similar to what we have experienced in the last few years. Again, let me please remind you that in this number, we are including the sales of the serology products coming from the business focused acquisition, which was completed in May 2016. Molecular test sales at about €90,000,000 in 2019 will grow over the period of the plan at compounded rate of 40%. Let me please remind you that this increase is enjoying the fact that we completed the FOCUS acquisition last year. The normalized growth for full year 2016 would have been 18%. On 2016 full year revenues of about €50,000,000 The impact of the initiatives described by Esther a few minutes ago, and I am referring in particular to the post transplantation strategy in Europe And the multiplex disc program will start to kick in beyond 2019. By the end of the plan, molecular sales will represent 12% of total DiaSorin sales. Lastly, instruments and other should grow over the 3 years plan at a compounded rate of 6%, so to reach €80,000,000 Now before we move to the 3 years P and L and free cash flow guidance, I'd like to share with you some major assumptions and in particular, how we see the clear technology pricing developing over the period covered by the plan and all the initiatives we are implementing to safeguard our EBITDA margin. In this slide, on the left hand side, we represent what we believe will happen to the prices of our clear products using the clusters described by Carlo at the beginning of our presentation. We think Me2 products will be subject to a reduction of 3% to 6% per year as a combined result of price pressure and different mix. Once again, let me remind you that in this cluster, we also account for vitamin D. Whereas we see high volume specialty prices declining by 2% to 3% per year, and we believe we are not going to see any material price pressure on differentiating specialties cluster. All of these elements will push our margins downwards across the 3 years plan. And we are planning some initiatives to offset this pressure in order to safeguard our EBITDA margin. We are listing these programs on the right hand side of the slide. And in particular, we are going to focus on industrial processes optimization, supply chain streamlining and services efficiencies. We have identified an internal team led by a senior executive to drive these initiatives, which will span across the whole group. The project was kicked off during 2016 after having spent some material time and effort in assessing and planning with the help of an external consultant how to best move forward. All of these efforts should allow to save costs, all the rest being the same, for about €10,000,000 to €15,000,000 in 2019 compared to 2016. Besides, industrial and supply chain initiatives should also allow us to reduce our inventory ratio to turnover of about 1.5 percentage points, again compared to 2016. As we will see in the next slide, all of these initiatives together with increased focus we are going to put in managing our operating leverage will allow us to basically offset at EBITDA level all the price pressure that I've just described. We can now move to the P and L and free cash flow guidance, which is the last slide of my very short deck. As we just said, revenues will grow at a compounded rate of 9%, and the same will true for our EBITDA. Therefore, allowing us to maintain a margin an EBITDA margin at around 38.5 percent of our revenues and to deliver in 2019 €280,000,000 to €285,000,000 EBITDA. We believe the group tax rate will go down to 30% as a result of the recent Italian corporate tax rate reduction and of the different geographical composition of the 3 pretax profit coming from our geographies. Please note that this guideline does not consider any potential tax benefit coming from any potential tax reform in the U. S. And let me remind you that a 1% reduction of the corporate income tax rate in the U. S. Would mean for us about $1,000,000 less taxes. All of this will bring us to a net result in 2019 of about €155,000,000 to €160,000,000 which means a compounded growth over 2016 of about 12%, increasing the net result ratio of revenues to 21.5%. Moving to cash now. We believe we will be able to generate over the 3 years covered by the plan a cumulative free cash flow of about €450,000,000 And this is net of all the extra efforts that we'll have to put in place to finance and to fund the initiatives that have been described so far by my colleagues. This confirms, once again our ability to keep on generating a very healthy, very strong free cash flow. So this was the last slide of my deck. So we'll turn the microphone now to Carlo to summarize the main takeaway of our presentation and then to open the Q and A session. So what did we say today? We said that we have a very solid growth in immunoassay and we're going to add lots of differentiating and innovative products. We said we're going to launch a new system, the Genesone XS, and we're going to address these systems. With this system, a different segment of the market, the small and POL office labs. We said that we are open for partnerships, and QIAGEN is a very good example of that, and we will continue to pursue partnerships that provide content to this company. We said that molecular diagnostic is a second leg of the company, and we said that you have seen from Esther that we have lots of expectations in terms of new products and specialty products that we will add, especially in the ID segment. We said that there is a strong financial performance, and we will get we'll continue to guarantee strong margins to the company. And last but not least, what we said and we have shown with the support of our shareholders, our Board of Directors and the Chairman, Mr. De Negri, that we are committed to targeted bolt on acquisition to strengthen our portfolio and also to give us access to new customers in a consolidating market. At this point, the presentation is over, and we open up for Q and A and questions. Please. Thank you for taking my question. This is Maja from Kepler Cheuvreux. I would like to start with the financial plan. It's great and highly appreciated that you give us the indication on what you are expecting coming forward and what kind of cost savings you see. You've also told us that certain of the partnerships and initiatives that you're starting today are actually only going to come through in 2019. So I'm going to ask you something about 2019 beyond. Is the kind of pricing pressure that we're seeing here to stay, and therefore, the initiatives will help you to keep the kind of growth pattern that we're seeing today? Or do you think it could slow down? So it could be getting easier for you and you could start to see an acceleration in top line growth and possibly a margin expansion? I don't see that price will ever improve, right? And simply because reimbursement will continue to decline. If you see PAMA in the U. S, very good example. If you would have a chance to, I think, walk down few floors in this building and talk to the guy that is responsible for health care in lumber, he's going to tell you that he's running out of money, right? So there is a very strong pressure on the system to decrease cost. So we don't foresee that price pressure will decline. However, as you have seen, there are different level of price pressure. Vitamin D is a vivid example of a situation where all of a sudden market becomes competitive and boom, you lose up to 50% your original market price. However, we are developing lots of new products. And as you have seen there, you don't see price pressure. QIAGEN Alliance is another very good example of a unique partnership where you develop products which are unique, protected by QIAGEN IP, so both companies don't expect price pressure there. So looking behind 2019, I think eventually, as a combination, you will continue to see good chunk of our business under pressure, emerging new products not under pressure. But fundamentally, we will need to continue to implement initiatives to control cost to maintain margins. So as a summary, you will feel comfortable with saying that margins should be flattish? You'll be able to balance high value tests facing pressure in Me2 tests? I feel comfortable with nothing because I'm an over anxious guy. But yes, I feel comfortable with the ability of the company to put together actions to fend off declining in price. Berit, we cannot make any statement behind 2019, as you can imagine. However, you have seen what happens with vitamin D. So at that point, the company was highly exposed to one product. I remind you that I think it was 2010 or 2011, vitamin D was 44% of our revenues, 45%. So big pressure on one product meant a lot to the company. Today, the good thing about this company is that vitamin D has been diluted out, still relevant for us but not to that level. And if you look at the portfolio of diasporin, without disclosing anything, but if you look at a product called the sales contribution after vitamin D, next in line is less than €25,000,000 in revenues. So we don't have that exposure any longer to a single product that goes under attack by competition. So to make a and yes, please consider also the 21.5% net earnings, I think, is one of the best, if not the best net earnings in the industry. Right. Right. It is. Right. So you can, do you want to finish up? Maybe you want to Yes, I have Jeff. I mean, I have a list of questions, but I'll forward afterwards. On the partnership with QIAGEN, particularly when you were looking at the slide where you were showing the different kind of competition in post transplant. QIAGEN was pretty nicely around and pronounced there. Are you going to partner up in post transplant with QIAGEN or are you going to compete with them? No, we will compete with them. Because don't forget, the 2 companies were very clear. This is nothing to do with molecular, which is their core business and it is our business for the future. So as far as Molecular is concerned, we are competitors. This has to do with immunoassay, their products and our technology. Hi, thank you. This is Oram Hazanna from Exane BNP. Three questions, if I may. The first one regarding the new midterm guidance. So first, if you can just clarify, should we exclude the scope effect from the Focus acquisition if we should rather expect a 6% organic growth average over the period? And how should we look at the phasing given that many business opportunities will only kick in into 2019? Should we expect a back end loaded? Or are they also front end loaded opportunities? The second question is on the Keyagen partnership. If you can give us more details about the economics. So for example, will you sell the QuantiFERON on Liaison? And how will it fall in your P and L? And yes, I have a more basic question on the tax rate then. So why don't you take the financial part and I'll Yes. Does it work? Yes. In terms of basic growth, like for life, without including the Focus acquisition, our growth is between 6% 7%. We have seen in Q1 6.7%. Percent and that kind of growth is also, give or take, built in the plan. A different speed because we will have different initiatives kicking in. One of them is QIAGEN. One of them is the gastrointestinal project in the U. S, which are going to kick in later on. But if I blend over all the numbers, I would say between 6% 7% is the right ballpark number. Dan, I believe you have a question. Do you want to ask the tax question? Yes, which is more basic. No, I was just wondering because you mentioned that it was not including any potential tailwind from the U. S, but does it include any potential tailwind from the patent box in Italy? Neither? No, it doesn't. We are we filed for our patent box back in 2015. We started talking to the tax authorities in the past few months. We are hopeful we will be able to finish up our negotiation because it is a ruling. So we are hopeful we will be able to finish up our negotiation by the end of this year. Since the Patent Box allow you to have a rollback mechanism, if we will be able to get it, as I hope, by the end of the year, we will have in 2017 the sum of 3 years, '15, 'sixteen and 'seventeen, which can be up to €6,000,000 €7,000,000 It all depends on how the negotiation will kick on. And then we will have in 2018 2019 the additional uptake coming from again 2,000,000 ballpark number of less taxes coming from this Patent Box. The Patent Box is a 5 years elective tax regime, so we would have to apply for it again before the end of 2019. But it's not in. It's not built in. Now we go to the Caiogen 1. And you know you asked a question I cannot answer, right? I know. So let me just tell you, we have not agreed or better, we have agreed how we are going to serve the market. And it's very obvious that when it comes to XL customers, because this is the basis of the Alliance, DiaSorin will certainly have the responsibility to serve those markets. But keep in mind that when it comes to some of the products, you have different components. So you have an immunoassay component, but you also have other components that make some of those specific products of QIAGEN. So both companies will address the market together. And certainly, we're going to exploit our LIAISON customer base as well as existing customer base of QIAGEN. But I cannot be more specific because as you can imagine, we are 1 year away from commercialization. And then with QIAGEN, we're going to be much more specific when time comes to commercialize the product in Europe, which, as you know, we expect is going to be second half of next year. But will it be possible to have some cayagent tests like QuantiFERON compatible on your instrument? Or Again Conceptually, I mean, could be possible? Conceptually, everything is possible. Let me just say that the LIAISON XL, as you know, is not a molecular platform. And so the products that will go on the ELIZON XL are immunoassay based products. And then we're going to be much more clear closer to launch. Good afternoon. Massimo Vereckho from Mediobanca. First question is on the LIAISON XS. I remember when you were launching the XL that there were some critical factors in the launch. The customers you will have gained the instruments, the full depreciation of the old instruments, several factors which were critical in the implementation. What are the critical factors now with the Liaison Excess that we should monitor understand exactly how we [SPEAKER MARCO TRONCHETTI PROVERA:] Look, when we launched the LIAISON, the critical factor was to avoid cannibalization, right, because we had an extensive base of Liaison, and we did want to keep growing the company. And so we were putting together a mechanism for the sales force to go after new accounts, right? That was, if you remember, Phase 1. Today, the Liaison Excess well, first, we built a Liaison Excess base, which certainly is not target for the LIAISON Excess, right? Completely different customer. We have left an extensive base of LIAISON, which is aging. And as you have noticed, we have not been replacing this Liaison base since few years. And so we expect that as a role of engagement, the LIAISON XS, when launched in Europe, will pretty much provide an opportunity to cannibalize LIAISON, guaranteeing continuity of life to some of these very important customers that we could not the residual part, we could not really tackle with the Liaison XL because it's too big, okay? So the in this case, cannibalization will be directed and is not going to be a threat. And this is how I see fundamentally the main difference. Plus, don't forget, strategically, in the U. S, and we're talking about U. S. And China, complete different market segments because we are talking about smaller labs. So the challenge that we will need to address is the fact that in China or the U. S, we need to put together a distribution network that is able to take the access to these accounts. And this is going to be the investment for the company. How do we go after that segment of the market? And I was looking at the slides, and you have a very high market share in the big labs. You will enter the small labs, the POL. Do you need a midsize instrument to attack the midsize labs or you will stretch the 2 segments down and up? But Massimo, that's the XL. I mean, what I think Cern was saying is that the XL was designed for a mid sized lab and the vast majority of placements are there, right? The XL boy, we should change names. The XL LIS, which is the connectable, the one with the nose, big nose, the Liaison XL with the big nose goes to the very large labs, and that is through alliances. Chen showed a very interesting slide. I don't know if you picked up on that. Eventually, we have a Russian Wegmann, But today, in Europe, we have more than 100 installations and 140 installations worldwide projects, which are also done with all the other companies in the space, Edbot, Siemens. So every time there is a track system, we connect and we connect with LIS. So for us, the LIS version of the XL was the one that was intended for the very large labs. So large labs LIS, mid labs XL, small lab Excess. 2nd and last question. Some of the pharmaceutical companies that I covered, they which operates in rare diseases, they say that there are more than 3,000 rare diseases with no cure, which are under Diane's. Do you share this view? So do you see an unlimited growth potentials for you in launching specialty tests? And do you see it more in immunoassay or in the molecular diagnostic? No. I see that when it comes to the immunoassay, it's going to be more directed toward some of the infectious disease. I mean Zika is a very good example. There are some regional infectious disease that today are underserved. Dengue is a good example where we should be developing some of the specialties. What you're referring to, I see it much more for molecular because usually is today molecular targeting. And so they need either companion diagnostic 3 ms technology because what Esther said, to get this 3 ms technology because what Esther said, and we are not shy about it, is that the technology is phenomenal, not because it's being developed by Focus Focus was a relatively small company. But because 3 ms, which is a $40,000,000,000 company, developed that technology and developed it especially for the Army as it quite often happens in the U. S, right? So the idea was you have an Humvee, you throw in a small cycler, the disc, and off you are in Iraq testing soldiers, right? And actually, 3 ms got lots of money from the U. S. Government to develop that. And when it was done and over, they decided to move somewhere else, right? And so this great technology developed by 3 ms was left there, was optimized by 3 ms and then was in partnership with Quest launched. But then they really needed a diagnostic company to know how to do with it. And today, the basis of the acquisition, the reason why we spent $300,000,000 yes, it is customers, but it's the technology that will allow us to develop these assets you're talking about. Okay. Thank you very much. Alessandro Poggi from Bancauretti. My question is on what you just mentioned on building a network that might convey your offer of excesses to the markets. And when I say markets, I'm talking about the U. S. And then China. So could you since the excess is in the plan year 2019, could please give us a clue of what you are planning to do more or less to hit the market with excess? Thank you. Okay. In China, everybody, including us, operates through distributors because you're not allowed as a foreign company or local company, in fact, to sell directly to the hospital. So there, the solution, it's easier because there is an existing network of distributors that we will need to use in order to disseminate the liaison excess in the smaller account. So I don't see a change there in the way we do business. When it comes to the U. S. And the PUL, it's a completely different ballgame because in the U. S. Today, we don't serve physician office labs. Actually, we use and today, these labs are served through distributors, big ones. Cardinal was a very good example, an $80,000,000,000 company, plus other franchises which are more specialized in serving that market. So in my opinion, it's a combination of using the distributors in the U. S. And but I think the differentiating factor is going to be that in certain pockets of the country, in certain states where you do have a lot of POs, we would like to go direct. And so the idea would be to make the investment in adding some reps in order to regionally serve the market and where it's more dispersed, use a distributor. We do have an experience with Cardinal because 40% of our liaison at the good times of vitamin D were placed by Cardenal, okay? So we've been historically working with them. Yes. I can. Romasana again from Exane. Just a clarification on the PCT. I'm sorry if I missed that during the presentation. But do you have any timing for the launch? And on which instrument will it be performed? Will it be XL, XL? The PCT will be launched within Q2 of next year in the U. S. Right. I think we're doing the clinical studies as we speak. It's a fairly simple regulatory because it's been downgraded and so is a regular 510, and you can use very simple samples. It's commercially available. And it's going to be available on the Excel first and then on the Excess, okay? You know that market leader today's view, Maria, I don't know if your question is more chauvinistic or what, but it's a French company. Afro the body. Yes. But you also know that, very recently, Roche put approval in the U. S. And so the monopoly became duopoly. And then there is a line of companies that are getting access to the PCT market in the U. S. Notwithstanding that, the market is still growing 20%, 30% per year because there is lots of adoption, right? So in the case of PCT, it will not be unique for us. It will be more participating on our installed base to a very market that is growing very fast. Yes. And so you fairly expect some heavily price pressure going from, let's say, kind of a monopoly to a much more diversification? Today, the price for PCT, if I'm not mistaken, is $20, dollars 30 per test. And it's very expensive. So yes, in our model, we envision a dramatic price decrease. But for once, we are going to be the new entrant. So we're not going to be the ones suffering from the price pressure. Thank you. We have some questions from the web. Okay. The first question. How long do you expect it will take until a lab internally validates your ASRs? All the 57 ASRs are validated. And typically, it takes 90 days for a lab to take the ASR, validate and then there is no filing, obviously. There is no regulatory path, so it's all internal documents. And so this way, the adoption is extremely fast in the U. S. Because of the huge free cash flow you plan to generate, do you consider additional potential acquisitions in the next 12 months? Well, that's a question that we cannot answer to. But as we said, we are quite committed to and we've been acquiring few companies in the last few years. So we are always paying lots of attention to opportunities. If they materialize within 12 months, I don't know. Which, if any, of the immunoassays will maybe affected negatively by potentially new, better molecular tests entering the market? I believe none, and simply because the technology are the 2 technologies are very complementary. The immunoassay is more is the cheap technology for that allows screening and patient identification, whereas molecular, which is much more expensive, is used for patient monitoring. So typically, cannibalization doesn't happen. Zika is a very good example. Today, the FDA protocols sorry, the CDC protocol and guideline for Zika testing is that within the 1st 14 days from symptoms, the pregnant woman should be tested with a molecular product. And then after 14 days, it should be tested with an immunoassay. And so there are all the 2 technologies are always complementary. Is it 20% of DiaSorin's tests with, for example, the oncology tests like CEA being at risk? Or which immunoassays are potentially at risk from new molecular tests? Very confusing question. Because CA okay, let me give a generic answer. As I said before, I don't believe that there is any risk of any of our products being cannibalized by molecular testing, complete different technologies, complete different use. How many do you have? I have a few more. Sorry. It's a popular webcast. Right. How important is Europe in achieving your 18% molecular growth targets? Is your European molecular strategy more risky than the U. S. Given how concentrated Europe is on post transplantation only? Is it more risky? No. It is different because our focus was a U. S. Company and what we bought was U. S. Base, U. S. R and D and so a company that think U. S, U. S, U. S. And therefore, it's very clear that the company was able immediately from the get go to exploit the U. S. Market. When it comes to Europe, we are building actually our network. We are building our infrastructure. We are hiring people in different countries. And the post transplant products will come to market after 2019. So I would say the next 2 years are there for us to build the franchise in Europe in order then to be very successful launching the post transplant. Something Esther said that probably was not picked up, 30 today, DiaSorin has a 30% market share in Europe for products immunoassay, which are used in the transplant centers. So these are not new customers. They are customers that we serve with our existing products and we have access to for molecular. Should we expect further acquisitions to supplement your strategic objectives? What would be a reasonable and efficient capital structure for DiaSorin? I think we already answered this. Just have a few more. What is the risk that MDX in the U. S. Increasingly shifts to point of care from benchtop, effectively becoming bifurcated to high throughput or patient bedside? I see no risk because when it comes to point of care, there is a clear limitation. Point of care testing is very good only when a disease can be tested with one product. So glucose testing, for example, was a very good example because you had patients that had to be followed up just with one parameter. When it comes to molecular, there are really few products where that you can have point of care testing. Flu is the biggest market today in the U. S. And is very typical of the U. S. And not in Europe. So I don't believe in bifurcation. I believe that there is an opportunity to go after the POL business with Clearwave Molecular, but I also believe that in an expanded market, there is an opportunity in the mid sized segment. All the hospitals are doing molecular testing today, and we'll continue to do molecular testing. Okay. And the final question. Is? Europe seems to be the biggest market for low throughput immunoassay. With BioMerio dominating here, can you remind us why DiaSorin has decided not to take Liaison Excess into Europe? Well, that was a miscommunication. We did not we are going to take Liaison excess to Europe, certainly. But I think that BioMerieux was dominating in Europe and especially in France when France had 5,000 private labs during immunoassay. The problem, as we have shown, is that since then, the 5,000 became 800. And therefore, we don't believe that strategically there is place in Europe for a small system. And the reason why some of our competitors like BMW are very successful is because they were able to take the small system out of Europe into U. S. Or China? Because in Europe, I think everybody with small system in a consolidating market is suffering. Thank you. Thank you. Okay. Ladies and gentlemen, thank you for coming, and I think the day is over. Thank you.

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