Good afternoon. This is the conference call conference operator. Welcome and thank you for joining the DiaSorin full year 2022 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, then they 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. Ladies and gentlemen, good afternoon. Welcome to the year-end 2022 results call. As usual, I'm gonna make some remarks about the business, and then I will leave the microphone to the CFO to go through the actual numbers and guidance for next year. Let's start to discuss 2022. As usual, I'm making comments at a constant exchange rate to understand how the business did progress in the last year. As you know, we now use to represent the business looking at three different legs of the company, the Immuno franchise, which is a roughly EUR 700 million business, the molecular business and the LTG business. The Immuno franchise last year grew 3%, with different results depending on the different geographies.
We have North America that grew single double digits over 10% as a result of the hospital strategy that I think we have discussed over the last calls. The initial strategy was initiated in end of 2019, and the idea was to add resources to support deployment of systems in the hospital setting in the U.S. We achieved by the end of 2022, the target we had, which was to add 150 new hospitals. The program has been so successful that we decided to continue to invest in this segment.
We hired 20 more reps in Q4 last year. We gave ourself the target to now add to the customer that we have in that segment over 250 hospitals in the next three years. As discussed many times, this strategy is fundamentally centered around certain specialty products that we have today available in the U.S. We are adding in the next three years as part of the immuno assay menu development effort. Clearly, we are talking about products like MeMed, like the Lyme Disease, like new products we have in mind for gastroenterics.
We are talking about high reward specialty products, very differentiating, that clearly will generate revenues at high margin, but at the same time do require an investment in terms of resources to be allocated for the promotion and education, especially the education of some of the end users of these products, which are not the labs, but are the clinicians. When it comes to Europe grew 4% last year, which is in line with what we historically achieve in this geography. Remember, it is a blend of Europe and Italy, where we are clearly overly penetrated in the main regions.
As discussed many times, Europe for us is geography where we expect steady growth, where we have an installed base in hospitals of over 2,000 systems that do benefit by an add-on strategy. Clearly, the difficulty of Europe is that when it comes to the introduction of new products, a new product meaning those products where you need to educate the clinicians, you need an effort that goes country by country, and not necessarily directly to a single a larger geography like the U.S.. So we need to be extremely choosy when it comes to in the markets that are worth investing in because of the effort quite often is not commensurate to the market opportunity.
Europe continues to be for DiaSorin a flagship territory with, and we believe that, 3%-4% per year is fundamentally what, we need to continue to guarantee and will continue to achieve with our Immuno franchise. Let's go outside the rest of the world. The rest of the world, actually declined 4%. That's actually a combination of, two different groups of countries. Countries that, are doing very well for us, where we, today we work directly, and namely is Brazil, which, grew high single digit. It's India that grew double digit, and Mexico double digit growth, and Australia high single digit because we are highly penetrated.
A different group of countries where the business did suffer last year, primarily in China, where our business declined 14% year-on-year as a consequence of declining volumes, the COVID situation and the kickstart of some of the programs that are driving prices of certain products down by 30% compared to previous years. We also suffer in other secondary geographies like Iran and clearly Russia, where we had business, certainly in Iran was not marginal. That because of what happened in the last few months, clearly got to a stop in the second part of the year.
Overall, although the Immuno franchise I think is solid in terms of growth, in terms of success of the, in those geographies where the company has invested, and in terms of prospective growth, funded by the new products that we have discussed and we are bringing to the different markets. Let's go to molecular. Molecular is a little bit more complicated because there is a change of perimeter that took place in 2021 with the acquisition of Luminex. If I can make a general comment on molecular, which is for us over 200 million dollars or euros of business, the business is stable.
Notwithstanding the fact that, as we know, in the multiplexing side, we are offering products which are getting old and will be replaced by the LIAISON PLEX that I'm gonna comment after this. The business is stable, certainly with an acceleration in Q4, where the business grew actually 18%, that has been driven by the very strong respiratory flu season. That, as I think you've seen for all the companies that have been working in this space, was extremely strong in Q4. By the same token, the flu peak was pretty much done and over with by December. In Q1 of 2023, we expect a slow start in respiratory.
Anyway, as said, the business is a combination of the DiaSorin Simplexa business, which continues fundamentally its path of single-digit growth, very profitable. The Luminex business, which is fundamentally multiplexing, which again is stable depending on the respiratory, as we discussed. Then we have some legacy Luminex business like the ARIES, which is lingering. As we've been discussing, we are evaluating options moving forward to consolidating some of these platforms into existing DiaSorin platforms. Let's move to LTG. The LTG, again, difficult to give year-on-year comparison, again, because of change of perimeter in 2021. However, we've always stated that the LTG is a business that is very profitable and where we expect a growth of 7%-8% per year, so high single-digits.
We had slowdown of the business in Q4 on the instrument side, I think as we have discussed, because of supply chain issues with parts and electronic components. If we dissect the LTG, we had 7%, 8% growth on the royalty side and on the bid business, following the trajectory of our partners that continue clearly to sell their products in the research market. We had in the second half, we had a decline on instruments, and not because we are missing orders, not because we were missing parts. I believe that comes H1 in 2023. This situation should be addressed and resolved, and we should then see our LTG overall franchise continuing to grow at historical rates. Let me move to the 2023.
We decided in order to make the numbers comprehensible, to discuss the numbers or the projection on ex-COVID. I'm gonna make a comment on COVID and ex-respiratory, because when it comes to respiratory, there is clearly a strong seasonal impact. We made an assumption on respiratory, but truly we need to understand to see what will happen in quarter four then to understand the business impact, positive or negative, versus what we forecast. If you look at the business ex-COVID, ex-respiratory, we expect a growth of 4%-6%, where we see the Immuno assay franchise to continue to grow mid-single digits with a strong impact on from North America, again, Europe in the low single digit numbers.
We expect China starting from H2 to recover, so not to be a drag compared to last year. Also, you know, the effect of Russia and where we have sold in 2021 and not sold in 2022 is gonna be now washed away in 2023 in terms of comparison. So we also expect the rest of the world business overall to contribute to the growth of the business. When it comes to the LTG, as said, we believe that the supply chain issue should be addressed by the end of H1, and therefore we expect high single digit growth in line with past expectations.
Let me also add a comment here as part of our attempt to recover from the increase of cost. Due to inflationary pressure, we have starting from beginning of 2023, we have increased prices of instruments and components to our partners following the pricing policy that partners applied to their end user customers. We expect that there is gonna be a low single digit positive impact starting from Q2 and Q3 to the revenues that we get in LTG, selling again, instruments and components to partners.
We believe that fundamentally, the LTG will continue its trajectory and a margin contribution improvement compared to 2022, due to the fact that we'll be able now to overcome certain cost increase we had especially on spare parts and instruments. When it comes to molecular, we expect the business to continue to be stable, notwithstanding the fact that as we've discussed, we're not gonna see a contribution from Plex and NES in 2023. There is an element of this business that we need to remark, and that has to do with the fact that Luminex already prior to the acquisition, had lost a significant contract with one of the major reference labs in the U.S. where Luminex was supplying tests for cystic fibrosis.
It was a significant business, a $12 million business, that after the acquisition, we were able to continue to supply because of the, let me say, existing relationship between DiaSorin and this very large lab. Although, the lab has provided to us a final notification, they are switching to a homemade different technology. Therefore, starting from the second quarter of 2023, we are gonna take a net loss of $10 million in this segment. This is gonna be important, and we're gonna be moving forward in the next quarters.
We will continue to point this out because it clearly dilutes growth in molecular, and it is because of the size is, again, it's important that you understand that this component is a one-off component that is actually going away in 2023. Let's talk about COVID. I believe that in 2022, we got EUR 220 some million of COVID revenues. We already saw starting from Q4 last in 2022 that there has been a sharp decline in this business pretty much across all geographies. I would say it is more relevant in Europe than in the U.S..
Although starting from quarter one of this year, we saw a dramatic decrease of this business. Therefore, we expect that, I think as for everybody else in this segment that operate in the COVID diagnostic, we expect that our COVID revenues will be down 80% compared to what they were in 2022. We believe it's gonna be around EUR 60 million of COVID revenues in 2023. Let me make a couple of comments on the two strategic programs. One is MeMed, and the other one is the LIAISON PLEX and LIAISON NES. Let me start with MeMed. As I think everybody has seen, MeMed decided to give another license to another partners. We got some questions about this.
Very, very clear that for us it was not a surprise at all because it was embedded in the contractual agreement that we have with MeMed. We believe that because of the fact that we have the product and the product has been already approved in the U.S., we have a couple of years of advantage compared to the partner. I have to say that I see the fact that there is another player or more players in this business, I see it as positive and not negative for a very simple reason.
The opportunity is vast, but the opportunity also comes with the fact that clinical marketing is to be activated in order to promote in the, among the ID specialists, the adoption of this algorithm, the fact that the clinical guidelines do include this algorithm. MeMed is a very, very small company, they clearly decided to spend their economic resources in promoting the test with payers, but they don't have the footprint in the U.S. to go and promote the clinical content of physicians. DiaSorin made an investment and we are making more investments in adding reps in this area because we see that today the success of this product we come from the adoption and not from a clinical value.
It's just a matter of explaining to people that this product exists. We are limited in size. We are a great company, but certainly we don't have the footprint that by ourself we can cover the U.S. The addition of a good player like Beckman, you know that we do have a relationship with Beckman in many different fields. We believe that having Beckman also taking the token of and commitment to promote will certainly help the growth of adoption of this product. I don't see this as a competitive threat. I see this as actually an advantage to make sure that this assay is adopted in the U.S. Let me make a final comment on the LIAISON PLEX and the LIAISON NES. I'll go one by one.
When it comes to the LIAISON PLEX, we are, as we speak, conducting the clinical study in the U.S. during the respiratory season, that will be concluded around May when the season is completely over. As you know, companies in respiratory are required actually to go through the full season because of the fact that certain strains only appear toward the end of the season. Then we submit, and at that point we'll expect, we are expecting to have the product approved by the beginning of next year. Results so far are very good, and the product is the system per se is performing as expected.
Now we are working on the second set of products that will follow suit, which is the blood panel, the three assays from the blood panel. When it comes to the LIAISON NES, the initial product is, as you know, COVID, Flu A, and Flu B. We had a delay on this product for a couple different reason, and this has to do with supply chain issues with us and the partner that is actually been awarded with a contract to manufacture the system. We are, as we speak, working with the partner to make available the first 100 units that will be necessary to start the clinical study.
We are thinking that the clinical study on respiratory will start in Australia first in order to anticipate the season and then end up in the U.S. and the Western world when the flu is going to cross over and come to us. Again, we expect to submit this the LIAISON NES COVID flu by the beginning of next year and have it approved in 2024. At this point, I'm gonna leave the microphone to Mr. Piergiorgio, who is gonna take you through the numbers, then we're gonna take questions. Thank you.
Thank you, Carlo. Good morning and good afternoon, everybody. In the next few minutes, I'm going to walk you through the financial performance of DiaSorin in 2022, and I will also make some remarks on the contribution of the fourth quarter. Again, let me please remind you that consistently with what we did over the last course, in order to better understand the performance of the business, I will refer to adjusted P&L items, therefore sterilizing the impact of the Luminex deal-related elements. In the press release available on our website, we are providing a line-by-line bridge between adjusted and IFRS item. Please also remind that we completed Luminex acquisition in July 2021, so starting from Q3 2022, the perimeter of consolidation is comparable. I would like to start with what I believe are the main highlights of the period.
2022 total revenues at constant exchange rate grew by 2.4% vis-à-vis 2021, as a combination of a decrease in COVID sales by 40%, more than offset by an increase in the ex-COVID business by 21%. This performance is in line with 2022 guidance. The Immunodiagnostic franchise ex-COVID at comparable effects grew in the year by 3.3%, driven by an increase in CLIA sales by 5%, partially offset by a negative performance in the Chinese market, as we just heard. The molecular business ex-COVID growth was mostly driven by the different perimeter of consolidation and by a very good performance in H2, +13% at constant exchange rate, fueled by a strong respiratory season.
The licensed technology franchise growth year-over-year is due to the different perimeter of consolidation, whereas H2 soft performance, -2% comparable effects rate, is mainly due to COVID-driven supply chain issues on electronic components which affected our instrument sales. Q4 2022 total revenues at constant exchange rate decreased by 14% as a result of the anticipated decrease in COVID sales, 61% of EUR 62 million, partially offset by an increase of the ex-COVID franchise by 4%. Before moving to the EBITDA, we need to spend a couple of minutes on the so-called payback system for medical devices.
This measure, originally introduced in 2015 by the Italian government and never implemented since then, has been eventually reactivated in September 2022. With the goal of rationalizing public healthcare spending, this scheme requires company to pay back any sum exceeding the budget allocated to the Italian regions by the government. Specifically, the law obliges returning to the regions about 50% of the turnover exceeding the medical devices cap, fixed for the period 2015-2018. Please note that even if the September 2022 law decree covers only four years, as said 2015-2018, the payback could be potentially extended to subsequent periods. More than 1,000 companies in Italy, including DiaSorin, have filed legal appeals to administrative regional authorities to challenge the decree. The payment due date, originally set for January 2023, has recently been postponed by the government to the end of April.
The Regional Administrative Court in Rome has scheduled a hearing on June 2023, that will reveal its intention with respect to all the pending lawsuits. In the case the administrative court rejects the claim, DiaSorin, and very likely most of the 1,000 companies that already filed a recourse, will appeal the decision in front of the State Council, which is the Administrative Court of Appeal. Before September 2022, the reactivation of the payback mechanism, DiaSorin had already built in its balance sheet a provision based on the information available back then, and its relative risk assessment. Because of the news introduced by the September 22 law decree, the provision has been increased during Q4 by about EUR 4 million or EUR 5 million.
In case of a negative outcome in both the Regional Administrative Court and the Council of State, starting from 2023 onward, the payback will have to be accounted for as a reduction in revenues. Having clarified the meaning of this payback mechanism in Italy, let me please move back to the financials. 2022 adjusted EBITDA at EUR 514 million, or 38% of revenues, is in line with the full year guidance, in spite of the payback provision we just mentioned, which was not originally factored into our projection. The decrease compared to last year, EUR 29 million, or 5%, is the result of the combination of diluted gross profit, mostly driven by different product mix, and the lower operating leverage, driven by the inclusion of Luminex in the perimeter of consolidation and lower COVID sales.
Q4 adjusted EBITDA margin at 35% of sales, or EUR 123 million, record a decrease toward Q4 2021 of EUR 39 million, or 24%. This variance is mostly driven by lower COVID sales, EUR 60 million in the quarter, to be precise, and by the payback provision that we just discussed. Lastly, we keep confirming our ability to generate a very healthy free cash flow. EUR 316 million in 2022, with an increase compared to 2021 of 5%. Moving now to the P&L. 2022 total reported revenues at EUR 1.3 billion, grew by 10% or EUR 123 million compared to last year.
Luminex products revenue in the period amount to EUR 386 million, vis-a-vis EUR 185 million in 2021, in line with our budget, as a result of lower instrument sales for the licensed technology franchise, which has been offset by higher molecular sales. 2022 adjusted gross profit at EUR 904 million, grew by 9% compared to last year, with a ratio of revenues of 66% compared to 67% of 2021. The full year contribution of Luminex on the different product mix are mostly driving this very light dilution. Q4 2022 gross profit iteration is in line with Q4 2021 at 66%.
I believe it is important to underline that in spite of the inflationary pressure we discussed about in previous quarters, we have been able to put in place cost containment measures and initiatives that have allowed us to safeguard margins. Full year adjusted OpEx at EUR 472 million, grew by 32% compared to 2021, with a ratio of revenues of 35%, vis-a-vis 29% of last year. This increase, in line with our expectation, is mainly driven by the different perimeter of consolidation and higher COVID sales booked in 2021, that generated back then a very material operating leverage. A negative FX effect, higher travel costs, and higher inflation mainly drive Q4 2022 adjusted OpEx increase toward previous year of EUR 12 million or 11%.
It is important to underline that the increase at comparable exchange rate is just short of 4%. Year to date adjusted other operating expenses increase toward 2021, as said, is mostly driven by the payback provision. As a result of what we just discussed, 2022 adjusted EBIT at EUR 417 million or 31% of revenues, has decreased compared to 2021 by 10%. Interest expenses at EUR 3 million are lower than last year by almost 40%, mainly because of better yield on our cash investment, whereas the adjusted tax rate at 23% is basically in line with 2021. Year to date, full year adjusted net result at EUR 319 million or 23% of revenues is lower than previous year by EUR 38 million or 11%.
Let me now move to the free cash flow and the net debt position. During 2022, DiaSorin generated EUR 316 million free cash flow, as we said, vis-à-vis EUR 301 million in 2021. At the end of 2022, the net debt was negative for EUR 907 million, vis-à-vis negative EUR 986 million at the end of 2021. This improvement has been driven by a strong generation of operating cash, which has been partially offset by the following items. Share buyback for about EUR 160 million, EUR 57 million dividend to our shareholders, and about EUR 40 million of negative translation effects affect, mainly due to the U.S. denominated term loan that we put in place to finance the Luminex acquisition.
Lastly, let me move to 2023 guidance, as usual, expressed at previous year exchange rate. Total revenues -14%. Total revenues at constant perimeter of consolidation, which means without the flow cytometer business, which was sold at the end of February, -11%, of which COVID at about EUR 60 million, molecular respiratory business, -20%, and the base business ex COVID and molecular respiratory +4%, +6%. Adjusted EBITDA margin at around 34%. Beside, we believe that 2023 base business growth will be skewed towards the second part of the year since we deem, like many other peers, that China will recover from H2.
Please consider that 2023 guidance does not include any possible impact on the payback mechanism in Italy, since we have no visibility, neither on its potential implementation nor on its materiality. We deem that in the worst case scenario, we could have a negative effect of EUR 6 million to both our top line and the EBITDA. Before concluding, please remember that DiaSorin financials are highly exposed to the U.S. dollar, and even more so now than sales denominated in U.S. represents about 50% of our total group sales. As a rule of thumb, please consider that for every 1 cent movement of the dollar against the euro, DiaSorin revenues move by about EUR 6 million on a yearly basis. Let me please turn the line to the operator to open the Q&A session. Thank you.
This is the current 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 the touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Odysseas Manesiotis from Berenberg. Please go ahead.
Hi there. Thanks for taking your questions. I just had 1 question with several parts. I wanted some more color behind the reiteration of your immunoassay midterm growth trajectory. Could you touch on your thoughts around MeMed second partner a bit more than you initially did so, as well as the implications of the QuantiFERON exclusivity expiry and recent launches in the low to mid throughput space by some of your bigger peers? My point is, have none of these affected your confidence in achieving this 7% guidance? Thank you.
When it comes to the QuantiFERON, I'm gonna make a general comment. We have a contract which is valid and in place. We have pro-provision on that contract that protect the two partners. We have a relationship more than a contractual relationship. We have a business relationship with QIAGEN that has been developed over the years that goes behind QuantiFERON. Lyme disease is also involved, and we discussed, I think, last year that we are working on another application together. I do not have a concern about the exclusivity provision or the relationship with QIAGEN. Again, these are confidential informations that I'm not allowed and I will not share with third parties.
When it comes to other players launching in the mid space is not a problem for DiaSorin because, again, we sell a fairly unique menu. Our differentiating factor has nothing to do with the box, but has to do with the menu. I don't see the other players actually getting into our space when it comes to menu content. When it comes to MeMed, I think that I don't know what else I can, I can add. I just have stated, we have today, if you look at the 2,000 hospitals, at least in mid and large institutions in the U.S. that could run.
This assay, we have 15% market share, I think. We serve 15% of this hospital base, so there is plenty of space for other partners to chip in and support the adoption of this assay. I think that we all came to the realization that MiMed is small. MiMed has been dedicating their effort, I think, in a very good way to obtain coverage. Now they're working on coverage by private insurance companies, but this is what they can do in the U.S. Therefore, there is a heavy lift when it comes to education and the more players they would come to this market, I believe, the better it's going to be for the different players. I know that some of you raised a concern about pricing.
I don't have concern about pricing at all, to be honest with you. I think that today companies, especially when it comes to these new kind of products, we're maximizing clinical value and we're maximizing economical value for the specialties. Typically, the price war comes when you have too many players or me-too products. Certainly this is not a me-too assay per se. When it comes again to geographies, I think I gave my view. I think U.S., all thumbs up. I think Europe, modest growth. Is in line with what the European market does. When it comes to China, my expectation is they're coming from second half.
there's gonna be a recovery, driven by volume and driven by the fact that we put in place, certain strategies, including, some reorganization to the geography to allow, China for us to, unleash the opportunity with our product. I think during COVID times, has been for several reason, lost.
Thank you, Benito. Over to you.
The next question is from Maja Pataki from Kepler. Please go ahead.
Yeah. Hi, good afternoon. I have three questions. I'll take them one by one. I think it's easier. Carlo, with regards to the 2023 guidance, you were talking about flat molecular sales in 2023. Is that including the headwinds that we're seeing from the respiratory? That's the first question. The second question to that is could you just give us a ballpark how big respiratory is within molecular? Because it is really helpful to have an understanding of how the rest of the business in molecular is doing. That's question one. One and two.
Maia, are you done? You said you have three questions.
I can take them all three at a time. The second question would really be with regards to the wording around the 2025 Strategic Plan. You are reiterating the trajectory for the Immuno franchise and the Licensed Technologies Group, of course, adjusted growth rates for, you know, 2025. You've talked to the fact that there are delays in molecular. Is it fair to say that the EUR 1.5 billion target that you've put out back then is no longer valid and we should not basically, also not take the molecular growth rate of more than 23% that you've put in the Strategic Business Plan as a given for now?
Okay, Maja, let me go to question number 1. Respiratory, just understand 2023. Well, overall, respiratory is a third of the business, molecular. Okay?
Okay.
There are three components to the molecular business. Respiratory, where in our guidance, we have embedded a respiratory season, which is in line with previous years. Okay? That means that we foresee a decline in the business due to the fact that Q1 2023 is extremely slow because everything was actually done in Q4 last year. Okay? Now, if you have in 2023 a Q4, again, very strong, all bets are off. You could have a completely different number. But in the projection we gave, we assume that because of the way that the peak was shaped in 2022 versus 2023, the respiratory overall business will be less than what we had in 2022. Got it?
Got it. Thank you.
Okay. when it comes to the second element is that you need to take a $10 million hit on the business, which has to do with one assay, one contract that is gone. Okay.
Yeah.
The rest of the business is actually, we expect it to continue to be flat with, growth that is coming, actually from the singleplex more DiaSorin products in a small decline coming from multiplexing, although we didn't see it in 2022. Again, is a projection we are making for 2023. Overall, the combination of the base business, ex respiratory, ex contract, is flattish.
Okay, got you.
Got it. Okay. Second comment about the 2025 plan. Look, I think all the trajectories when it comes to the business, the fundamental of the business are all there. When it comes to a different program, the platforms and what we need to shoot for, and the content and MeMed, everything is there. We are today reiterating our guidance, and we are looking at 2025 overall in line with what we presented in the LTP.
I believe that comes the end of 2023, when we're gonna have the proof of the approval of the respiratory panel and a much better visibility on the confirmation of the launch of the next next year, when next year is gonna happen because it's crucial that it happens before the 2024 respiratory season. Last but not least, on the MeMed side, the adoption, because they were investing ton of money and time in promoting the adoption. We need to understand the adoption rate of that of this product, how it goes. As I speak today in Q1 2023, I'm reiterating the 2025 guidance.
Okay. Thank you. My last question, Carlo, I think on one of the calls last year, you were talking about a VERIGENE I that your customers, that you mentioned that the gastrointestinal test is one that is most used. That respiratory prior to last year's flu season wasn't the main test. When you have the LIAISON PLEX, do we have to think that the replacement of the existing VERIGENE I platform in the market really depends also on the gastrointestinal, or do you think that doesn't really matter?
Maja, I think that what we stated is the following. We said that 30% of the business is respiratory so to the contrary in multiplexing. To the contrary of what we see from bioMérieux, for example, which is heavily skewed to our respiratory. In multiplexing, we have less respiratory. Okay, the rest of the business is fundamentally blood, the blood panel and the gastro. The blood panel is the one that is highly adopted in the U.S. because it was the first assay that was actually made available to the U.S. market by VERIGENE on the VERIGENE I. It's, let me call it a business which has been where the adoption of this technologies versus traditional culture has been now on the market for a long time.
Let me call it, the most boring part of the business in terms of innovation. On gastro, to the contrary, where we do have a presence both with NxTAG manual and with the VERIGENE I, is the one where we see the most potential. Okay? Long story short, I believe that respiratory is growth because we don't sell much respiratory in relative terms. Blood is a defend and grow a business that today doesn't grow that much, and gastro is growth. Growth because the market itself is growing significantly.
Great. Thank you very much.
Thank you, Maja.
The next question is from Aisyah Noor from Morgan Stanley. Please go ahead.
Good afternoon. Thank you for taking my questions. My first one is also on the midterm guidance, but on your margin targets, given that you are expecting to make 38% EBITDA margin by 2025, and your guidance for this year is sorry, 34%. It implies you have a lot of heavy lifting to get to 200 basis points expansion per year, to 25. Could you talk about some of the drivers of you getting there? Maybe perhaps this is also an opportunity to update us on where you are with respect to your cost synergy program. The second question is just on the MeMed partnership. Do you have a better assessment now of how close you are to achieving this MeMed test in clinical guidelines?
What hurdles do you need to overcome? What KPIs are you tracking to achieve this? Just some color on the clinical adoption or reception you've received so far.
Okay, I'll take the second part of the question, and then I think Piergiorgio will cover the margin. Look, it's very difficult to say where we are at because we just started, okay? You, you will understand that in order to have an essay into a clinical guideline, it takes years, okay? I'm not banking on the fact necessarily that this will go right away on a clinical guideline. This is because the essay, if you think about it, is not so complicated. In a way, if this was a new way to diagnose a pancreatic cancer, clinical guideline would be of key importance.
In this very specific case, the essay, the product actually goes to answer a relatively simple and understandable clinical question like fever without source. To me, what is more relevant. The data are extremely supportive. The clinical data that have been generated by MeMed, not by us, I think, are a good start. Today, there is a clinical study that is ongoing, is actually starting, where us and MeMed together are gonna fund, one year plus clinical study to generate data for the private payers, okay? That goes to the payers. When it comes to the.
Physician, clinicians is not a matter of a clinical guidance, it's a matter of just reaching them. You're talking about thousands of doctors that need to understand the availability of this assay. It's foot on the floor in terms of having clinical specialists. It's digital campaign and marketing because these days, these doctors are actually using that tool, especially the specialists, to be updated on what's new in the field. It's a matter of investment, but not necessarily on a clinical guideline. When it comes to reimbursement, which is another key element, the discussion, I believe, MeMed did great in setting the foot on a $280 reimbursement when it comes to Medicare, Medicaid. That's the beginning of a story because now you need to go to the payers.
When you go to the payers, you need to have to achieve two results. The first, having the clinical, having the insurance to recognize very specific code and reimbursement for the assay. The second one is the unbundling, meaning that today, each hospital has negotiated with insurer, a bundling payment for somebody showing up with, in emergency room with these symptoms. What MeMed has to achieve now is that they unbundle from this sum of money a specific portion of this, which is dedicated to paying for the assay itself, and this will require time. I don't think that today the lack of reimbursement is an issue necessarily because when I recognize clinical value, then it goes into the budget of DRG of the hospital.
Again, we're talking about the U.S. now, of the hospital itself. Again, I see that today the effort is to go door to door and initiate these doctors to the concept of using this product. Again, clinical guidance, in my opinion, is not necessarily a must there. It will come, it will take time, but it's not a must.
Digging on the margin.
Yeah. Hi, Aisyah. Let me take the one on the margin. Let me start saying that the 34% EBITDA margin we guided for in 2023 is not far. It's actually pretty close to the number we have in our plan, which is the plan we use for our 2025 midterm guidance. Obviously, you know, a few things have changed. We have the payback, which could be going against us. As I said, it's not included, it's not embedded in our projection. At the same time back then, we were not factoring the sale of the flow cytometry business, which being mainly an instrument business, is and was actually better dilutive to our EBITDA margin. That is working in our favor, obviously, right?
At the same time, it is true that back then when we did our plan, we knew nothing about the big inflationary headwind we had to face, which back of the envelope calculation, we think is gonna be around, you know, EUR 25 million. At the same time, we put in place several measures to contain costs, which as I think the gross margin in 2022 and in Q4 proved, are kind of paying out. We kicked out these pricing increase initiatives. We have already started in our B2B business, so the license technology business, and we and that was not factored in our model. We started a program with an external advisor to extend this pricing increase also to our Immuno and molecular franchise.
Those were not included in our projection as well. You know, I would say really many moving parts, as always, right? I mean, margin are derivative also of top line growth. Since we said we confirmed that we're still shooting for the 2025 top line, with the only exception that you have to take out the flow cytometry business, which is not there anymore now, right? I believe that at the 38%-ish, EBITDA margin is still a value we are shooting for, exactly as the top line, exclusion of flow cytometry once again. Being these three years projection, as I said back in 2021, we all need to build in some flexibility around these numbers.
That's very clear. Thank you so much.
The next question is from Shubhangi Gupta from HSBC. Please go ahead. Mr. Gupta, your line is open. Please go ahead.
Hi. Thanks for taking my question. Regarding your 25 margin guidance of 38%, this margin improvement depends on product mix. Does that include only MeMed or are there other products in the pipeline? Can you shed some light on that?
Hi. If you are referring to 2025 guidance, it includes all of our products in our mix, right? It will be a combination of our three franchises. The Immunodiagnostic one, and MeMed is for sure belonging to that franchise as it is Lyme, for example, the SPG franchise, and the molecular diagnostic franchise. It will be a combination of all of the three different franchises.
Thank you.
The next question is from Hugo Solvet from BNP Paribas. Please go ahead.
Thank you. My question, I have just one for clarification. Carlo, you mentioned that at the end of the year, you will have more visibility on traction from IMED on the launch timeline for the Liaison Plex. Should we expect you to either confirm or adjust the long-term targets by the end of the year?
I think that we are gonna have this discussion at the end of the year.
Thank you.
The next question is from Emanuele Gallazzi from Equita. Please go ahead.
Yes. Good afternoon, everybody. Two questions from my side. The first one is on the LIAISON XS, if you can just provide more details on the rollout in the U.S. My second one is on the current trading, if you can provide us an update on what you have seen in the first quarter to understand how the year is starting. Thank you.
sorry. Can you just repeat your second question? Not clear to me what you are saying.
If you can just provide some color on the performance of the business in the first quarter of 2023 as we are at the end of March.
Not really. I cannot. I cannot provide colors on a quarter that is not over. I think you need to wait until early May for the Q1 call. When it comes to the liaison access, as you have seen in this platform, I remind everybody it was designed for China, and the class 2 hospitals, and the U.S. when it comes to the hospital strategy, clearly it. Then tactically in Europe and in some of the developing countries. Far, we have placed around 150 systems and we just started the program in the U.S. because we were waiting for the approval of the PBSA, which came last year. China has been completely put on hold for obvious reasons.
We'll think about China and the LIAISON NES starting from 2024 and over. Keep in mind that when it comes to China now that there has been a strong push to move manufacturing away from to China. Most likely our priority is gonna be to move the LIAISON XL first, and then we think about the LIAISON NES. The liaison access today is tactically placed in Europe and in the rest of the world, and strategically to continue to feed our hospital study in the U.S., so it's very, very relevant for us.
Thank you very much.
The next question is a follow-up from Maja Pataki from Kepler. Please go ahead.
Yeah. Carlo, just a question on the respiratory testing. Last year, you were discussing or sharing with us that there could be a bit of a change in respiratory testing, more towards the low plex in, low plex respiratory testing, given the fact that there was, you know, flu and COVID and everything. What have you observed in the market? Have we seen a shift away from the single flu tests to a bit more like the low plex tests, or has that not happened yet?
look, Maja Pataki, I believe that the comment that were made by bioMérieux were actually very right. I believe the following. I believe that when it comes to respiratory, there is a business opportunity moving forward in the not in the existing market, but in the POL market and in the pharmacy market. decentralization of plexing respiratory, I believe is gonna be there. I also agree to the fact that the level of multiplexing that you need in that space is not the complicated 30 some essays that targets we provide today, but is more on the 5 up to 10, depending on the different customer setting.
I also believe that we saw a low plex meaning we saw an uptake starting from the end of the COVID season because of now the need of differential diagnosis. Until COVID was all over the place, they were testing COVID first because 80% of the time it was COVID. Now that the curse of COVID is not there any longer, now you see more adoption of differential COVID, Flu A, Flu B, and eventually for kids, the RSV. Okay? I believe that fundamentally this market will continue as is and driven by fundamentally reimbursement in the U.S. when it comes to large panels in the medical institutions.
I believe that the low plex will take place, especially in a decentralized setting. As DiaSorin, we have two different platforms to go to two different segments. One, the existing one, which is still very interesting, dominated by one player. I believe that it requires today there is, let me call it, an abuse of customers, meaning that the customers have been forced to use a very high multiplexing that I don't think makes financial sense. It will make less financial sense due to the constraints of reimbursement. We believe that flexibility in testing is key to continue to flourish in that market. By the same token, as discussed, you need to invest in decentralization.
Last but not least, because of decentralization is driven by reimbursement and availability of players to actually work in decentralized setting, I believe that, it's fundamentally a U.S. play. The rest of the world still is half-pregnant in a way, didn't make a decision to reimburse or develop decentralized testing through decentralized testing and therefore, for respiratory in my opinion, the market to play is the U.S.
Okay, thank you very much.
Thank you, Maja.
Mr. Rosa, there are no more questions registered at this time.
Thank you, operator.
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