Good day. Welcome to the bioMérieux half year 2020 financial results call. Today's conference is being recorded. All participants are in a listen-only mode. After the presentation, there will be a question and answer session. To ask a question over the phone, press star one. At this time, I would like to turn the conference over to Sylvain Morgeau. Please go ahead, sir.
Thank you, Diana. Good day, everyone. Thank you for joining us to review bioMérieux's performance for the first half of 2020. Before leaving the floor to Alexandre Mérieux, Chairman and CEO, and to Guillaume Bouhours, CFO, I will just make a very short introduction to provide you a couple of information. First of all, our press release was published this morning at 7:00 A.M. The press release can be found in the investor section of our website, www.biomerieux.com. In addition, please note that the slides of this meeting are also available, and they can be downloaded directly from the webcast. Promptly after the end of the meeting, the webcast and the call will be available in replay on our website. Now going to the presentation content after reviewing the performance after the first six months of 2020, we will hold a Q&A session.
Questions can come from the conference call or from the chat of the webcast, and if you wish to ask a question, please make sure to identify yourself. A very last word before starting the presentation. I will not read the slide that is currently projecting, but I recommend that you take note of its content that reminds the usual disclaimer about the forward-looking statement. With that, I will now hand the call over to Alexandre Mérieux.
Thank you, Sylvain. Hello to all. Thank you for joining this call. I will start with a snapshot on the key takeaway messages from H1 performance. As you know, since the beginning of the crisis, diagnostics is at the forefront of the fight against COVID, bioMérieux has delivered well on its mission by developing a comprehensive range of diagnostic solutions. You can see also that during H1, the strong performance was driven by a very strong demand for molecular tests. We display the growth of around 16%, 15.7% in H1. Nice increase and also increase in term of profitability to reach around 17% EBIT during H1. I will move to the next one. You see that we developed a comprehensive range of solutions, both in the field of molecular but also in the field of serology and immunoassay.
Looking at the molecular front, we have available the extraction with the eMAG and the easyMAG. We developed the PCR test, Monoplex test with the ARGENE solutions. Also, we have now the syndromic test with RP2.1 in the U.S. and RP2.1plus for Europe and the rest of the world. For serology, end of June, I believe we launched the test for VIDAS, both on IgM and also on IgG. Quite a complete range of solutions coming from the portfolio of bioMérieux. Since the beginning of the crisis, we kept the same priorities. Obviously, the first one is to ensure safety of our own employees. Second one is to ensure business continuity. Regarding employees, we ensure that their sanitary safety, I would say, but also we took care of them more socially.
Also you see that the board of directors has decided to allocate half of the dividends of 2019 to support solidarity actions. Part of it will go to the Mérieux Foundation, which is very active in emerging countries. The foundation has redirected part of its program to fight COVID-19. Also a significant amount also will be allocated to support local initiatives in the countries where bioMérieux is operating. You have seen also an impressive growth regarding molecular biology in general, but more particular for BioFire, which displayed a growth of 60% in the first semester with an install base moving from 10,400 instruments to 14,000 units worldwide. 80% of the business being done in the U.S. and 20% outside of the U.S.
We see a strong demand for the test, mainly for RP 2.1, knowing that it is a very adequate test in the current context, and it will be also very adequate for the upcoming flu season, where it will be critical to detect, identify between what type of virus is impacting the population in the flu season. We are ramping up our manufacturing capacities, not only in molecular, but this is in Salt Lake, and you see that in June, we have been able, I would say, to put in place or to operate on another site for the production of FilmArray pouches, working to improve the capacity and production.
Strong demand surge in molecular, but it's quite contrasted also regarding clinical applications. Outside of molecular, mainly in the field of microbiology and also immunoassay, we have seen in the first six months, overall, a reduced hospital traffic with less patients going into the hospital. We have seen a decline of sales on the ranges such as VITEK, BACT/ALERT, and immunoassay, which is, I would say, consistent with what we see also outside in the world and with other competitors. Looking at the field of industry applications, which represent 15% of the bioMérieux business at the end of June, basically, we remained a 1% growth. Pharma remains solid, but in the food business, we have been impacted by the fact that the catering services and the restaurants were not able to work. We had an impact on this with less testing coming from these two sectors.
With this short introduction, I leave the floor to Guillaume for the financial results.
Thank you, Alexandre. Let's review our financial performance in H1. Total sales growth of 15.8%. No major FX effects, actually neutral in H1. No scope effect either. Just to mention that when looking at H2 with the variation of USD recently, it's likely that the effects on revenues and also on operating profit will be more negative from a foreign exchange impact, just to keep in mind. Let's review now the 15.7% organic growth of H1 by range and following that by geography. This shows actually the translation in financial terms of all the trends that Alexandre has just explained. Especially the reduced traffic in hospitals impacts microbiology with a minus 4% in H1, and impacts even more immunoassays, minus 14%.
We have a, let's say, a mix in immunoassays of partly routine in the portfolio, more impacted, and partly more, let's say, emergency type, slightly less impacted. Molecular, very impressive. We just saw the BioFire figure. Adding the ARGENE and extraction, we go to +69% growth. Actually, you have to add potentially the molecular BioFire Defense, which is the gray other 3% on top, to get to actually the +80% organic growth of molecular that is mentioned in the press release. Industry, already commented by Alexandre, but pretty solid on pharma, much more impacted on food, and overall, 1% growth organic for H1. Now looking at the same by the, let's say, region. The main comment is actually that the region trends, let's say, mirror or reflect our exposure or penetration of molecular in the different markets.
Obviously, Americas is where we have the best positions in molecular with the huge success of BioFire. Overall, 30% growth. On the other side, Asia Pacific is probably the region where the weight of molecular is least at this stage, and therefore, most impacted by this H1 context, with only 2% growth. EMEA is somewhere in the middle with a slightly better exposure and position of BioFire and molecular than in Asia Pacific, and therefore, a higher growth of 4.5%. Now coming to the P&L. We just commented the first line of sales. Gross profit, you can see, is slightly decreasing percentage-wise from 55.7%- 55.3%. There are two, I call it, external factors there, which is FX, slightly negative, and also the phantom shares impact. With the share price increase, we had to provision more of the phantom shares bonus.
When we exclude those two effects in gross profit, actually the percentage is flat year on year. This flat percentage includes, I would say, mixed effects that are positive on one side for the FilmArray growth, having, again, a positive effect, and negative on the other side with the stronger equipment sales. As we usually mention, of course, equipments have a lower margin on sales. That's the different effects for the gross margin. SG&A is up 8% on an organic basis. You will see that it's much lower than sales trend, but also much lower than our usual trend, which used to be double digits. Of course, we have there a lot of savings in the lockdown periods in the different regions on less travel, less congress, less promotion on the commercial front. R&D is up 12%.
That reflects, of course, all the COVID-19 developments, specific developments that we had in Q1 and Q2, but also an effort to maintain, as much as we could, the pace of innovation for the rest of the business. All in, margin operating, current operating margin contributive at 17.1%, and up organic-wise 32%. Just to mention on the next page, some, let's say, exceptionals that you might want to look at differently. Included in this operating margin, the U.S. pension. We finalized in June, the termination of U.S. defined benefit pension schemes. It had, if you remember, positive effects last year of plus 10 or 11 in H1, and a negative minus four, in H1 this year. Year-on-year, it's a variation of minus 14. That's one effect. Now this operation is done, it was over two years.
We have, let's say, the usual 401(k) for all of our employees in the U.S. now. The second effect is, of course, phantom share plan. I remind everyone this is a special schemes of long-term incentive bonus, where the amounts are linked to the share price of bioMérieux. These schemes will end in end of Q1 2021, so next year. We have, of course, with a huge increase of the share price, pretty significant expense provision for phantom shares, EUR 42 million in H1 this year compared to EUR 26 last year. This is a variation of minus. A final point to mention here, minus EUR 7 on FX. Overall with some emerging currencies especially, that devaluated in Q1. Two comments on the next slide, between contributive operating income and net income.
We have our usual BioFire acquisition-related cost amortization, flat EUR 18 per year, EUR 9 for the H1. Special line that is new, mentioned by Alexandre in the willingness and decision by the board to support solidarity initiatives, for, let's say, half of the dividend. We already booked EUR 12 million of this, the Fondation Mérieux amount in H1. It will be overall for the year, it will be EUR 22 in this line. These, let's say, special actions are considered as non-recurring. That's why they are classified here. Net financial expense improved slightly to EUR 12 million expense. The tax rate was at 22%, I will comment on next slide. Overall, net income group share EUR 173 million and up 23%, all included. A quick comment on the tax rate. We end up just below a 22% effective tax rate.
We have, of course, a pretty major effect of our mix of countries, especially pretty significant exposure on the U.S. profits with lower tax rate than France. Just to mention the sponsorship, this EUR 12 million, let's say, solidarity actions funding, has a slight impact, let's say positive to reduce to 21.7%, reduction of 0.6%, non-recurring. Let's now look at the cash flow. A pretty strong free cash flow generation, EUR 144 million as compared to EUR 55 million last year for H1. Of course, the first driver is operating profits, pretty strong. Working capital was up, let's say only EUR 22 million overall. We're still inside this EUR 22 million, a very significant increase of inventory, due to slower sales in microbiology and immunoassays, where the, let's say, the adjustments of production, with the lack of visibility was difficult to go at the same pace.
A really good level of collection and AR and days of sales. We also slightly accelerated, and we wanted to accelerate our payment to vendors and, included there a positive effect of PSOP, as we provision more than we cashed out. In the free cash flow, also, let's say, a sustained level of investment. As you can see, EUR 127, 9% of sales. It includes, of course, the new manufacturing capacity for BioFire, and the new plan that Alexandre showed. Not only, we also invest in the rest of our industrial setup. We also invest in this amount, I remind everyone, on the install base with all the placements that are considered as CapEx. With this strong free cash flow, our net debt decreased to EUR 192, so pretty significant decrease to a very low 0.3 times leverage.
Just to mention that we refinanced our 2013 bond coming due in October with a EUR 200 million private placement, Euro PP, eight-year maturity, so pretty long, for better diversity of our financing maturities and 1.6%, a pretty successful transaction. With that, I hand over back to Alexandre for the outlook.
Thank you. Thank you, Guillaume. You see that under difficult circumstances, bioMérieux has delivered a sound performance in H1. To the market, there's still a lot of uncertainties linked to COVID around the world. We felt we prefer not to issue any new annual guidance out of this date, we have to follow and monitor the evolution of the market and bioMérieux, even if we say we are on a good trend. With this, if it's okay with you, we can open the floor to questions.
As a reminder, ladies and gentlemen, to ask a question, press star one. We will now take our first question from Catherine Tennyson with Bank of America. Please go ahead.
Hi. Thank you for taking my questions. I have three, if I may. My first one would be, if you could just talk us through the exit rate that you saw on your base business in August in both Europe and U.S., that would be helpful. Secondly, we've recently seen rapid flow antigen tests from Abbott and also from Roche. If you could just help us understand where you see that test fitting into the general COVID testing landscape and if you're interested in expanding in that space. Finally, on the increase in BioFire placements, I still see on the slides that an ex-U.S. increase in the install base is a key priority. How should we think about additional investments in selling and marketing and advertising in, say, 2021 to get back on that agenda? Thank you.
Thank you. I'm not sure I understood the first question. Maybe just hang on the line for the first one. Can you maybe repeat the first part of your question, please?
Of course. It's just basically what level of activity are you seeing in your immunoassay and your routine molecular business?
Okay.
in Europe and the U.S. in August?
Okay. In August? Oh, okay. I'm not sure we mentioned this. As you can see, yes, the routine testing has been impacted. I believe it continues to be. We are not back to what we can call normal, we are monitoring this situation. The trend has not completely reversed yet. For immunoassay, we have launched end of June a test for virus COVID. It's a bit early to say. It's a slow ramp-up. It's a bit early to comment at this stage. Regarding your question around the Abbott new test and the upcoming potential Roche new test, difficult for me to comment, especially. I would say it's good to have more players coming with more solutions because there is a strong demand for tests and any type of test all over the world. Today, the standard is PCR. Abbott is a different technology.
Let's wait and see. I don't believe it will have too much of an impact on bioMérieux since the most of our growth on our push and demand is coming for syndromic testing, which is different. The idea is to have a comprehensive view of all the potential viruses and bacteria involved in a discovery disease. I missed the third question. Guillaume, you have the third question?
The third was on the placement for BioFire. Ex-U.S. actually was 25% of the new installations over the first half. It was a bit more U.S.-focused than the past years. Yes, I think the second part of the question was on the additional investment, sales and marketing investment to continue to expand the BioFire base and customer, in 2021. Certainly, we will continue to invest. We will continue to invest, as we mentioned. It's our strategy in the outside of the U.S. expansion and market share gain and new customers for BioFire.
Super. If I could just be very cheeky and slip in an extra quick one. Of those new install bases that we've had in the U.S. and elsewhere, presume a lot of that is linked to COVID testing. Can you just talk us through the contract that those new placements have? Do you have specific volume agreements into 2021 for tests on those machines that aren't COVID-related?
Your question is really about BioFire, I guess. Most of the equipments are actually sold to customers. In this case, there's no specific volume agreement. The customer buys the system and then can purchase the reagents. What we can say today is that the demand is super high, and we are even, let's say, struggling to deliver at the level of the demand that we see. Yeah. It's more subject to supply the market. Also referring to what Alexandre said, that it's good to have a new test with such a huge demand overall.
That's great. Thanks so much.
We will now take our next question from Hugo Solvet with Exane BNP Paribas. Please go.
Hi. Hello. Thanks for taking the question. I have one on the guidance that you've put for 2020. Just wondering if we should extrapolate the sustainable impact on financials in H2. From the base of H1 2020, meaning organic growth of 16% or from a base that you had in the second quarter, i.e., a growth of 10%. Also on the maintained pace of innovation that you had with the level of R&D at above 10% of sales. Could you remind us of the upcoming launches and product that you have in the pipeline and if you've seen any delays here? Thanks.
Yes. For the level of R&D, as we mentioned, bioMérieux will always invest in R&D. This year it's true that we have focused our efforts both on the ARGENE, on the extraction, and also on syndromic to be able to deliver in a few weeks an improved immunoassay, because it was not planned in our budget. We have invested to develop this test. In term of potential delay compared to what we announced, I think, yes, maybe on immunoassay, I think there will be some delay in some of the tests that we have announced, such as TB IGRA because of the clinical trials have been postponed or slowed down during the COVID crisis. This is, I would say mainly compared to what we announced, this is mainly in that space that we see some delay.
Your first questions around the guidance for 2020, but we don't give a guidance so cannot give you more details. Dynamic is strong. The demand for molecular is very strong. As you know, there are lots of uncertainties, so difficult for us to project. Otherwise, we would have done it. Very strong for molecular and not yet back to normal, and we don't see it back to normal on the other ranges that are negatively impacted.
Okay, thanks. Just a quick follow-up. Are you seeing different dynamics in the recovery of the immunoassay and or microbiology?
Immunoassay is more impacted than micro because of the routine testing, but also because of the usual consolidation of labs. At this stage, it is difficult to see a difference in recovery.
Okay. Thank you.
We will now take our next question from Delphine Le Louët with Société Générale. Please go ahead.
Thank you. Hi, good afternoon, everybody. Alexandre, can you be more specific in the breakdown? I try to figure out, when I look at BioFire, how much of BioFire sales is today dedicated to COVID versus the rest of the panels? This is my first question. Secondly, within the COVID testing, can we get a breakdown of revenue between the extraction and the testing, meaning between ARGENE testing and COVID-19 or RP2.1 testing? Third question will deal with, I just got the finding that Asia is a bit of a laggard, and effectively due to the immunoassay, we have a normal backtracking to hospitalization there in the region. How do you explain this, the fact that there is no more strong rebound in Asia? How do you see, more broadly speaking, the sequential tech up in revenue in between April, May, June, July, and even August?
Just to give us a flavor. Thank you.
Okay. I'll take the last question and then I forgot the other one, but okay. The last question is, Asia Pacific. Yes, as mentioned by Guillaume, Asia Pacific is less exposed to molecular than the rest of the regions. This is where we don't see the same uptake with FilmArray. It's not a complete back to normal in Asia. China, we see a slow ramp up, but it's a slow ramp up. I wouldn't say that life going back to normal, at least in terms of hospital traffic. Countries such as India are under very difficult situation. I believe that the ramp up of Asia will come back also with a return to normal. Asia is not only China for us. There are still many countries which are under difficult situations. Your question on the split between BioFire and extraction.
Do you want me to take that?
Yes, please.
COVID and COVID. Okay.
Yeah.
Most of the ramp up in molecular is linked to respiratory and COVID, be it for BioFire or linked also to BioFire Defense. Over to you.
Okay. With the time, have you seen a switch from RP 2.1 to COVID only and or from COVID only to RP 2.1? Is it a trend? Is it something that you observe or you have order for both COVID testing indifferently the same? How can we think about the next wave or next post 2021, 2022?
Just to think about when you say COVID only, I guess you are referring to the BioFire COVID single test.
Yeah, not ARGENE. Yeah.
Just to explain this one, this one was developed by a sub called BioFire Defense with a contract and a demand and a financing from the Department of Defense, U.S. DoD. Pretty early.
In Q1. The vast majority of these tests were and are sold to the Department of Defense. We wondered if we should actually sell it broader. We've been able to add COVID to the BIOFIRE RP panel with BIOFIRE RP2 becoming BIOFIRE RP2.1, including COVID, really fast. BioFire teams have done an excellent job there. Therefore, our approach, our strategy is really to push the syndromic value and the syndromic approach. We actually sell in the U.S. and everywhere, BIOFIRE RP2.1, the syndromic approach. We only continue to sell the single test for the DoD.
DoD, okay. The breakdown in selling between the ARGENE test for the extraction and the RP2? This is in WebAllyn.
To give you the breakdown. You have in the slides, you have EUR 557 million of molecular. You see that on slide number 15. In this, that includes all the ARGENE and extraction, that represent about almost EUR 70 million. You have to not forget the BioFire Defense. We classify in others.
It's in the gray bar, and it's about EUR 40 million. It's not included in the EUR 557. Okay?
Okay. Thank you.
You're welcome.
As a reminder, to ask a question over the phone, press star one. We will now take the next question from Scott Bardo with Berenberg. Please go ahead.
Yeah. Thanks very much for taking my questions. First question, please. I think there is a sort of a broader expectation that as we come into the winter months, that life will get a bit more difficult for respiratory cases, those with combined flu or presenting with flu symptoms. Is it flu? Is it COVID? I really wanted to point to your thoughts on the development in Australia where there seems to be a very benign flu season indeed, and with not many people presenting with respiratory symptoms. Is this a potential concern to you that in a sense or an observation that we might not see that strong pick up in cases into the back end of the year, thus limiting the demand for BioFire and FilmArray consumables? Some thoughts on the Australian dynamic and read across would be helpful, please.
You want I start with this one? Australia, for me, it's difficult to know what it means, in fact, because I think the country has been in lockdown also during part of the summer months. Summer for us and the winter for them. When you're under lockdown, I'm not sure this is where respiratory diseases spread a lot. I think it's difficult to see a correlation between what happens in Australia and what will happen in the upcoming winter. Whatever happens, I believe the syndromic approach is the right one to detect, as you mentioned, COVID, flu A, flu B, or the others, but difficult to make a correlation at this stage.
Understood. Thank you. You communicated then that you are ramping up production of FilmArray consumables. Obviously, I note that these are uncertain times, and you're not giving any explicit guidance. Could you help at least us to piece together some of these things by providing a sense of what your ramp up of consumables will be at full capacities? Some sense of perspective as to where we are today would be helpful, please.
First, it's a cycle. We have not initiated this site visit, which was planned before, anticipating the future growth of BioFire. I would say that now, I don't know what we need to say. We should be soon be able to produce around 1 million test, 1 million pouches per month. We are working hard to keep on improving this production capacity.
Understood. That compares to several hundred thousand today or something like that. Is that correct?
A month? Sorry, what you say?
Sorry, I'm trying to understand the incremental step up so that 1 million pouches is compared to where are we today as of Q2, about 700,000-800,000 per month or something like this?
I should know. I am not sure. I know we are improving. We are progressing. The site is operational since June.
We keep producing in the other site.
Yeah. It's not the only site. It's an extra site for production.
Okay, understood. Thank you. Maybe an additional question on BioFire, please. Obviously, you've been a very important part of the solution in containing the virus and giving optimal clinical diagnosis. Has there been any evidence of a significant channel shift in North America, testing a lot of nursing patients or in the nursing home patients or in the outpatient setting? Has there been any change in the mix, or has it remained predominantly hospital-related business?
To be frank, I didn't follow this exactly. We have no way to know if it's hospital or there is a change between inpatients or outpatients. We can guess that there are more outpatients currently, but it's just a guess at this stage. I don't have the data. It has to come from the hospital.
Okay, thank you. Last question from me, please. I note that your selling and marketing costs have fallen year-over-year, and I think you explained that there was obviously some lower travel and congresses and things helping reduce that total expenditure. But as we go forward, and we think about the business into the second half of the year and into 2021, could you help describe these cost reductions? Are they relatively transitory and just related to near-term COVID impacts? Or could there indeed be some more structural change or lowering of your selling and marketing costs going forward? Thank you.
I think it's linked to COVID. The sooner I can travel, the happier I will be. No, it is linked to COVID mainly.
We should assume that SG&A ratios sort of return to historic levels at some point?
Depending on the sanitary situation next year, at some point when we can travel.
Understood. Thanks for answering my questions.
Thank you.
We will now take our next question from Peter Welford with Jefferies. Please go ahead.
Hi. Yes, a couple of questions. I will take them in turn. Firstly, just sticking with the sales and marketing, if I may. You mentioned that it was the usual double-digit trend that was decreased for SG&A due to lockdowns. I guess, looking beyond, therefore, 2020, and given your plans to expand ex-U.S., the BioFire rollout, should we consider that double digits should be a trend that will likely continue for sales and marketing for a few years? I guess if you could perhaps balance that with also some of the factors you mentioned, such as the change in the U.S. pension and the phantom share plan, and perhaps give us some sort of idea how we should be thinking about the sales and marketing trend beyond 2020, if possible.
It's related to the earlier question. A lot of the decrease or savings was linked to COVID, to lockdown, to the impossibility to travel, to access customers, and to organize congress and events. Again, our ambition remains the same, to continue to expand the customer base in the U.S., but even more internationally outside of the U.S., which will require, of course, sales and marketing, let's say, expenses and trend in a significant way. Let's say the way this becomes a reality depends on the sanitary crisis and when we can travel or reorganize events that potentially are not digital events.
Okay, thank you. The second one, just on BioFire. When we look at the new placements that we've seen during the first half of the year, perhaps you can just talk about are the majority of those placements new customers, so new labs or new hospitals or physician offices, or are the majority of those placements from existing customers looking to increase their testing capacity beyond what they currently have? Has there been-- Sorry, go on.
Yeah. It's clearly a mix. Of course, we are gaining new customers, for sure, especially outside of the U.S. There are also a lot of existing customers that have increased their capacity to do more. We can tell you that approximately for the U.S. only, about 75% of the new installations are with existing customers. That's for U.S.
That's great. That's all I need. That's great. Thank you very much.
Once again, as a reminder, press star one to ask a question. We will now take our next question from Manon Coulon with Erasmus Gestion. Please go ahead.
Hello. Thank you very much for taking my questions. I have two. Well, first, on immunoassay, microbiology, and industry, could you give us maybe the exit rate? I mean, the growth in these three segments in June? The second question would be on BioFire Defense, on the COVID tests that you sell to the Department of Defense. Can you remind me what the agreement you have with them? I'm just thinking that could they maybe at some point switch for the ultra-fast American version of the PCR test? I mean, the BinaxNOW now solution. Thank you.
Okay. Maybe the trends on the micro and immunoassay end of June was -4% for micro. I think the question was on the month of June. Probably, we don't give the month of June, just maybe a comment. As you have seen, microbiology for Q2 was at -14%, immunoassay at -18%, which obviously Q2 is the most impacted with both Europe under lockdown most of the period, U.S. under either lockdown or measures, Latin America, India, et cetera. Q2 was the most impacted. When we monitor internally the speed of recovery, what we were discussing earlier, we look at how we get back from there. As we said, it's contrasted. It's slow recovery. Even without giving a figure, it's a bit better June and then July, but not a fast recovery at all.
Probably because, again, hospital traffic has not fully recovered, and lockdown measures here in different countries reduce also maybe ID transmissions.
Okay. Thank you.
Your other question was?
The other question was on the Department of Defense agreement and BioFire Defense. Can you refresh my memory on what is it exactly?
I'm not sure we displayed that.
Can they switch from your solutions into their solutions?
With Binax.
There is no link with Binax. I don't understand why you.
Can they switch?
How can they switch? In broad terms, BioFire Defense is a specific sub with strong links with DoD that existed before we acquired BioFire and remain. Specific contracts with the DoD. In this case, actually, the DoD asked for development of a COVID test and funded it. As I said in Q1, we were able to actually develop it very fast. That led to this single COVID test that was sold and is still sold to the DoD. That's the main terms.
They also funded recently an increase in the capacity. It means that they are interested in continuing to be supplied by BioFire Defense.
Yeah.
That's what I wanted to say.
We cannot really give more details than that. These are the broad terms.
Okay. Very clear. Thank you very much.
As I said, this represented EUR 40 million revenues, so pretty significant compared to the past in H1.
Thank you.
We will now take our next question from Christophe Ganet with Oddo. Please go ahead.
Yes. Good afternoon, gentlemen. Can you hear me correctly?
Yes.
Yes.
Perfect. Thanks for taking my question. Actually, three of them, main qualitative answers requested. The first one would be, how would you qualify, maybe region by region, the gap between demand and supply currently for COVID tests, and what's your view in terms of over capacity, under capacity, given what we have seen as approved tests on the markets? That's one. Second question would be related to your guidance. I'm wondering if the biggest reason why you haven't précised your guidance is related to price evolution, related to market share competition or specific political decisions. That's the second question. The last question, maybe a more general question regarding the current position now of bioMérieux. Would you consider that after this sanitary crisis, the global competitiveness of bioMérieux has increased, has stabilized, or has declined, and why? Thank you.
I don't know which one to take. I think the reason for the guidance, it doesn't link to price or volume or anything. It's linked, I would say, to some uncertainties on the market. It's a very volatile environment. The demand is there for molecular, but it's difficult to predict the rest. This is more linked to that, to make sure that we have the fluidity to follow the market evolution. Your last question, I believe bioMérieux, but I would say maybe diagnostic companies will be stronger because I think this crisis has shown the value of diagnostic. Its role in the case of a pandemic, but also in the role of taking care of patients. I believe also that we have increased our positioning in molecular, which is a very promising technology in that space.
I would say that we should be with a stronger position. Let's wait for the market dynamics on what comes after COVID. For us, it's very bioMérieux. I think it's a recognition of the value of diagnostic. The first question, the gap demand, it has evolved a bit. I would say now we need tests. I think we are facing a strong demand. I believe the more tests available on the market, the better it will be to go back to normal life and to use, trace, isolate, and detect. It takes time now to get some results sometimes, so it's good to have more tests.
We will now take a follow-up question from Scott Bardo with Berenberg. Please go ahead.
Yeah, thanks very much for the follow-up. Question just related to progress with the BioFire approval, FilmArray approval in China. I understand that there's been a lot of flexibility from the regulatory authorities, particularly in this COVID environment, and I wonder whether that's enabled some more momentum with approval in this important growth region. If you can comment on progress there, please, that would be appreciated. Second question, please. Again, I appreciate you're not giving a quantitative guidance, but if you could help me with the logic path. If one is seeing some recovery in your routine business, microbiology and immunoassay industrial application, and you're expanding capacities for BioFire pouches, could that indeed mean that we see accelerated growth to what we've seen in the first half in the second half of the year? Would you agree with that statement?
If not, could you please provide some reasons why? Thank you.
I think the 16% growth is linked, I would say, to exceptional circumstances. I wouldn't extrapolate this for the coming years for bioMérieux. The recovery, I told you at this stage, and we told you, we don't see strong signs of recovery and the rest. We don't expect things to happen overnight or for one month to happen. I forgot the first question.
BioFire China.
BioFire China. No specific progress to report on the validation or the certification of the FilmArray at this stage.
Thanks. The prices go down.
Yeah. The clinical trials study. No boost on this side regarding the clearance.
Maybe we will take a couple of questions from the webcast. The first one was the recovery trend in bacteriology and industrial application in recent weeks post end of lockdown. It is coming from Murienne at HSBC. The CapEx intensity that we have to expect for H2.
The recovery in immuno and microbiology is, I think we commented already that we see some recovery as compared to the Q2 trend, but a slow recovery. Not at all back to normal in July, August on these ranges.
CapEx.
CapEx should be probably sustained still and probably at a similar level overall than H1.
A second question from David Berry at Everpoint. Why was there a sequential decline in sales of BioFire in Q2, about EUR 225 million from EUR 265 million in Q1? Was it due to an ASP increase as there were more SARS-CoV-2 single test in Q2 before the launch of RP including SARS-CoV-2?
It's actually no, it's not price. Price was very stable actually. It's more a question of inventory and capacity on our side to manufacture. We ended the year 2019 with a pretty high inventory. I think that's also something we commented with you. High inventory, especially on RP to prepare for the flu season. Actually these were totally sold, especially in, I think March, April, when RP was used, RP without COVID as a first line or let's say detection or negative detection of non-COVID patients. That boosted actually our Q1 revenues. Then in Q2, we also had the switch effect. We had the months of stranger revenues where we announced the launch of RP 2.1, the demand moved massively and very quickly from RP without COVID to RP 2.1 with COVID.
That explains also maybe a slight time lag of about two weeks, I think, in Q2.
Thanks. Then we have a question from Dariusz from Kepler, I guess he's also queuing on the phone, maybe we can switch to the phone.
Please go ahead, Dariusz. Your line is-
Yes. Hello. Thank you. It's Dariusz Ubik from Kepler Cheuvreux. Thank you for taking my questions.
We can't hear you very well. Can you speak a little bit louder, please?
Is it any better now or?
It's okay.
Okay, thanks. Thank you. It's Dariusz Ubik from Kepler Cheuvreux. Thank you for taking my questions. Two, if I may. My first question would be on the positioning of different testing alternatives. What's your view on what populations or what application fields do you see for the antigen test? Maybe where do you think that PCR tests are absolutely necessary? Maybe also a positioning of multiplexing, please. My second question, if you could please share your view on what is the risk that the FilmArray instruments w ill no longer be used once the pandemic period is over. Thank you very much.
Different positioning of the test, I would say for me the most-- I defend the value. I believe the most comprehensive test is done with syndromic, is done with FilmArray. This is where you get the most indication. It's also important for patients showing symptoms. I believe PCR today is the standard in the lab. It will remain. This new antigen test is using a different technology with different, I believe, performance. I think it can be useful. If I understand clearly, it's for people without symptoms, at this-
With symptoms at this stage, so it's a bit different.
I believe there will be room for everyone, but because medical value, I believe, will be for the syndromic one.
Second question was about the risk that FilmArray instruments will no longer be used after the pandemic.
We don't know. Today the focus is of course a lot on RP2.1, but we have a very comprehensive range of tests for FilmArray. We have a gastrointestinal, we have a meningitis, we have a pneumonia test. It's a menu impact that we have with the FilmArray. The focus is on the RP, but the menu is much broader with strong indications for other types of disease.
Thank you. Thank you very much.
We will now take a follow-up question from Delphine Le Louët with Société Générale. Please go ahead.
Yeah, two additional question. One regarding the industrial application. Can you give us the sense of the business? I mean, Q2 was poor and effectively everybody understand that. What do we see in that space since summertime? Any recovery? Can you quantify that or qualify this recovery? Secondly, on the European business, it sounds very strange for a European company not to be more present in Europe and especially regarding BioFire. How do you explain that? What's your take up from the discussion you have with the government? Everyone is in dire need for testing everywhere. It's a bit difficult in understanding, at least to my point of view, why Europe is not more reactive with a European company like yours and why we have such a performance in Europe. Can you elaborate a bit on this one?
Yes. We have a good growth of FilmArray in Europe. You don't see the same results as we see in the U.S. and the Americas, because in Europe we are more impacted by the decline of immunoassay into the routine testing being less present also due to lab competition. FilmArray is increasing quite steadily, I would say, with the COVID in Europe. Except that the level of the U.S., for many reason, it could be reimbursement, the focus also on the value-based healthcare, which I believe is stronger in the U.S. than it is in some countries in Europe. I think the crisis has or is accelerating the penetration of FilmArray in Europe. Regarding your question, too early to tell for food business.
As we mentioned, I think part of the business, which is into catering or in French what we say, "restauration collective" has not really started yet again. We have to monitor this. We expect things to improve, but we have to monitor.
All right. Thank you.
We will now take a follow-up question from Manon Coulon with Erasmus Gestion. Please go ahead.
Thank you for taking my follow-up question. Just one for me, please. Looking at your BioFire system installs, looking at your install base, do you know the average capacity utilization rates before COVID? What is this capacity utilization rate today? Thank you.
I don't think we have looked at it. We don't communicate externally on this.
Okay, thanks.
It has increased for sure, and that's why we explained earlier that a lot of our existing customers have increased their capacity by buying new BioFire instruments. Yes, the consumption has increased for instruments.
Maybe we have a last question coming from the webcast. What is the install base potential for BioFire in the U.S. and ex-U.S.? Where do we stand regarding the market penetration?
I don't think we will be quantitative on this. From a qualitative point of view, as we said, we believe there's potentially still a lot of growth outside of the U.S. Clearly, we are continuing to gain a lot of new customers in Europe, in Latin America. There's still a lot to grow for sure in Asia-Pacific. By the way, Japan, that we entered more recently, proves a really good success. Australia as well, also entered maybe more recently. Clearly still a lot to gain. In the U.S., probably as well, even though it's more difficult to say because our penetration is of course much stronger. That's something to see when all this settles in the U.S.
Very good. Thank you very much. I think we don't have any more questions, both from the call and from the webcast. Thank you everyone for attending this meeting.
Thank you.
For the very good interactions, and we are looking forward to speaking to you in the next couple of days or weeks for the Q3 results.
Q3 results. October.
Thank you very much.
Thank you.
Thank you. Bye.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.