Earnings Call: H2 2019

Feb 26, 2020

Welcome to the Full Year 2019 Financial Results Presentation on the 26th February 2020. I will now hand over the presentation to Mr. Sylvain Morgu. Please go ahead, sir. Thank you, Molly. Good day, everyone, and thank you for joining us to review Guillermo's performance for 2019 and our objectives for 2020. Before leaving the floor to Alexandre Merlier, Chairman and CEO and Guillaume Beurieu, CFO, I will make a very short introduction to provide you a couple of information. So first of all, our press release was published this morning at 7 a. M. This press release can be found on the homepage of our website, www.biomereuxfinance.com. In addition, please note that the slides of this meeting are also available on the homepage of our website or can be downloaded directly from the webcast. And so 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 our 2019 performance and 2020 objectives, we will hold the Q and A session and questions can come from the conference call and from the chat of the webcast. Very last word before starting the presentation. I will not read the slide, which is currently projected about the disclaimer, but I recommend you to take note of this content to remind the usual disclaimer about the forward looking statements. And so with this, I hand the call over to Alexandre Merriault. Thank you, Sylvain. Good day, good afternoon to everyone. I will start with the key takeaway message regarding 2019. So we announced this morning our results for 2019. So we announced the sales reaching 2 point €675,000,000 for Biomerie, displaying growth of 7.2%, which is one of the highest growth, if not the highest growth in the IVD industry. We announced a profitability of 14.5% with a EBIT of €389,000,000 in line with the guidance. And this, I would say, was a solid underlying performance that Guillaume will detail further after. The key growth driver for BioMed in 2019 have been Molecular Biology with the continued success of BioFire microbiology, doing very well and also the dynamic in the SPAC region. During the year, we announced a few M and A deals, the first one being having been Invisible Sentinel in the field of food, beer and wine testing and quality. And also we introduced sales in the Chinese company in the field of immunoSA, Hybio. You notice also I would say that the depth level of BioMario that we are displaying. Leadership in that space. Okay. So we have we reaffirmed our leadership in that space and I would say diagnostic is more and more recognized as a key weapon to tackle these major threats. You know that 80% of our sales and 75% of our R and D investments are directly and directly linked to the fight against AMR. Our clinical sales at this stage of growth was 7.7%. I want to insist I would say on the complementarity of our offering on that space. Also, BioMarriott was selected last year by the Fleming Fund to strengthen the diagnostic capacity and tackle AMR in low- and middle income countries in Africa and ASEAN. BioFire, having your continued success, we are now having more than €600,000,000 sales linked to Filmorhea. The installed base has increased now to reach more than 10,000 instruments sold and placed worldwide. Worth noticing also that the sales outside the U. S. Are increasing to be close to 19%, in line with our expectation to make it a worldwide success. I would say that the future growth driver of our BioFire remain the fact that we want to grow the installed base and the consumption through enriching the menu of Filmorhea, growing international markets, also working on upgrading the BioFire instruments. Last year, we announced the launch of a new panel, which was pneumonia. Now we announced that we have we are going under FDA validation for BioFire BCID II, which is a new version of the BCID, which is a very, very comprehensive panel with more than 43 targets in one test, including 10 resistant genes. And this is totally in line with our strategy to fight AMR, but also to be a key player in the field of sepsis. And it will be also very complementary with the virtual solution we have for hemophuture as BCID will be tested after positive blood culture. So clearly, a very innovative on the on Sofotecanib panel. Looking at the immunoassay activity, more contrasted situation there. As you know, our positioning is around the high medical value markers, but also growing the needs of the faster growing market. What we have seen this year is an increasing demand in regions such as Middle East, Africa and Asia Pacific, decreasing volume in Europe and linked to the lab consolidation and still some price pressure on PCT in the U. S. Even if volumes are growing in the U. S. Market. We have a busy pipeline to refrigerate and strengthen the menu on ImmunoSA. First, HIBIUM, which is on a Chinese based ImmunoSA company, which displayed a nice growth in all 2019 with the expansion of its market access to the grade 2 hospitals in China. We're also preparing the launch of Vydas Nephrochek for the acute kidney injury, ongoing trials for Vydas latent tuberculosis based on the IGRA method and also working on the development of Vydas dengue. Moving to Industrial Microgy. We displayed organic sales growth around 5%, a bit below our expectations. With good performance in Europe, we were impacted on a worldwide basis by the slow instrument sales in Q1. But my main message is to say that we have solid fundamentals both in the food and pharma application with our portfolio of solution. The fact also that we are pushing forward the key account worldwide strategy and our expectations are to bring back industry macro ready to higher growth than what we displayed in 2019. With this quick overview of 2019, I will now leave the floor to Guillaume who will detail our financial results in 2019. Thank you, Alexandre. Hello, everyone. So let's review our financial and operating performance. We start with total sales growth of 10.5%, which includes €53,000,000 of positive FX impact, especially with strengthening of the U. S. Dollar. 1% growth, euros 27,000,000 coming from acquisitions, High Biome and Invisible Sentinel and the bulk being 7.2% of organic growth that we are going to detail in the coming pages. So by application, organic growth by application, microbiology grew by 5%, solid growth in a market that is growing around 4% or 5% and when we have solid leadership positions. This growth is driven by blood culture with the success of our virtual instruments and also by IDAST with our VITAC range performing very well. ImmunoSA, as you can see, stable sales of our VITAS ImmunoSA range with all the, let's say, contrasted effects that Alexandre mentioned negative on U. S. PCT price and volume in Europe and positive solid growth in Middle East, Africa and Asia Pacific. All these coming together in a combined stable overall. Molecular, as Alexandre detailed on the Filmora, very high growth at 20% for Filmora, 18% overall molecular. And the growth of Filmorhea, interesting to note, was very balanced on all our major panels of biophire Filmorhea. Industry plus 5%, we can mention that we were stronger in Healthcare and Pharma than Food, pretty solid in Europe, but as already mentioned, more mixed performance in Americas and Asia Pacific. Now coming to organic growth by geography. Americas, our first region, grew 7.7%, driven by Filmoray with 14% growth in the U. S. For Filmoray. Also interesting to note, very solid in Latin America with a good year for Brazil, who was coming from a difficult base in 2018, so good recovery in Brazil. EMEA, of course, our core region, 4.4% growth, driven by very high growth of Filmora, very good performance in the Middle East, Turkey, Russia overall for the year and a solid performance of the Industries Business. And Asia Pacific, highest growth region at 12% fueled by China, India and Southeast Asia cluster all at very high growth levels. Coming now to the P and L. The gross margin improved from 53.8% to 54.8%. That was thanks to positive product mix, especially coming from Fin Marais, but also some operational improvements in terms of quality, productivity and our freight mix improving to more sea versus airfreight. SG and A. SG and A are up 13% on the constant exchange and scope. And this totally reflects our sales and marketing efforts and investments for BioFire growth worldwide as well as a few, let's say, specific provisions linked to the termination of a few distributors in certain countries. R and D. R and D was up 9%, reaching now 14% of sales, with the majority of the R and D increase being dedicated to BioFire, especially on the instrument as well as the panels and the enriched menu as Alexandre mentioned. So overall, we have a like for like SEBIT growth of 9% on a like for like basis, improving improved margin when we exclude the scope and the FX effects. We can look at that on the next page in a bit more detail. Coming back to the bridge, yes. So you see on the right of this page the slightly positive effect of FX, 'nineteen compared to 'eighteen, plus €3,000,000 The negative effects of the scope, the contribution of IBOOM and Invisible Sentinel negative in 2019. So overall, a pretty dilutive impact of acquisitions. But excluding these effects, you can see that our margin grew from 15% in 2018 to 15.3% in 2019, again, at the same scope, same exchange rate, despite very negative effect of the phantom shares plans. As you might remember, these Phantom shares are actually cash settled plans that are actually linked to the share price. So as our share price increased a lot in 2019, the provision for these cash settled plans had to be booked for significant amounts. So actually €36,000,000 was booking in 2019 as compared to a positive €7,000,000 on Phantom shares in 2018. Now coming below contributive EBIT to the net income, flat acquisition price amortization from BioFire at EUR 18,000,000 slightly improving net financial expense at EUR 23,000,000 Income tax was pretty good at 22%, which we'll see on the next page. And so all in, our net income group share reached EUR 273,000,000 up 6% for the year. Coming back to a few explanations on the tax rate. Our recurring effective tax rate is at 24%, pretty stable, and this reflects our mix of countries. And we have this year a few non recurring items, positive, favorable, the major one being the FDII U. S. Part of the U. S. Tax reform with a catch up on 2018 that we consider nonrecurring, so bringing overall the tax rate to 22%, 22.4% for 2019. Last subject is our free cash flow. So to read this slide, we actually start from an opening net debt of €365,000,000 which includes €365,000,000 which includes the IFRS 16 restatement of €98,000,000 We generated an EBITDA of €578,000,000 Working capital was this year a consumption of €69,000,000 mainly due to inventory increase. And this inventory increase was linked to our growth, of course, but also to the rebuild of our inventory on some critical raw materials. This is the main impact on the working capital. Income tax and financial charges overall about €100,000,000 CapEx. CapEx reached, as we guided, about 10% of sales. The major increase of CapEx was for the new plants that we are currently finishing for BioFire in Salt Lake City to increase capacity. And so overall, we generated a free cash flow of €150,000,000 for the year, which even with acquisitions and divestitures of 48 and dividends of 41, helped to reduce our net debt to €317,000,000 at the end of December, reaching a low leverage of 0.5 times EBITDA, so with a very solid balance sheet as a consequence. Thank you, Guillaume. Now we'll move to the 2020 outlook. So regarding the revenues for 2020, taking into consideration, I would say the current complex and uncertain context related to COVID-nineteen and the situation in China, but not alone. Taking also into account the fact that EBITDA through this year is higher than the one last year. We project the guidance revenue to be between 5% to 7% for 20 at constant exchange rates and scope of consolidation, which is believed to be higher than the market dynamic. Regarding the contributive operating income, we foresee project and increase of this EBIT to be between €399,000,000 to €415,000,000 This will include a negative ForEx impact between €5,000,000 to €10,000,000 also negative impact related to the capitalization of the U. S. Pension plan. The tax rate should be the same as the previous years between 23% 25%, while we'll maintain CapEx around 10% as usual to prepare for future support biopharma growth on this project that will be linked to capacity and automation. Regarding the coronavirus situation, the current biomarker test whether they are in fenrir or in arginine test for some coronavirus but they do not detect the COVID-nineteen even if it can be used to rule out other causes of respiratory infections. But we have ongoing R and D work to develop specific tests as we just provide the 19, both on the RGN solution range and also on the Filmora range, which will be specific test. At the same time, today, we are facing a situation in China that we're facing, reduced hospital traffic the hospital, reduced access to field forces. And I think you're also assessing the impact on the supply chain. So all in all, that's the situation today. We are preparing plans to develop new tests on Argin and FINRAV on COVID specific. We have also announced today a new organization for BioMerieux aiming at leveraging our unique value based offer that we have both in clinical applications and also in industrial application. So it's a new setup, new setting to tackle the next growth cycle of growth for Biomerieur and the disease moving from 13 people to 9 people. The idea is to first agile decision making and also keep on driving commercial and operational performance for the company. So all in all, there was a mistake for 2019 around 2020. Just to say that we are more and more convinced of the value of what BioMar is doing. I think the fight against infectious disease is recognized as being extremely important, and we believe we are well positioned to continue to impact positively patient care and also consumer care. Okay. Thank you, Alexandre. Molly, can we start the Q and A session, please? I have 2, if I may. The first one would be on the organic growth guide. It was perhaps a tad more muted versus Street expectations for 2020. How should we think about the levers that brings the organic growth for 2020 closer to the upper range versus the lower? And just so I'm clear, what assumptions for the impact of COVID-nineteen are already factored into your current guide? And then my second question would be, could you just give us a little bit of color on why the Molecular division saw a slight step down in organic growth in Q4 relative to Q3? And of the 600 new BioFire units placed, how many of those were placed outside of the USA in this quarter? Thank you. Okay. Your first question regarding the organic growth, so we are the range is between 5% to 7% for next year. I would say with our current assessment of the Chinese situation, you can see that maybe the lower range is also linked to our estimation of the impact in Q1 and potentially Q2. Just to remind that we remain displaying, I would say, a growth that we believe is higher than the market growth in the field of in vitro diagnostic. I forgot to say the question. It was about BioFire slowing down in Q4 and the installation outside of the U. S. I believe, BioFire, if you look at the I think we have a steady slide where you see the BioFire for this recent year, the continuous growth, I think we increased this year's revenue of by €120,000,000 I believe. So it's a very nice and steady growth. We are growing in the U. S. We are very strong growing strongly also internationally. I would say the point around the placements, maybe there were more placements in Q2. But for us in Q4, sorry. But for us, more placement, it also means the fact that we are linked to volumes and that more consumption of the test. So maybe it's a trend on the market, not only to Biosphere, but I believe it's good signal for consumption. Yes. And regarding the split, your question about the installations in Q4 of 600, about 35% are outside of the U. S. On the last quarter. Which is quite stable as compared to the rest of the year and even the year before. That's super. Thank you so much. We will take our next question from Bill Quirk of Piper Sandler. This is Rachel on for Bill. I have a few questions. What is the latest with your new PLA codes for respiratory and GI assays? And if you have any colors on pricing? And then next, also we appreciate the comments on coronavirus. Can you just give us some more color on what you're seeing in China and walk us through your exposure from a revenue standpoint and supply chain standpoint? Thank you. Okay. Also the point regarding China. So China is important to us. China is 10% of the sales of BioMerieux, and this is a fast growing market for us, displaying this last year the double digit growth. So clearly, it's important in the dynamic of BioMarriott. What we see today, as we see, I would say, I believe in every for every type of business that today, I know it's hard to say, but the patient traffic in the hospital is very limited. So it has an impact, of course, on the consumption of tests. So it has an impact on the overall activity of BioMarion in China, which is not growing, I would say. And in terms of what else are we facing, I think we're facing also difficulties like other companies in terms of sometimes servicing the customers. It's not easy to we have to take care of the installed base. Sometimes our field service engineers, they cannot move easily from one province to the other. So these are the type of things that we are being impacted with. We have a closed loop to our supplies, the stock of supply that we have. As you said, we have linked the assessment. I believe we are fine for the months to come. And as you know, this is a very evolutive we take care about is the safety and the health of our people. In terms of exposure, so China is 10% of our revenues. From a manufacturing point of view, we have one plant, which is actually Ibeom plant in China, where that manufactures for China. We have no, let's say, local plant manufacturing for our exporter. And on the other question on the PLA codes, so we were granted a specific proprietary PLA codes for BioFire in the U. S. That we believe are showing or recognizing the value of BioFire and the syndromic testing. And as you know, and this is concerning mainly the outpatients, which is today the population, but not the majority of the patient we are serving with the fumarate. But the PD codes are recognized and I think show the value of what we're doing. Okay. Maybe we can take the next question. Our next question comes from Maja Pataki of Kepler Cheuvreux. Please go ahead. Your line is open. Yes. Good afternoon. Thanks for taking my question. Alexander, just a quick question. You're talking about product and development. You mentioned the latent TB test where you say we're in clinical trials and you mentioned the COVID-nineteen test for Arginine, but also for BioFire. I understand you're not going to give us an exact timing, but could you give us an overall range and say where the tests are the respective time horizon approximately? Is it the COVID-nineteen, is that something of a couple of weeks? Or is it something like 6 to 12 months? And the same for latent TB, is it 12 months or further out? Thank you. Okay. Latent TB, we have started end of December, I believe, in the clinical trials. So it's an ongoing process. We'll launch it just now. But I don't think we should expect an impact on the sales or even on the launch in 20 20. It's more for 2021, I believe. Regarding the development we have on the Arginine and Filare for COVID the expectation for us is to be ready in Q2. But what I don't know yet is I think we'll launch it, We'll make it available. This is without the formal regulatory approval or recognition that some regions might want to do. But that's our plan to have it around this time again. Brilliant. And then a follow-up question on the guidance. Did I understand it right, so the 5% growth guidance implies basically an impact from China in Q1 and Q2 and 7% would be no material impact or is the 7% also seeing some impact but not like full loss sales in China? Just to know whether we are mixing the some impact in clear guidance. No. It's a very relative situation. I think the 5% is with the impact. That's what I can say. That's what I can say at this stage. I'm not going to do that. Under the 7% is the high range of the target, which is very solid. And again, things are relative. And as we said, it's 5% with the impact that we would potentially see for H1. It's so difficult to see beyond H1 that we factor the potential, let's say, Q continuing through H1. Then the impact in our accounts, we have to be careful. It might be in China, we are active through distributors, regional distributors, local distributors. So there are effects between the final sales and our sales of a bit of a timing and time line. So the effects we mentioned is for the full year, then it might be delayed between our sales and distributor sales and sales at finally adjust, of course, in terms of quarter. Okay. So more Q2 impact rather than a Q1 impact for you in that case? Is that It's a full year. And then just a last question, if I may. In your previous presentations, you were talking about other tests in the pipeline with the vector borne diseases for immunoassay and some additional panels coming to BioFire. You're not saying much about that. Is it because it's 2021, 2022? Or is it just because you were focusing on something else this time around? No, because we'd like to announce things where they are close to be ready. So today we announced the clinical sorry, the FDA filing for the BCID II. That's definitely going to be the very important launch for this year. And I think on the previous slide, I think we announced the work on the GBI Agua, dengue. Dengue, which is a vector brand. Yes, Yes. Dengue, the idea I think we said at the end of this year, the target. And also Vydeas and EffortCheck. So important pipeline also in the field of immunoassay. Brilliant. Thank you so much. Thank you. Our next question comes from Hugo Solver of Exane BNP Paribas. Please go ahead. Hi, hello. Thanks for taking my question. I have 3 on molecular diagnostics and the increased number of placements compared to sales in Q4. I understand this is mainly driven by Europe, but could you share with us the impact of the U. S. And all that and potentially also update us on the competitive situation? Also just a quick one on TB. Can you repeat the time line for the filing of the test? I'm not sure I got it right. And last, on profitability, what are the main drivers for the 100 bps difference in between the high end of the sales and EBIT growth guidance for 2020? Thank you. So I'll take the TB question. So TB, what we know that we entered into in clinical trials, when Invitus latent TB. So now it has to go through the process of clinical trials and validation. And we don't see, I would say, sales impact in 2020. Okay. The other question? One question, you want to say, Guillaume? On placement and the placement of Molecular in Q4 were 600. As we said earlier, 35% of this was outside of the U. S, meaning mainly Europe and somehow Asia Pacific. So I'm not sure. Okay. That's it. If it's not clear, let us know if it's different to your questions. Coming back on profitability, so I think your question is on the 2020 guidance. The first key element between the high and the low range for the profitability will be the sales, clearly. And as we said earlier, the major of course, there are other things, but the major elements between the low 5% and the high 7% is the COVID impact and the potential lower sales in especially in China. So again, sales driving SEBIT. Then on the SEBIT, it's also an opportunity to discuss other elements. We have the FX impact potentially between 5% and 10%. And FX are moving quite a lot these days with all these financial markets issues with the crisis. That's one. The other element is that we have this phantom shares impact. So just to re explain, these schemes are going on for already 2 years, and we still have a year and a half of schemes for the Phantom shares with significant tranches to be paid in April June this year and the very last one in June 2021. For this year, we still have a significant volatility in our P and L as 1 year of change in the share price is about €1,300,000 change in our EBIT. So that we factored a certain charge with a certain share price, which is, let's say, in line with our increase in EBIT. But of course, then things can move. That's a significant, yes, effect on potentially the EBIT. And last element, just to mention it, but that's more certain, is the impact of our U. S. Pensions termination that is scheduled for H1 and that will be minus €10,000,000 in our EBIT when we settle, meaning that we sell to insurance companies external, our U. S. Pensions. Okay. Thanks. We will take our next question from Delha Lourie of Societe Generale. Please go ahead. Your line is open. Yes. Thank you very much, Delphine and Elouette. Different type of question, if I may. First, Alexandre, can you come back into the internal organization? Because be frank with you, it wasn't really clear to my mind in the press release how that's going to be more agile apart from having less people around you, but should get a clarification on that? 2nd question would deal with the R and D incremental cost that we've seen over the year. I was trying to understand how much of this incremental growth is dedicated to the immunoassay franchise and so to the tests that are going to be launched and planned for H2 this year? And thirdly, I know there is a lot of volatility regarding Chinese situation, but most of your peers are impacted already. I mean, nobody has seen anything, mostly in Jan. February is a very different situation, and some of your peers are communicating to low sell as 10% of what they've seen last year, so meaning a 90% decline. I tried to understand if you can give us, firstly, an idea about February and also regarding possibly more precision on previous comments, meaning that do you expect the trend that you see rolling over, let's say, at the same path up to H1 or before that to come back into, let's say, a normalized situation? And finally, because I think there is a lot of unclarity even if it's getting clearer and clearer, thanks to the Slide 19 of your presentation. But if I'm correct and if I'm taking a normal situation regarding the fountain plan with, let's say, a €20,000,000 €25,000,000 cost for that, that would mean a 15.6% cooperating margin, so quite an increase compared to last year. And I'm just trying to understand, considering that concept, why you have a guidance, which is just €415,000,000 on the toppy side of the core operating profit because that was more or less what we could have achieved in a normalized situation. Any comments? Do you have more expectation regarding the scope next scope dilution to come or regarding ForEx? Or am I wrong in interpreting that? Okay. I will start with this, the R and D the increase in R and D spend by a million or the increased Verdel this recent year, it's mainly linked to the strong focus and effort we put on molecular, I would say, rather than immuno. Molecular has been driving the increase in R and D investments. 2nd question around the delivery organization. What is changing? In fact, it's we are doing this organization to leverage full global offer of Biomerie. I think co branding, I would say, complementarity of our offer, whether it is in the immunoSA, microbiology and molecular. So this is, I would say, the key driver of the new organization regarding the creation of the clinical operations. Sorry for the question. China, no, it's a very low start of the year. I think in January, I believe, the sales are flat flattish so far. I will hardly get the figures for February. As mentioned Guillaume, we have a sell in, sell out dimension in China, so we don't have a clear, clear full visibility. But clearly, we are impacted and I like the others on this under close monitoring. I cannot say more at this stage. I would say I come back saying it's a very evocative situation that we're actually monitoring, but clearly, we will be impacted and this is part of of the guidance that we give today. But you agree with me regarding the timing. The timing, let's say, in your forecast today, you've sort of a slowdown up to H1 or let's say sort of an impact till the end of H1? Yes. Yes, with what we know. Yes. Okay. Thank you. And Guillaume, you take the PSAP. Profitability or PSAP. So profitability, so again, yes, the high end of the guidance includes an improved margin when you exclude this FX impact. The major elements are the one we mentioned. Again, just to repeat, our pensions impact is a negative €10,000,000 Just on pensions, U. S. Pensions is to be compared to a positive 10% in 2019. Both are one offs. They will all disappear after that. But it's really a 2 step, let's say, externalization of our defined benefit U. S. Pension plans. And from an accounting point of view, the first step in 2019 was generating a plus €10,000,000 €11,000,000 positive in the P and L. The second step in 2020 is a negative €10,000,000 So that's also to be considered when you do a year on year. The other key element again is PSOP. As you saw, as I said earlier, we have minus €36,000,000 expense in our 2019 P and L from the PSOP. Let's say, the midpoint of the guidance includes approximately minus €15,000,000 €1,000,000,000 to be included in the way you look at that. And just looking forward, because yes, we are mid long term and I'm you are looking at us as well mid long term. I repeat that this PSAP impacts will still be slightly present in 2021 until mid-twenty 21. And after that, we'll totally disappear. And the schemes are actually replaced internally by more, let's say, usual schemes of free shares, performance shares that are less cost and more visible cost, meaning that they don't vary every month or every quarter with the share price, of course. Okay. Super. Thank you very much. We will take our next question from Peter Welford of Jefferies. Please go ahead. Your line is open. Hi, thanks for taking my question. A couple. Firstly, just on BioFire again, just with regards to the respiratory panels, you obviously made some comments about flu. Curious there whether do you think you will see any increased placement of both instruments during the Q4 and also respiratory panel during the Q4? Or is this very much do you think still to come during the early part of this year? And secondly then, just with regards to the coronavirus or COVID-nineteen, are you seeing at the moment any change in respiratory panel, potentially either stockpiling or similar due to this to eliminate obviously the virus as far as a negative test, if you like, goes? Or at the moment would you say the volumes you're seeing are very much in line with expectations? And then just on the financials, just with regards to cash flows, just curious on free cash flow. Obviously, you made the comment and gave a very helpful explanation of what's happened with the free cash flow this year. But it might seem a silly question, but are there a lot of internal efforts at the moment going on to improve your cash flows? Because it does seem as though perhaps your cash flow conversion is tracking well below perhaps where it could be. Is this a focus for management? Or is at the moment the focus more on the operation from the top line growth side? Thank you. Regarding respiratory panels, so yes, we've indicated that the flu season is stronger than last year. So yes, it would have an impact on the dynamic of the IP panel. Regarding Q4, I believe it depends when it starts and the year if it starts and obviously the intensity of the season. So I think we'll have to wait for this. And your question around is BioFire used to rule out coronavirus. I believe that's something we see. You have to note that Fumarate is not approved in China yet, but it's being used in Taiwan and Hong Kong or some other Asia Pacific country. And yes, we see since the beginning of the COVID-nineteen crisis, we see that in some cases, yes, people are using the RP panel to rule out different type of infections, but not so much significant at this stage, but at least it's already a tool to help for the diagnosis. Question on cash flow. Cash flow coming back to cash flow, so good question as well. So the main levers on the cash flow are obviously the CapEx and the working capital. On CapEx, as we said several times, I think we basically have investments that are aligned with our strategy and our growth, especially to build additional capacity for future growth. So again, for BioFire especially, we need to have significant investments for the future that we are happy to do and to support. So that's why also we have this level of CapEx. Also to mention, we didn't discuss, but yes, part of our CapEx is linked to placements, slightly increasing. Actually, the placement part reached €55,000,000 in our CapEx in 2019 as compared to approximately €45,000,000 the year before. So we are increasing, but we believe these are very profitable investments actually to place instrument to rightly selected customers. So that's for the CapEx. On working capital, we have, I think, a very good follow-up on receivables. We didn't discuss today, stable to slightly increasing, but not much today on the receivables ratio, well under control. On the working on the inventories, inventory part, we mentioned a major, major increase. Clearly, we wanted to have to rebuild of inventory on some critical raw materials. Some are sole source and we needed to increase this raw material for to make sure that we are secure on the manufacturing process. But we also had increase on some product lines, especially on BioFire. And there are probably areas where we can improve. We need in our industry to make sure that we don't have backorders because that has really a very tough effect and long lasting effect when we have backorders with our customers, not even to mention the public health in some cases issues. So we need to have the right inventory to avoid back orders. But we also think that there are maybe some place for improvement there, some optimization of our inventory in some places, and we will work on that. Thank you. We will now take our next question from Scott Carder of Berenberg. Please go ahead. Yes. Thanks very much for taking my questions. So sorry to stick with China and coronavirus, but billing for how you expect any potential impact to operate or to spread across the business? So is there any one particular division that is more sensitive, if you like, to the fallouts here? Or do you see this potentially across the board impact? Also just like to understand a little bit with respect to the BioFire utilization for this outbreak. My understanding is that there are other My understanding is that's not the case yet for BioMaria and that you still don't the right pathogen on your panel. So the question is, is there any consideration for your limitation for approval or use in China? Is there any historic military connection with BioFire, which is causing some prohibition into China, given the U. S. Military backdrop. Just a little bit of discussion there about your ability to introduce BioPhy in China with the right pathogen. Okay. Your first question, I believe the impact is across the board. It's not a rural one department or the others. That's right. Because the Board of Directors, no more clinical than industry, I believe. If that's your question, I believe, variability impact is above variability impact that we're having in China. Your question process in China. And there is no, I believe, no connection between the history on the on China. I don't see any impact on this. It's a matter of public health. It has nothing to do with the under deficit. Okay. That's helpful. And actually, I think it's pleasing to see that you continue to commit to invest in the business despite anticipated softer dynamic. Obviously, you're trying to position the business for the longer term. But my comment really just relates to there has been various one offs and currency moves and impacts over the last 5 years. But the reality has been that your operating margin has been flat over the last 5 years, which on paper may be somewhat of a surprise given strong growth over that period. So what I'm trying to understand is, are you satisfied with the margin today? Do you think this is the right level? Or is there any particular driver that we can actually start to see some operational leverage in the business, which we haven't seen for the last 5 years? To your question, I don't think we have been flat. I think I don't give a 5 year or 10 year guidance. I think what we said a few years ago that could steadily improve the operating performance of the company. And I believe that this is what we have delivered because I believe we were at 13.2% in 2015, 14.2% in the 2016 and 14.6% in 2017 and 15% last year. This year, we are underlying performance. So we keep on investing to improve performance. Am I satisfied? We are progressing. I think it's what matters is to also to yes, to progress and to prepare the future. As I look a bit naive sometimes, but I think the value of what we're doing, the impact of what we have, I believe it's only the beginning of the value of diagnostics, the way it is looking nice today. So we'll keep on investing it. At the same time, my goal is to keep on on improving the performance of the company. Makes sense. And maybe just quickly, antibiotic susceptibility testing and identification, which is a pocket of the market, which is growing today. I think you've been working on this area. Can you maybe give us some sense of how far along you are in with this initiative, whether this is something that you think could contribute to growth in the near term? I think this is part of the G and A of the history of BioMarin with the investment we are doing in R and D and we're also leading of course to pushing in the fight against antibiotic resistance. So we keep on investing with the menu. We are working on time to result. We have seen also that maybe we have made some agreements or strategic investments in companies in that field. I think the idea for us, it's a key topic and there's still a lot of unmet needs in the field of AST, mainly linked to time to result of detection. So we'll keep on working on this. Very good. Thanks for my questions. We will take our next question from Alex Cogut of Kempen. Please go ahead. Your line is open. Hi. I have two questions on immunoassays. Could you share a bit the launch strategy for NephroCheck in H2, whether it's global or certain geographies? And is there any meaningful revenue baked into the guidance from that? And then the second one on the PCT assay, how would you classify the pricing pressure maybe in H2? And do you see that developing over 2020? Thanks. Okay. So for Nephrotchek, it will be the goal is to see marketing. I don't see an impact on the sales of all the sales dynamic this year. Regarding PCT, we still see some price pressure on PCT, but I need to say also that it's a high medical value marker. So even if we are not alone as we were a few years ago, there have been point of price pressure. But this test is still positioned by us and by our competitors as a high medical value markers. And I think it's not a commodity test. And I think the value is recognized by us, by the physicians and by the competitors. So some pressure, but natural pressure, I would say, not drastic. Would you say there's still room for the price to fall? Or are we now seeing the bottom? It will depend on market dynamics, I would say. I don't know. Okay. Thanks. We will now take a follow-up question from Maja Pataki of Kepler Cheuvreux. Please go ahead. Yes. Thank you. Alexander, could you give us a bit more information about your non controlling interest in specific diagnostics? I'd be more I'd be interested how it fits your portfolio and how you think it differentiates from other technologies in the market? And then on Nephrochek, it's very helpful that you give us a time on CE Mark. When do you think you will have the FDA approval? Thank you. So specifically, I don't think it's a very smart, innovative company. So we have a partnership on a small stake in this company. That's part of our, I would say, our focus on AST. And I think that this company is working on the solution to have a fast AHT after also positive blood pressure. So this is in line with our flagship and which is a fight against AMR. Regarding nephrotect, so I mentioned we're planning for C marking end of this year. FDA should start where that started, I think we'll do the CE first and we'll work after on the FDA. So I have no indication date for the FDA approval at this stage. Okay. So we don't have any more questions from the call, but we have a couple of questions from the webcast so that I read to you. So first of all, but I think we already gave a bit of an answer on that, is how long would you need to develop a test active on the current coronavirus strain, the new coronavirus timeline for the test? We said that the goal is future, future for research use only. Exactly. Okay. And then we have a question, maybe more for you, Guillaume. So to be clear, the front of share impact is a provision. As such, it is included in the €578,000,000 EBITDA? Yes, it is. Yes, it is. For €36,000,000 impact negative in 2019. And so last one is about IFRS number 16. Can you give us more color on the impact of IFRS 16 on EBITDA 2019? So it has been restated. It's on balance. So the restatements are all available in our press release and in our appendix. Basically to make it simple, it's a significant impact on our balance sheet. As you have seen it, IFRS 16 increases the net debt by €90 8,000,000 and this is of course the discounted value of the future rental expenses. But it has a minimal very minimal impact on our P and L. It was actually slightly positive about 2,500,000 on the sebit in 2019. And that was restated. So when all the figures we commented today are all comparable at restated IFRS 16 for the previous year or for the balance sheet, so that we compare apples to apples. Okay. And the last question from the webcast. Would you consider to buy a company which already has an approved coronavirus test? No. We have our ongoing work. The answer is no. And I think that with that, we've cleaned all the questions both from the call and from the webcast. So thank you everyone for your participation. And then we look forward to meeting you in several meetings in the next month. And then the next formal presentation will be mid April for the Q1 results. Thank you. Thank you. Bye. This will conclude today's conference call. Thank you all for your participation. You may now disconnect.