Good day, welcome to the bioMérieux first quarter 2019 business review conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Sylvain Morgeau. Please go ahead, sir.
Thank you, John. Good day, everyone, thank you for joining us to review bioMérieux's performance for this first quarter of 2019. As usual, I'm online with Mr. Alexandre Mérieux, CEO, and Mr. Guillaume Bouhours, CFO. Alexandre will start this call with a short introduction to give you his main messages about the quarter, then most of the call will be dedicated to the Q&A session.
Before I hand the call over to management, please note that this conference call will include forward-looking statements, I would like to remind you of the usual disclaimer saying that forward-looking statements are based entirely or partially on assessments or judgments that may change or be modified due to uncertainties and risks related to the company's environment, notably those described in the 2018 registration documents, including but not limited to economic conditions, financial exposure to currency exchange fluctuation, change in government policies or regulation, third-party reimbursement policies, timing of the onset, length, and severity of the flu season and competition. Accordingly, we cannot give any assurance as to whether we will achieve these objectives. bioMérieux issued its press release related to the first quarter of 2019 this morning at 7:00 A.M. French time.
If you have not received our communication or if you would like to be added to the company's distribution list, please feel free to contact me. I also remind you that today's call is being recorded that a replay will be available on the website www.biomerieux-finance.com. With this, I hand the call over to Alexandre Mérieux.
Thank you, Sylvain. Good day to everyone. Let's start with a global overview of the sales performance for this first quarter of 2019. I will then address some specific topics. At the end of these first three months, bioMérieux recorded sales of EUR 632 million as compared to EUR 587 million a year before. It implies a reported growth of 7.7%, including favorable FX impacts for about 290 basis points and consideration of recently acquired companies for about 100 basis points. As you probably remember, when we disclosed our financial target for 2019 in February, we highlighted that Q1 was expected to be soft and more specifically softer than the full-year target for organic growth. As expected, the organic growth of Q1 came below our full-year guidance at 3.8% in line with our forecast.
Now digging into more details, I think it's worth commenting on the two specific ranges, VIDAS and BioFire. Let's start with the immunoassay line and more actually with VIDAS, which makes the bulk of the immunoassay sales. It's first probably worth reminding that VIDAS has a dual positioning in the immunoassay space. First, positioning as a complementary platform to the main instruments in the lab, mostly running specialty and high medical value test. This is typically the use we can see in developed and mature settings. Second positioning as the main platform in the lab, running both routine and specialty testing, and this is a use we rather see in emerging or developing settings. The routine testing now accounts for less than half of the sales on an annual basis, with very different dynamics depending on the geographical areas, growing in developing countries while decreasing in developed countries.
For high medical value markers, we have seen a strong increase over the past few years, fueling the growth of immunoassay at a high single-digit pace. Since about three years now, we experienced more competition on one of those high medical value marker, namely PCT, in one specific market, the USA. This increasing competition has created price pressure on the U.S. market since about two years, which is the peak we have already discussed with you over the past quarters. The new impact that we have seen during this quarter is a stronger revenue decrease in Europe in Q1, both on routine markers and on high medical value markers, while high medical value markers used to be slightly negative. Both are mostly volume-driven with a limited impact on prices.
In parallel, several growth areas such as North Africa or Asia Pacific have experienced a slower growth than usual for one-off reasons such as custom clearance or management of receivables. All these drivers combined led to a quite deceiving performance on the immunoassay line and are encouraging bioMérieux to continue its efforts to bring new tests on the VIDAS platform, such as NEPHROCHECK for acute kidney injury, to keep differentiating through the menu and also to support the development of Hybiome, which performed very well in this first quarter, offsetting the decrease of VIDAS. Let's talk now about BioFire. On the motor front, BioFire continued to perform well, particularly in the context of a less severe flu season. As you remember, bioMérieux enjoyed an extremely strong growth in Q1 2018 at +12.5%, which was largely driven by FilmArray growing nearly 50% year-on-year.
This performance has established a strong basis of comparison on the much less severe flu season this year. The FilmArray range reached EUR 157 million in sales at 13%. The softer growth hides very different situations. For RP panels, the growth obviously slowed down naturally because of this base effect, where the growth of GI, meningitis, and BCID panels remained pretty steady in line with last year trends. It is also important to mention that we have not seen any major impact from the recently changed reimbursement landscape for outpatients. GI panel growth remained very solid, RP was mostly impacted by a lower flu season.
Respiratory and gastro panels also gained positive coverage decisions from private payers, which is encouraging us to continue to conduct HEOR studies to demonstrate the value of syndromic testing for infectious disease, as we are deeply convinced that this is the way to go for more efficient patient care. On the instrument front, installations remained very solid, with about 700 new placed or sold instruments over the quarter, and this growth has been notably driven by the U.S. and by the U.K., Italy, and Spain. About the geographical deployment of BioFire in Q1 2019, sales outside of the U.S. weighted for about 16% of the total FilmArray sales, as compared to 13% for the same quarter in 2018, with notably strong growth in France, Greece, India, Singapore, and South Africa. Overall, it has been a very satisfying performance for BioFire FilmArray, despite an unfavorable flu context.
As a conclusion to this short introduction, I would like to reiterate that this soft quarter is not coming as a surprise and does not question our 2019 objectives. The recurring business of reagents did go well in most of our strategic businesses lines, except VIDAS, but was partly offset by some volatility on instrument sales and by one-offs in certain countries. With this, I propose to move on to the Q&A session. Thank you. John, can you introduce the first questions, please?
Of course, sir. Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, ladies and gentlemen, please press star then one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. We will now move on to our first question from Romain Zana of Exane. Please go ahead. Your line is open.
Yes. Thanks for squeezing me in. Can you hear me?
Yes, sir.
Yeah. First question regarding the full-year guidance, and correct me if I'm wrong, but from my understanding, the full year 2019 guidance range was closely related to the magnitude of the flu season. Is it accordingly fair to expect rather the bottom than the top of the range, or do you think that the upper range is still realistic? That would be my first question. Second question is more big picture regarding the diagnostic market. If we look at Roche, Abbott, and even Waters overnight, they all seem to point to a weakening demand. Even if it's different segments, so I was wondering if you would have any comments that could give us more color on what is happening in the industry and could explain the weakening demand. Thank you.
Okay. Yes, to your first question, we maintain the guidance for this year. We were expecting to have a softer Q1, knowing that the flu season this year is much lower than the one we had last year. At this stage, looking at the dynamic, we confirm the guidance for the year. Not giving a higher or lower the range. We confirm the guidance. In terms of dynamic, yes, I have seen a few results also coming from other companies. I cannot say we see a decrease of demand when you look at bioMérieux, at least when you look at the reagent sales. I think this is quite positive on our side. It's only a Q1. It's too early to do a conclusion, and I surely cannot talk about the competition.
Okay. Just a follow-up question, if I may, on VIDAS. What kind of visibility do you have on a pickup of demand in the coming quarters? I'm thinking especially about Europe, where you seem to experience more difficulties, maybe related to a consolidation of labs. How do you see the trend evolving looking forward this year?
I would say that the lab consolidation is a fact in Europe for many years. I think that this is continuing. It has impacted us on VIDAS for some years. We believe consolidation will continue. Usually, we used to have a EMEA region, also Asia Pacific, who had maybe strong comparative last year, catching up with that. That's something we are following. I don't see a complete change of the landscape at this stage. The consolidation keeps happening. The thing that we need to monitor is the price decrease of PCT in the U.S. that we have to see and watch or wait for that. That is something we are, I would say, evaluating and assessing.
Would you say that that further deteriorated this quarter on pricing?
The price has not stabilized yet in the U.S. regarding the PCT testing.
Okay. Thank you.
Thank you.
We will now take our next question from Maja Pataki. Your line is open. Please go ahead.
Yes. Hi, this is Maja from Kepler Cheuvreux. I have a couple of questions. First of all, Alexandre, you said that you don't really see an impact from Palmetto on the respiratory volumes in the U.S. I was trying to understand whether you can walk me through the thinking process behind that. If we say that 2019 flu season was similar to 2017, if we look at the CDC data, you do have a significantly higher number of instruments in the market. How has the test per machine developed? Has it been, if we compare it to 2017, to the existing installed base? Just trying to understand how strong is your confidence that Palmetto has not had an impact in Q1. That's the first question. Second question.
You talk about the high medical value test on VIDAS. Qiagen has been pretty vocal about you entering the TB market to investors. I was wondering if you could give us an update on that. I believe that Qiagen is actually talking about the 12-24 months range of possible bioMérieux TB tests coming to the market. Anything you can add to that? Thank you.
Okay. To your first question, I'm not sure if I can remember the all seven. You want me to compare all 2017 with all 2019? Maybe what we can say on the flu season effect. Sorry, this is Guillaume. What we can say on the flu season effect is that it is indeed slower than last year, lower than last year. It's actually lasting a bit longer, so there will be a bit of effect on probably March already and April. The effect that we see in Q1 is difficult to evaluate. Again, it's only an assessment. Growth assessment is about EUR 15 million of impact of 2019 flu season sales as compared to 2018. Again, take it as an estimate. It's just to give you a rough order of magnitude. That's part of the bridge that you were expecting in your question.
On Palmetto, I think our view, and Alexandre will complement, is more on the customer feedback, and what we see from customer behavior, that we don't see a major or any significant impact of the Palmetto on the customer in the U.S.
This is something we are monitoring. It's true that the Palmetto so far, we believe that Syndromics is well-positioned. As you remember, maybe Palmetto is only for outpatients covered by Medicare, so it's a limited number of the population. Plus, the pricing was only concerning the viral targets, while the FilmArray has viral and bacterial targets. That's the beauty of Syndromics. We are monitoring this, but our statement, which is the right way, I decide that we don't see an impact, I would say, slowing down the penetration of our panels in the U.S. We are monitoring. Your question on TB. Yes, it's true. Sometimes competition are talking about our development. I prefer to talk when the product is developed and approved.
It's true that, yes, we have R&D work being done on TB, but it's too early at this stage to communicate around results or around the date. I can just tell you that we're working on it.
Okay. Thank you.
On the R&D front. Thank you.
Okay. Thanks.
We will now take our next question from Delilou of SocGen. Please go ahead. Your line is open.
Thank you very much. Delphine Le Louet speaking here. Can we get, Alexandre, a better vision regarding the U.S. growth, considering the good performance of BioFire and finally the 0.4% growth that you've seen in North America? Second question deals with the industrial application and possibly here, can you give us some update regarding the business development during the quarter? Third question will deal with the immunoassay division, specifically regarding the volume. You mentioned the fact that you have lower volume in Europe. How is it compared to the U.S.? Meaning that, just to get a feeling of the pricing pressure and the mix between volume and pricing. Thank you.
Okay. First question was on the U.S. U.S., we have very nice growth on BioFire. For the rest of the dynamic in North America, I would say maybe the impact has been a slow start in term of equipment. Not only America, but I think Q1 has been slow in term of equipment. We rather see it as a delay or postponing, if it's too early to say if it's going to be a trend or not. We believe it's mainly slow Q1 on the placement, on the installation and selling of instruments. Otherwise, the main impact in the U.S., on the dynamic of the U.S., is coming from the price pressure we have on PCT, on the immunoassay. I would say this is the main factor. To be assessed, if the flu season lower than last year have also a global impact on the dynamic.
That's to be assessed on the microbiology front. That's what I can say. Regarding industry, if you look at the performance of industry, it's also a slow start in term of equipment. When you look at the reagent growth, on a worldwide level, we are around the 7.5%, which I would say is in the high single digit, which is into our objective. We can see for the instrument ramp-up of the dynamic of the reagent, which is the consumption of our tests by customers is quite okay. The last question was on immunoassay in Europe. Immunoassay is not so much a question of price decrease. It's mainly a question, as I mentioned in the beginning, around the lab consolidation.
In let's say Western or Central Europe, this is happening. Usually we tend to balance this consolidation in Europe with higher growth in [AMET]. Under this quarter, we have been a bit delayed because of one-off reasons also, I would say, such as customs and other elements. A different dynamic in the U.S. and in Europe. Europe is around lab consolidation, and in the U.S., this is quite linked to PCT.
Okay, thank you.
Okay.
We will now take our next question from Bill Quirk of Piper Jaffray. Please go ahead. Your line is open.
Great. Thank you. Good afternoon, everyone. First question, I guess just staying on immunoassay for a moment. I appreciate that the pricing trends are difficult in the U.S. in particular. Any way to think about how long this may last? I guess what I'd like to think about this is just bigger picture. You tend to have longer-term contracts, do we need to think about immunoassay being kind of a multi-year negative headwind in the U.S.?
I wish I knew. The thing is still the prices are still decreasing. It's not a cliff. It's a steady, I would say, decrease of price. The thing, as I mentioned to you in the past, and we believe that the PCT market is still growing in the U.S., and still the test is not used, we believe, at its right level, at its right recognition. This is a growing market. No, I cannot tell you at this stage. We are working on developing also our business on VIDAS with other type of customers. Maybe not the bigger labs, but this is things we keep on promoting, as well as AKI. We are assessing the market, I would say, but we are fighting with others also to prove the recognition of PCT, which is still unutilized, we believe.
Understood. Just on European market trends. Is there any way, Alexandre, you mentioned obviously a slow start to the year. Is there any intra-quarter commentary? In other words, do we see any improvement in the business as we headed into March or even perhaps in April? Or was it fairly consistent throughout the quarter?
I need to remember that. No, I think, to be frank, it's good to Q1 as Q1. I'm not sure we can only differentiate different trends between January, February, or March.
Okay.
It just looks like a slow start for the industry.
Understood. Just lastly for me, just thinking about some of the positive coverage decisions within the commercial payers that you mentioned concerning both respiratory and GI. Certainly, we track that as well. Curious, maybe you can help us think about the number of discussions that you're having with some of the other commercial payers. Should we expect more positive decisions in the coming quarters concerning specifically respiratory and GI within the commercial insured population? Thank you.
Do we find that this is not exactly in our hands, but what we do since the beginning is to promote the value of syndromic, not only the medical value, but also the economical value for the hospital, for the lab, and for the patient. I believe that we have stuck to this type of a HEOR approach, we are not the one to take the decision. We can only keep on doing what we do, is promoting the value of syndromic.
Understood. Thank you.
Thank you.
We will now take our next question from Mike Rusek] of Berenberg. Please go ahead. Your line is open.
Yeah, guys, thanks for taking my questions. Just a couple from me on BioFire, please. Firstly, I appreciate it's still early with the pneumonia panel, but I was hoping you'd give some sense of what the uptake's been there thus far, and did it contribute to growth at all this quarter? Secondly, I saw at ECCMID last year, you did a presentation with a bone and joint panel. I was wondering if that is progressing, and if so, when you think that may come to market. Thanks.
Your question around pneumonia, that we launched pneumonia Q3 or Q4, I believe. At this stage, we still believe it is a very sophisticated panel in a nice way because it provide, I would say, very rich information in term of viruses, bacteria resistance. It's a soft launch, I would say, at this stage, and it's got a very good recognition within the medical hospital community. Now we have to keep on doing our efforts on generating, I would say, real life evidence of the clinical value with KOLs. We still believe that the pneumonia will be a strong seller, I would say, for BioFire. It's going to take time because of its sophistication. If it is on a U.S. world, I don't know. We need to do some education on it, but very promising.
At this stage, it's a very limited impact on the growth of Q1. Sorry, the second question was around-
BJI.
BJI. I look at Siva. We announced BJI to be the next one, did we give a date?
We don't.
No, sorry. We don't give a date. Still in development. We have not closed yet any launch date . Sorry.
Thanks.
Once again, ladies and gentlemen, as a reminder, if you would like to ask a question, please signal by pressing star then one. We will now take our next question from Maja Pataki of Kepler Cheuvreux. Please go ahead. Your line is open.
Yes, I'd like to have two follow-up questions. First of all, can you give us an update on what you see in the competitive environment for BioFire? I believe that the Qiagen instrument hasn't really made any inroads, but what do you see from other players in the U.S., like GenMark, or on another note, Accelerate Diagnostics? Do you hear anything from your customers? That would be question one.
Accelerate, they're not in the field of syndromic, so it's more the Fast AST. To be frank, it's more for them to comment than for us. Today, we, I think, are still in the implementation phase, I understand. We don't see them so much. Regarding the other competition in syndromic, we know it's coming, and it's a very attractive space. To be frank, I have not seen the recent result of GenMark.
Yeah.
They're not published yet. On Qiagen, I think they have announced that they should have an FDA filing or approval-
Kaijen
Q3 or Q4 in the U.S. We are watching them, to be frank, it doesn't really change. We know that more competitors will come. We believe there is room for more, also. The idea, we keep the same idea, is to keep developing, and I would say, owning the syndromic space through next generation of panels or improvement of the instrument. We keep having the same strategy. We want to keep on leading the race through our R&D and our commercial investments.
Okay, great. Then just a quick question on NephroCheck, and where are you in the process of having NephroCheck running on VIDAS?
R&D work at this stage, we start fitting the NephroCheck test on the Astute140 Meter today.
Yeah.
It's still in development for VIDAS, and I don't know if we gave a date around this one. It should be during 2020.
Okay, great. That's very helpful.
That will be helpful to launch it. Yeah.
Perfect. Thank you.
Sometime in 2020.
We will now take our next question from Bill Quirk of Piper Jaffray. Please go ahead. Your line is open.
Great. Thank you. Just one quick follow-up from me. You had an announcement back in, I think it was late 2017, about an arrangement with Banyan Biomarkers for a concussion immunoassay marker. I'm just curious where we are with this particular product. Is it on market? Kind of what the trends have been. It certainly strikes us as being fairly novel. Thank you.
Yes. No, it's not on the market. It's on development. Also, the idea is to put it on the VIDAS platform. This marker is for detection of traumatic brain injury. Still R&D work.
Understood. Any comments on when we might see that reach the market?
No. I gave a date for AKI. It's already a lot. We don't give the date yet on Banyan.
Understood. Thank you.
Thank you.
Once again, if you would like to ask a question, please signal by pressing star then one. It appears there are no further questions via telephone at this time. I would like to turn the conference back to you for any additional remarks.
Thank you, John. Thank you to all of you for participating to this call and for your questions. Our next formal release will be for the first half of 2019. It will be on September the 4th, with a webcast to present those results. By then, we remain at your disposal if you have any question. Of course, we are looking forward to meeting with you in the next conference or roadshow by September. Thank you very much. Bye-bye.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.