Earnings Call: H2 2018

Feb 27, 2019

Good day, everyone, and welcome to all of you. It's always a great pleasure to be here in Paris to present our annual results and perspective for the year. Before leaving the floor to Guillaume Beur and Alexandre Merrieux, I will just make a very short introduction to provide you a couple of information. First of all, I wanted to inform you that Bergmeier issued its press release this morning at 7 a. M, and it is available on www.biomerio finance.com. If you have not received our news release or if you would like to be added to the company's distribution list, do not hesitate to catch me at the end of the meeting. In addition, please note that the slides of this meeting are also available on the homepage of our website and can be downloaded on the website itself or on the webcast. Now going to the presentation contents. After reviewing our 2018 performance and 2019 objectives, we will hold a Q and A session. And so question can come from the room, from the call or from the webcast. And so we will rotate the questions from those 3 different sources. A very last word before starting, and if you can jump to the next slide, I think you have the I have it, sorry. So that's the usual disclaimer about the forward looking statements. I do not I will not read it, but please take note of it as it's an important part of information. And now I'll leave the floor to Alexandre Thank you, Sylvain. Welcome. Thank you for attending this conference around our 2018 results. I will start directly giving a snapshot or maybe the key takeaway messages regarding the performance of BioMarriott in 2018. So we'll qualify this year of being a year of solid performance for the group since we had sales growing up to almost 10%, 9.9%, which is a nice commercial dynamic. And also, we have been able to improve, I would say, the operating income of the company, moving from 14.6% to 14.9% this year. The sales dynamic will be detailed further, but I think basically key growth driver is remaining also Filmora BioFire, which has displayed a very nice growth of 30% worldwide, reaching now EUR 48 million and representing today still almost 60% of the company, company growth. Industrial application grew quite well also, around 9%, while also as back region was also a key driver of growth, I would say, healthy growth in the region. As you can see also, we were able to generate a stronger cash this year, around €220,000,000 which enable us also to invest in business development and strategic opportunities. So this year was marked by the acquisition of Astute Medical and also a majority stake investment in HIBIUM, a Chinese immunoassay company. And in February this year, we acquired Invisible Sentinel dedicated to food safety and quality. So important to say also that when you look at the past few years, we have been able to improve steadily the performance of BioMarriott growing in term of operating income. Doing so, keeping investing in R and D, sales and marketing and for the long term, which was in line, I would say, with our strategy. Looking at BioMarriott. I would say the anchor message around BioMarriott is around the threat around AMR for antimicrobial resistance, which is becoming, I would say, public health priority in most of our countries. Most Ministry of Health have announced that AMR is becoming a key issue. These numbers are mainly only for the U. S, but you will see it's becoming an increasing threat for public health. And we believe that BioMarriott through the diagnostic, fighting AMR is not in diagnostic, it's patient care, it's medical education, it's hygiene. But we believe that diagnostic has a stronger role to play on that space. And today, AMR represents, I would say, 80% of the sales we do in Clinical Applications are linked closely to AMR. So it's the flagship. If I look now by strategic ranges, microbiology, where BioMario, we have a leading position on that space. We have been able to increase, we believe, higher than the market growth because we grew around 6%. This was thanks, I would say, to the broad portfolio solution that we have on our recent investment also. And worth noticing, I would say, the success of the Vertio, our range for hemoculture, the range around the lab automation also and BiTech Solutions, our flagship for ID, AST, also had a good success in 2018. Molecular Vergy, so a real fuel driver of growth for the company. So impressive growth again this year. We're noticing also that now more and more we are doing international sales, international for Biofriere, it means outside of the U. S, the sales have grown from 13% to 17% outside of the U. S. We have increased installed base. Now we are above 8,000 units on a worldwide basis. And I would say it keeps running a growth driver. We are leading the race since the beginning on the syndromic approach. And the goal for us is to keep on leading this race through innovation, investments in the instrument but also in new panels. And we have been pleased to launch a very important panel in 2018, receiving C marking on FDA clearance around the pneumonia panel, which is really tackling a very important unmet need in terms of clinical applications. It has been a very complex sophisticated, I would say, test to develop, I would say, addressing main causes of infection for pneumonia. This test, I would say, has clear benefits in terms of number of samples you can address, faster on time. We are up to 33 targets in the pneumonia panel. And I would say this one will have an important clinical benefit for the patient and for the hospital. ImmunoSA, it has been contrasted this year. I think the VITAS range has grown around 2% on a worldwide basis. We suffered in 2018 from the announced competition on PCT, mainly with price pressure, while we have been able to increase in volume and also improvement coming volume coming from Asia Pacific, India, Middle East and Africa. And this year through 2 major, I would say, investments, Astute Medical for the fight against acute kidney injury, which is a promising biomarker with a high medical value. And also with Hybio, Chinese company, it's very important for us, but we believe also for our Chinese customers that Bammero can be more present in terms of R and D and manufacturing to serve, 1st, the Chinese market. And Halqoam delivered €24,000,000 sales in 2018, and this is a fast growing company. Industrial Microbiology, which represents 18% of BioMaro revenue in 2018, we displayed a 9% growth. Our intent was grow this business around with high single digit. This is what we did this year with a 9% growth with good performance coming from Food, a very good performance coming from pharmaceutical applications. And we have been able, so post 2018 in February, to acquire a company called Invisible Sentinel, active in the field of food safety and quality control, targeting, I would say, food control, but mainly also the beer and wine segments for spoilage control, which we believe is a very nice addition to the range of solutions for BioMerieux in industry. I would say it's a smart, agile solution, well suited for at line monitoring and also for improving the workflow of testing in this lab. So it has been quite an active year for BioMarriott in terms of activation of the strategy and a very good year in term of financial results that I will let Guillaume detail now. So let's review together our financial and operating performance. So we'll start with total sales growth coming. So overall, our total reported growth is 5.8%, which includes a pretty negative foreign exchange impact of minus €95,000,000 As you can see, majority of this is coming from the dollar and the rest of it from a mix of emerging exposure that we have. We will come back at the end of the financial section on the FX exposure of BioMarieu. Minimal parameter effects on the revenues. And as you can see, 9.9% organic growth. And as mentioned, the majority a bit more than half of the organic growth is coming from the BioFire range in the U. S. And globally. Just to remind you that among the EUR 2,400,000,000 of revenues, 83% is made of sales of reagents, 10% of our equipments and 7% of services that are linked to our activity. Let's now review the organic growth split by geography. The first region for us is now Americas. By Americas, we mean North America and Latin America. As you can see, it's now 44% of group sales with 12.5% organic growth last year. In this 12.5%, we have some, let's say, less positive elements. The less positive are especially the price pressure that we have on the PCT, Vydas in the U. S. That Alexandre already mentioned with a number of competitors entering in the last 2 years. So we are still growing on volume for this parameter in the U. S, but clearly we had to decrease prices in 2018. 2nd, less positive in the region was Brazil last year, pretty difficult year in Brazil. Strike in the transport sector in Q2, you might remember, but also a global economic environment that was really tough in Brazil in 2018 for everyone, including for BioMarion. So these are the less positive and some of the very positive growth driver in the region last year were first BioFire Filmora, which of course has its domestic market, I should say, for BioFire in the U. S. And grew strongly over 30% in the U. S. 2nd element, microbiology, especially with blood culture, strong growth in North America. And 3rd driver, Latin America, except Brazil, but the rest of Latin America was really on a very dynamic sales growth. 2nd region, Europe, Middle East, Africa, 5.9% organic growth, which, if you think about it, with a lot of major markets in Europe is actually a very good performance at 5.9% organic growth. The drivers for this growth are, 1st, again, molecular biology, so BioFire, Filmorhea, very strong growth in Europe. 2nd, the industrial microbiology for industrial customers that had a very good year at 7% growth in Europe, Middle East, Africa. And 3rd growth driver for this region is actually the geographic, let's say, extension of growth. We grew strongly in Middle East and in Africa, where we invest quite strongly in the past 2 years. 3rd region, the smallest but still almost the fastest growing, Asia Pacific, 12.4 percent organic growth. The growth driver there were China, where we have a really strong position. It becomes now the 2nd market overall for the group after the U. S, obviously. India, very good dynamics as well and Southeast Asia. We can also mention, you might remember that in Japan was a very special year in 2018. We took over the back, the distribution fully of Biomerulus product in Japan. Previously, it was a JV with Sysmex. So this takeover went well. We had to, let's say, rebuild the sales force. And we saw an acceleration of the sales, especially in Q4. So nice to mention. Now a wrap up on what Alexandre already presented on the organic growth by platform. First comment, you see a pretty good balance of our portfolio between technologies, 40% microbiology, 3 pillars around 20%, immunomolecular and Industry. Microbiology at plus 6% organic. Alexandre mentioned that one of the driver was really blood culture, fueled by the success of our automated instrument, Vertuo. 2nd element, immuno. As you can see, stable sales at 0%. Actually, the major range inside immuno is our Vydas range, which grew by 2% organic. The 2% worldwide being contrasted between the price pressure in the U. S, again, some volume growth in the U. S, but clearly price pressure and on the other side, pretty nice volume growth fueled by China, Middle East and Africa. So all these together, plus 2% organic for the VITAS immunoassay range. Molecular, plus 30%, obviously, fueled by Filmorhea success in the U. S. And outside the U. S, especially in Europe and in Asia. And Industry, Alexandre mentioned, plus 9%, pretty well balanced between our 2 major customer segments, food customers and pharma customers. Our P and L now, so below sales, first element is our gross margin, which you can see improved from 53.0 percent last year to 53.8%. And this is despite negative foreign exchange impact inside the gross margin of minus 90 basis points. So how did we increase? We had I remind you kind of an accounting effect that we decided to have we decided we aligned the depreciation of our installed base with the real use. So that was a longer depreciation period that had 11,000,000 euros impact in the year, so about 40 bps on the basis points on the gross margin, but that's not enough. On top of that, we improved the, let's say, operational gross margin by almost 130 basis points. This is really mainly a positive product mix effect. And you can think of the fact that Filmora Biofaire Filmora is growing faster than the rest of the group with pretty nice gross margin overall, so improving the product mix. Below gross margin, SG and A, sales, general and administrative costs were up 9% on a like for like basis. This is really reflecting our investment in our sales force and especially the investment to reinforce dedicated film array sales force worldwide in the U. S, in Europe and in Asia especially. It also reflects the rebuild of our sales force in Japan. As I mentioned earlier, we regained control of our distribution network in Japan. R and D, up 7% on a like for like basis. We continue, as a policy, to invest slightly more in R and D with a significant amount of 13.5% of our sales dedicated to R and D efforts, so internal innovation. And this was dedicated in 2018, I would say, for the major drivers, again, to BioFire new panels, we talk about that, and as well the instruments, always improving the instrument itself, as well as our microbiology range. So overall, our contributive operating income improved in terms of rates from 14.6% to 14.9%. And as you can see, overall, we have 8%, all included, increase of our contributive operating income despite a number of effects that I want to explain. In this 8%, you have first negative foreign exchange headwinds or impact of EUR 40,000,000. It was in line with our guidance, but still it's pretty negative. Again, we'll come back to the exposure in a few minutes. We have the effects of some acquisitions that, let's say, to start with, are slightly dilutive, minus EUR 17,000,000 included in these elements. And let's say, somehow offsetting, you might have seen in our press release, we have a positive effect year on year of special, let's say, bonus plans for our U. S. Teams that are based on the share price of BioMariel, it's called the Phantom Shares, that were an expense of minus €29,000,000 in 2017. And because our share price decrease in 2018 was a positive, let's say, release of provision of +7 in 2018. We can come back to that if you have any question. So year on year, minus 29 to plus 7, it's a change year on year of plus 36. And that's it for this part of the P and L. Below contributive operating income, we have stable amortization of the BioFire acquisition price, about EUR 18,000,000 per year. Net financial expense was pretty stable this year, around EUR 22,000,000 EUR 23,000,000 as an expense. Income tax, pretty low at 20 percent effective tax rate. I'll come back to that in a minute. And so all in, a net income of €256,000,000 up 8% despite the foreign exchange headwinds and negative effects. Just a quick explanation on the tax rate. We are heavily exposed to the U. S. Tax rate, having a lot of our base in the U. S. So actually, on the positive side, the U. S. Tax reform that you all know of was actually very positive on BioMarious tax rate. You see that in the second green line, bringing our recurring effective tax rate to about 23%. And in 2018, we had 2 nonrecurring effects that we highlight. The first one that we made exceptional contribution to our U. S. Pension fund of EUR 56,000,000. The idea that the U. S. Administration had given a window of opportunity to do these kind of contributions with a tax deduction at the old tax rate. So it was a pretty interesting opportunity. That's one element for 1.5% in terms of tax rate. 2nd element, we won a long standing tax litigation in Sweden. And so that was for EUR 3,500,000, so 1.1 percent of tax rate. So these are the 2 nonrecurring. Coming now to our cash flow. Let's review that together. EBITDA improved to EUR 5.19 in line with the EBIT improvement. Working capital was actually increased by EUR 3,000,000, so minus EUR 3,000,000 in the cash flow. You can see in the different elements, the operating ones, inventory, receivables and payables, really basically moved with the activities, so pretty stable in terms of days for the three lines along the activity. And they were offset by in other working capital a number of decrease actually of tax payables and social payables. Income tax decreased with U. S. Tax reform. CapEx, CapEx was strong in 2018, but I would say in line with our guidance as well, 9.4% of sales. We are investing in our industrial setup and footprint. And we are also investing in the placement of our instruments to our customers. It's about €45,000,000 to €50,000,000 per year, which is in our CapEx. When we take all these elements into account, our free cash flow before the exceptional contribution to the U. S. Pension fund that I mentioned earlier actually improved significantly from EUR 165,000,000 to EUR 222,000,000 so a 34% increase in cash flow generation. We use this cash flow for acquisitions, almost €200,000,000 IBLOOM majority stake and Astute acquisition. Share buyback, it's a share buyback that is you see here for EUR 23,000,000, which is purely to actually cover the performance shares awards to management and management teams as a whole that we have in the pipeline. And dividends, EUR 40,000,000 in 2018. So overall, our net debt increased slightly to EUR 267,000,000 but remains at a very reasonable leverage ratio of 0.5x EBITDA. So we have quite some headroom, if we wish to, for additional investment or additional acquisitions. And to finish the financial section, snapshot, if you remember why we did that 6 months ago as well, but we want to give you a better visibility, not easy to understand, on the FX exposure of BioMarieu. So you have on the one column the FX exposure on sales and on the 2nd column on EBIT, EBIT. On sales, you can see that we have a big exposure on the U. S. Dollar, of course, our first country. But it's not the case on the EBIT because in front of this U. S. Dollar sales exposure, we have a lot of costs denominated in U. S. Dollar. We have strong R and D base in the U. S, strong manufacturing, 3 big sites of manufacturing in the U. S. And of course, sales and marketing exposure in the U. S. So actually on the EBIT, we are a bit more exposed to some emerging or non U. S, non European currencies. You see that the Chinese yuan is obviously the first potential exposure to our EBIT. As a whole, just to wrap up on FX. So in 2018, you remember, we had minus €95,000,000 impact from FX on the top line, minus €40,000,000 on the EBIT. In 2019, we with the current view as of today, we forecast to have a potentially neutral impact on sales and about minus EUR 5,000,000 estimated on EBIT for 2019. And with that, I hand it over back to Alexandre. Okay. So all in all, for 2019, the idea is to continue the dynamic. First, in terms of sales, because we issued a guidance that revenue should grow between 7% to 8.5% at constant exchange rates and scope of consolidation. You have to also to compare with last year where we had, let's say, an important flu season. And while this year, we come to have, I would say, mild flu season, and this is quite impactful on our growth. In terms of contributing operating income, the plan is to increase to reach a target between €380,000,000 to €400,000,000 including negative impact of Astute, Hybome and Invisible Sentinel acquisitions for around 10,000,000 euros The tax rate should remain close to what happened in 2018. And we'll have CapEx around 10%, mainly to support the growth of the activity and importantly also to support the growth of BioFire. So the message is that we believe we're still well positioned for growth, that we're addressing the right public health topics with clear unmet needs today, such as fighting against sepsis, against AMR, improving conditions for respiratory infection, also without forgetting protecting consumer health through our food and pharma quality control activity. Keeping again, I would say, the fact that we are a well balanced company in term of portfolio of technology, well balanced in term of geographies also, working as we have done this last year to improve the agility and the performance of the company, always keeping, I would say, a long term view. So thank you very much. And I think we can open the floor to questions. Okay. We'll start with the questions from the room. Hello. Thanks for taking my questions. If we compare the 2018 top line guidance to the 2019 one, Could you help us understand the split in between the milder flu season that we have this year and also what you've integrated into potential risk of other Medicare contractors issuing similar decision to that of Palmetto? So flu season, so I think everyone understood that 20 18 was a really, really high flu season, very strong flu season in 2018 last year. This year, so far as we speak, it looks like a medium flu season, which is actually what we took into account into our guidance. It can still move a bit because it's not over, February March, can still move in terms of flu. So we took this difference of high flow season last year, medium this year into the guidance. It's difficult to evaluate really precisely, but we can say between €15,000,000 to €20,000,000 of revenues is our, let's say, rough estimate between a high flu season and a medium flu season. And you have to take into account that this will be visible, obviously, in our Q1 sales mainly. So the Q1 sales with a high comp basis will be slightly lower than the full year. 2 points, I think. I'm sorry, second question was on the growth of Filmeray globally in 2019, the impact of No, on the potential risk of that is backed into your guidance for the risk of Medicare contractors issuing similar decisions as planned. In fact, we look at FIMA on a worldwide basis now. We have 17% of solders sales outside of the U. S. So we look at FIMURAI as a whole. To be frank, in Q4, we have not seen impact coming from Palmetto decision. We believe Filmeraye is still on the way to grow and defending the medical and the economical value. And all in all also, the Palmetto is only concerning, I would say, ambulatory patients, which are covered by Medicare. So it's a limited fraction today of the population, which are being tested with Filmora. Okay. And one last on immunoassay, if I may. What visibility do you have on the competitive environment? And when are you expecting PCT sales to bottle out eventually or be diluted enough so that they do not offset the growth of other lines? Still in a few months, I would say, to understand. The dynamic now, I think, that the U. S. Market is quite served in terms of players in the field of obesity. What we said, I think, a few months ago, we need a few months to see assess if we start to see a plateau in terms of price. We still have a few months to see that I think, but we expect a plateau this year. Volume, we are still growing in volume in PCT in the U. S, so important. We'll continue with the question from the phone, please. We will now take our first question from Maja Pataki of Kepler Cheuvreux. Please go ahead. Yes. Hi, good afternoon. Alexander, I have two questions, please. And I was wondering, you stated that you haven't seen any impact from POMATO and we all understand that there is it's targeting the outpatient setting. So I was just wondering, since it has only been introduced in December, how great do you think is the risk that the information hasn't really tickled down from the labs to the physicians as there is a bit of a margin squeeze from the labs if the reimbursement is being cut? Is there a delay? And or how certain can you be that there is not a delay? Just to get a better understanding. And to my understanding, we've actually also seen a change of 4 d reimbursement of BioFire from Ansem late last year. What do you think is the time frame that we will see the other insurers commercial insurers follow suit on that point? Okay. I think to be frank, we are still assessing what could be the potential impact of Palmetto. We have not seen it so much so far in our growth. I think Q4 has been quite strong with Filmeray. For me, it's still under assessment on any way regarding RP panel. It's a lower reimbursement, but only for people under Medicare, ambulatory, so above 65 years old. And I would say using the microbial target that we have in Femurria, we still that the reimbursement is up to could be up to $300 for the RP panel, which is still quite, I would say, acceptable. Well, the second question. Private insurers. Private insurers. It's not in my hand. We believe that some will follow. We expect that, but that's not exactly under our control. Now we have seen for Anthem. I think maybe other could join, but it's not has a direct impact, I would say, on the we believe it doesn't have a direct impact today at this stage on the global growth of Filmeray. Worldwide growth is also becoming more, more important. We have just launched also the Premier Panel, which should be a good leverage of growth for next year. Thank you very much for that. Maybe if I can just quickly follow-up since you mentioned the Pneumonia Panel. Can you give us some initial feedback on what the uptake was and how fast that is growing compared to the rest of the panels? I think it's too early to talk about the dynamic. It's mainly, I would say, today more the input and the feedback from the physicians, which is very good. Now we have to it has been very, very recently launched. Thank you very much. Thank you. Okay. Thank you. So we will continue with the question from the webcast that I'm going to read to you. So given that the share price is back to where it was end of 2017, is it fair to assume that the €36,000,000 gain on Phantom shares will revert in 2019? Is it included in the guidance? [SPEAKER JEAN FRANCOIS VAN BOXMEER:] So I'll take that. So yes, you understood that this Phantom shares, let's say, formula has this effect that when our share price increase, the provision on this phantom shares actually increase and have, therefore, an opposite negative impact on EBIT. We included in our guidance an assumption, it's very difficult to do, on the share price so that we could assume an expense on these Phantom shares. Our assumption, including in the guidance, is an increase of the share price from 31 December 2018 to increase in 2019, in line with the increase, the organic increase of our EBIT, which as you have seen in our guidance is 10% to 15% increase. So we assumed the same for our share price. There's no good assumption on this. Beyond so above or below this assumption, we have an impact to make it simple. The formula is it's not as simple, but the formula to keep in mind is €1,000,000 of share price above or below has an impact of €1,500,000 on the EBIT from this PhantomShares U. S. Bonus plans. Okay. Let's continue with the question from the room. If there are no questions well, no, it's still a question. Thanks. Igor Solvay Berangani again. On industrial applications, could you give us an update on the Genop and Iglos? Also, you've been doing several acquisitions in this business. Will they enable you to maintain high single digit growth rates going forward? Or should we think about the Industry Application business as one that you will need some bolt ons every year or 2? So the first question. GENAP, so for the 1, it's a molecular solution for pathogen testing, which is really embedded, I would say, in the pathogen viewer with Vydas plus Genap. Now it's Vydas plus Genap plus Invisible Sentinel, transparent to note also that some tests, which were developed on Invisible Sentinel, can be transferred and developed to GNAP. So basically, we will increase our portfolio with that. On the Andozyme this year, we launched, I would say, a semi automated version of the Andozyme test, and which is progressing, I would say. On the goal, no, I think my plan, I don't really see much pressure for the teams, but to keep high single digit growth on the industry division would be good. I think a lot of needs when you look at, I would say, protecting consumer health. So when you look at the crisis which happened in sometimes in dairy, you had 200 people died last year in South Africa because of listeriosis on the nominal so that more and more we are discussing working with key accounts, industrial key accounts, both in food and pharma. The plan is to keep our industry as a faster growing segment for us. And if there are some interesting bolt on acquisitions, that's something we look at, yes, strategic. Okay. Thank you. And we will continue with the question from the phone please. We will now take our next question from Peter Welford of Jefferies. Please go ahead. Hello. I think that's me. Sorry, it's Peter Welford of Jefferies. A couple of questions left. Firstly, on the BioFire, I wonder if you could possibly give us an indication of what the sales for BioFire defense in the U. S. Were? I think you've talked about that in the past. And also perhaps an indication of what the placement of the 8,200 instruments is ex U. S. Versus U. S. Would be useful. Approximately how many instruments of the 600 this year were placed ex U. S? And then just on the two financial questions. Just on the debt maturity. Obviously, debt's picked up a little bit. Can you possibly give us some sort of help with regards to the maturity of that debt? And what sort of is the average rate you're paying at the moment on your outstanding debt obligations? And also, if possible, the number of treasury shares you hold at year end? I know it's obviously you did a bit of share buyback there. You hold some treasury shares at the moment. Any sort of visibility on what that is, that would be great. Thank you. Okay. So Guillaume, you will start by taking the debt question. Basement. Okay. So on the debt, I understand your question is about the our cost of debt. So overall, blended, our cost of debt is slightly above 2%. We have a big part, which is actually a bond that was issued for the acquisition of BioFire to finance the acquisition of BioFire. And this bond is coming to maturity in October 2020. So about 2% for the gross cost of debt. Treasury shares, I don't have the exact figure on top of my mind, but you will find that in our documents to be really soon. It's roughly 500,000 shares that we have outstanding as treasury. Units, you want me to do the placement of BioFire? No, it's a question on defense, BioFire Defense. Sales U. S? Peter, your question was on the sales of Biofaire Defense. Is that right? No, yes. So the 2 questions, yes. 1 Defense, Biofibre Defense. I think you talked about what the sales of Defense were. I think last year, they were roughly about €19,700,000,000 I think you said €1,000,000 in 2017. And then also the instruments, the you placed instruments, I think, during the year of roughly speaking about 2,100 something like that during 2018. I guess if you'd split that possibly between U. S. And ex U. S, that would be very useful. So defense, I believe the sales in 2018 were around $20,000,000 It's really contract based. So it's not recurring sales. It's into the contract we have with DoD or other departments. Installed base, we increased to 8,200 instruments worldwide last year. Big part of the growth has come also from the international expansion where the consumer is still an introduction phase, so the consumption is not the same, I would say, in region that we see in a routine market such as in the U. S. But all in all, I would say there is more placement outside of the U. S. Not at all. Onethree. And if you look at the picture at the end of 2018, 26% of the installed units are outside of the U. S. Okay. So we will continue with a question from the room. Good afternoon. Two questions. First one, can you elaborate a little bit more on your acquisition pricing? And especially, is your priority to enforce your expertise? Or is it to reinforce your geographical footprint? The second question also, can you elaborate a little bit more on the competitive environment evolution? Who is winning market share? Is there a player more aggressive than another on the specific region? Can you elaborate a little bit more on that, please? On competition, I would say, on the field of microbiology, it's I would say, we are leading the we are in a position. BD, since the, I think, 50 years, we are competing with BD. We have new players are coming also in that space with promising technology, but I would say not yet is a mature stage of sales. You can imagine all the competition you want between low throughput, mid throughput. I would say that Baidas is specialized, I would say, in the niche testing on the high quality market. I'm going to field of syndrome testing with Finray. Yes, there are many people who are interested to enter the space, who are interested to enter the space, which are companies that you might know such as GeneMark, such as Cayer Gene also has been an investment on that space last year. I would say syndromic is becoming a standard of diagnostic, I would say, almost a standard of care. So we are expecting to see more and more players in that space, knowing that we are leading the race since the beginning and we want to keep on leading the race through our investments in new panels. And your first question was around China or not at all? Acquisition priorities. Acquisition priorities. Acquisition priorities. Our action priority for us, it will be technology, always important for us because if we find a smart technologies, which mainly have an impact in terms of reducing time to results of testing. That's something we look at. We'll keep on looking at everything which brings good medical content, such as we did with Astute last year. And also, we did this year, China. I think we believe going being more present in China, in Asia through R and D and manufacturing is it's important also to be present there to serve the market where there is almost in the region 60% of the worldwide population. Okay. Thank you. So we will continue with a question from the phone, please. We will now take our next question from Scott Bardo of Berenberg. Please go ahead. Hi, thanks for taking my questions. Scott Bardo from Berenberg. So first question please, this relates to BioFire in North America. I think you mentioned that you haven't seen any related impacts from Palmetto or some commercial players coming on board, which is encouraging. But just to understand a little bit the dynamic of placements in the U. S. In the Q4, can you give us a sense of has there been any change in acceptance of instruments or modules from the outpatient sector at all? Are your placements still very heavily in the hospitals? Or maybe some feeling for placements as a leading indicator for demand in that category, please? Also just on pneumonia, I appreciate it's still too early. You had a good approval there with lots of different indication. But can you give us some sense, Alexandre, as to your expectations for uptake here? I mean, would this be as quick in your mind as the flu panel? Or would it take some time to establish in the market? So they're the 2 BioFire related questions, please. Also just on this phantom stock issue, which is obviously creating some variability in your contributive EBIT. Thank you very much for the clarification. But I just wanted to understand a bit more full because I think you mentioned that within your guidance is a 10% to 16% rise in the share price from December. My calculation is your share price is up, say, 33% since December. So I just wanted to understand, is my math correct that your guidance provided today, we should be haircutting by around €10,000,000 to €15,000,000 as a result of the stronger share price, which is at what €73,000,000 today? So there, that's a technical question. And I have a follow-up. Okay. I'll take the first one, which was around the demand around the film array and the hospital market in the U. S, which is still strong, yes? You've seen the good results in Q4. And I would say the trend on Filmorhea is good everywhere because I know also we have a platform called Torch, which is modular. We can have up to 12 testing units. And it's increasing because of the beauty that more and more customers are using more panels. We have now 4 respiratory panels, 1 for GI, 1 for meningitis, one for BCID. So I would say the beauty that the customers will start using Filmora with 1 panels. They keep on adding some others. So the demand is quite strong and it's quite diverse also. When you look at the growth of revenue of Filmorhea last year, I would say it was not only RP, GI did very well and the others did very well also. One question on the uptake of pneumonia. I think it's still early, as I mentioned, but we believe the potential is quite great. It's a sophisticated test, but clearly answering to medical needs. So we believe it will also be a good entry door sometimes in in Europe, where it will be a good way also to boost the funerary. And it's difficult to say what will be the final level of pneumonia, but I would say it will be a significant one, I would say, in the portfolio. I cannot say more at this stage early. Quantum shares. So yes, your comment is valid. Obviously, the share price, if we look at it today, is above the 10%, 15% that I mentioned as our assumption. For every euro above, as I mentioned, you have to take into account a €1,500,000 EBIT. So if it's above a negative impact, if it's below a positive impact. So that's a fact. Just to mention it, I didn't mention it, but the Phantom shares plan were actually awarded in 3 tranches in 2015, 2016, 2017. They are awarded for 4 years for these U. S. Teams that are beneficiaries have 4 year vesting. So part will be actually paid in 2019, second part in 2020 and third part in 2021. So this effect is pretty strong in the last 2 years and this year. It will also decrease over time as we pair these plans, and we are not expecting to, let's say, renew the same type of Fandom Shares plan. Okay. So we will continue with the questions from the webcast. Could you outline, sorry, plans R and D, pipeline for Filmorhea post pneumonia, where you will be directed spend and what areas of opportunity remains? What else can you do with the science? Do you expect to have more leverage on R and D expense given the recent more important spend? Where do we invest in BioFire? I think molecular, we'll keep on investing in molecular because we're building Schillermo. I don't think we'll communicate a lot about the new panels coming. We have many ideas, many plans, but we have many competitors now, so we have to make sure we don't give them the portfolio. I think molecular is still a very important area of growth for us. Of course, we believe that the Filmer Ray is a solution that can be improved continuously either the system or the time to result. And of course, I mean, we also we invest by a Marriott. This year, it was 13 point 5% of investment in R and D. And I think it's the way to go for us. We are presenting microbiology, in immuno, in molecular. We have most of the cases leadership position that we have to defend. The way to go in our space is around innovation. So internal innovation and sometimes, of course, we are open to external innovation through business development. Okay. Thank you. Let's continue with a question from the room. Jean Louis, Societe Generale. Three questions. First one on China. Can we get an idea of do you have any surprise with IBOOM in China regarding inventory levels or any strange stuff that may happen in China we are used to? 2nd question, specifically on IBM. What would be the plan in term of growth? And I know you won't share anything, but compared to the rest of the region, can we get a flavor of the rhythm of the growth for Hybion that you expect versus Asian region? If I move on Japan and specifically to BioFire, Can we get an idea of what percentage of sales of this 17% international sales being made for BioFire, how much was that for Japan? Is it still microscopic? Or does it start to make a bit of sense since the end of the Sysmex JV? And thirdly, more broadly, a general question on the CapEx. You had a very high level of CapEx or not. I mean, we are here to discuss about that. But just wondering what would be the ideal maintenance CapEx and the sort of additional up you had. We understand pneumonia was a big investment for you in the past years, 18 months. We have new on the table. But is the 10% something that we should now rely on, on top of the 13.5% of R and D? Or is it something where we might see some breeze in or not? Okay. So I'll take a question on China first on HIBIUM. So we are a majority stakeholder in HIBIUM since November. We have performed the due diligence before, so we are okay. The growth of Ibermics, it was a €24,000,000 sales in 2018. The immunoassay market in China is growing quite fast, really, really quite fast. I think this is the fastest growing market in China. We believe that Habumo is a very good fit for us in term of technology, in term also of a menu. And we already have 80 agents which are being approved by the Chinese FDA. So it will be a story of growth for us, an excellent growth in the on the Chinese market. Plus also, it's not official like this, but it's important to be Chinese in China, to be R and D and driven and having your base in China to also have access to some tenders. Regarding Japan, funeral rate is just starting in Japan, I would say, right away. So there was no impact in 2018. We are just working on the registration and the reimbursement. So the sales will start in 2019. CapEx or R and D, the question was on CapEx first? CapEx, the 10% level. 10% level. So the CapEx are suited today for a pretty strong growth. So we have to invest heavily in our capacity. You've seen the graphs for the last 4 years where at least the last 3, we were close to 10% organic growth, which in our field forces us to, of course, in advance, invest for the capacity needed in 2, 3 years down the line, which is what we do today in several of our product lines. So I would say it's difficult to extract from that a kind of maintenance CapEx, which would only make sense if growth were to slow down at, I don't know, 3%, which is not at all what we are working on. 10% is still, to come to your question, we believe quite a high level, but will be clearly the case next year. Especially next year, we will invest in the capacity increase for BioFire, not only but especially for BioFire. So it will be a big CapEx of 2019, a new plant in Salt Lake City that will be part of this 10% sales. But beyond that, probably between 8% 10% would be a good range, right? 9% we'll see. We'll see. Okay. Thank you. And now we will continue with a question from the phone. We will now take our next question from Bill Quirk of Piper Jaffray. Please go ahead. Great. Thank you and good afternoon everyone. A couple of I guess follow-up questions at this point. Could you please expand on the PCT dynamic in the U. S? I believe that we're into year 2 of competition. So I'm just trying to, I guess, balance that against typical contract duration, which I understand to be about 3 to 5 years. And so you mentioned that you expect to see price stability in 2019. I'm just trying to again think about that with respect to typical contracts. So PCT, yes, we have entry of competition since 1.5 years, I would say, but there are still newcomers who have just arrived in 2018. I think it was more more customers arrived in 2018. We believe now it's competition is there. We have seen an impact on the ASP decrease. We're still growing in volume. And also, in some cases, PCT went to higher throughput platforms. So we're also targeting, I would say, other segments of the clinical market, which are also maybe more adapted to Vyvanse. But then again, the market will grow. We are waiting. We need a few times to see when the market will stabilize in terms of ASP. But we believe PCT is and will remain a growing market in the U. S. I think the acceptance can still be improved on average. Okay. Very good. Thank you. And then secondly, I certainly appreciate your comment around BioFire in Japan. Can you help us think about what additional countries are currently reimbursing for this and some perhaps assumptions around countries that might start reimbursing in 2019? Thank you. To be frank, we believe that for Finlare reimbursement is not always the key question. Sometimes it's helping, of course, but the way to go is what we call through DRG. It's a diagnosis related group. And all the work we are doing on Finrare is around the medical value, but also, I would say, the economical value, the benefit of syndromic for the patient, but also for the health care cost. This is the approach that we are promoting through our HEOR, which are health, economic and outcome studies. That's the way to go for us in most of the countries, even in the countries where we are working on reimbursement such as Switzerland or Japan, for example. [SPEAKER JEAN FRANCOIS VAN BOXMEER:] But in fact, you have the 3 main countries where we have a reimbursement, U. S, Switzerland and Japan. All the other countries, there is no specific reimbursement. Any other questions, Neil? No, that's all. Thank you very much. Okay, thanks. So we will come to you with a question from the room or maybe from the phone. We will now take our next question from Maha Pataki of Kepler Chevron. Please go ahead. Ms. Pataki does not seem to be on the line. We will now take our next question from Scott Bardo of Berenberg. Please go ahead, sir. Thanks. Can you hear me okay? That's okay. Perfect. Thank you. So just one broader question, please, Alexandre. I think historically, or certainly in the last 3 or 4 years, BioFire has been tremendous success in driving, if you like, 50% of group growth or 500 basis points or so of your top line annually. I just wanted to get a feeling for this year where you're guiding for slightly more cautious growth. Is there an expectation of a similar sort of mix that BioFire is driving half of the growth also? Or is it that the business outside of BioFire more normalizes and has slower growth rates than we've seen in the past. So perhaps just a little bit of a flavor for what makes up your guidance on the top line this year. Also, just more generally speaking, you're clearly guiding for a slightly softer top line than we've seen in recent past from a growth perspective. How do you view this? I mean, is this now in the sense a level that you're comfortable with going forward for the company? Or would you characterize guidance this year as being a temporary dip and that you can accelerate growth thereafter? I'd just like a little bit more thought actually over the midterm outlook that you believe possible from BioMarriott. I think that's pushing me. No, I think 7% to 8.5%, I would say it's a nice dynamic growth for Biomerie when you look at the growth estimated growth of the IVD sector. There will be a comparative impact, comparison impact coming from the flu last year, which is explaining a few things. But otherwise, I would say, yes, we still don't feel the way to deliver because there's still a strong potential outside of the U. S, but also in the U. S. There are still many, many labs where our target to many physicians who want to use the fimire. But all in all, when you look at microbiology, we grew by 6%, which is above market growth. Industry at 9%, and we don't have only one level of growth for the company. On the topics we address, which are food safety, sepsis, AMR and also respiratory infections, I would say you also have to look at BioMarieu, as I would say, the portfolio. I would say the solution of throwing that we have makes sense. It's not always one we communicate with product. But I would say also we are selling solutions to the physicians and to the labs. Are there any other questions from the room? No. There are no more questions from the phone as well. So thank you very much to all of you for your attendance, and we're looking forward to further discuss all that in the coming days or weeks. Thank you.