Earnings Call: Q1 2021

Apr 28, 2021

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining Eurofins 2021 Q1 Interim Management statement. Just to complete the typical disclaimer, during this call, Eurofins' management may make forward looking statements, statement, including, but not limited to, statements with respect to outlook and the related assumptions. Management will also discuss alternative performance measures such as organic growth, which is defined in the footnotes of our press release. Actual results may differ materially from objectives space. Risks and uncertainties that may affect Eurofins future results include, but are not limited to, Those described in the Risk Factors section of Eurofins Annual Report. Please also read the disclaimer on Page 2 of this presentation, stage. I would like to now turn the conference over to Doctor. Gilles Martin. Please go ahead, Gilles. Stage. In Q1 of 2021, not only have we had a very strong Q1 overall, state. But we have seen a strong acceleration in our core business, excluding the testing we do for COVID and the reagents we We said around COVID testing, our core business has been extremely dynamic and beyond Q1 is very encouraging for the future. State. We see very strong demand. Actually, we are, in some cases, having to raise capacity. So this all looks very good. We have a presentation, and I will go on Page 3 of this presentation. I guess you will have it. Some highlights of this Q1. So we continue to see strong demand for COVID testing, stage. But the type of testing is changing. We are increasingly looking for variants, and we developed unique solutions to detect variants very, very fast, To remove the bottleneck to testing, because very often people have to wait in long lines at laboratories or sensing stations to be tested. Space. We have developed a range of products that allow home testing. And of course, not only with antigen testing, which state. In many cases, many situations and has a lot of false positives too, but with reliable PCR testing, which is what governments require, You also have to realize that the next phase of the pandemic will be tracing variance and you cannot detect variance with rapid antigen test. Now you're faced with the problem of having to resample the positives with PCR, finding those people and then state. Only once you have a specimen in a lab, we can detect which variant is present and potentially take public health measures. And so more and more countries, including the UK, for example, as part of the requirements for people coming back to the country that are being set up stake. Are you insisting on PCR, so this variant tracing can be performed? The situation around the virus is still very hard stage. I don't think anybody in the world can really predict what will happen. The world has been in sales with multiple surprises, positive surprises with vaccines state. And unfortunately, negative surprises of variants. There's still a lot of worry at the moment about the new variants that appeared in Brazil, in Mannerhaus And more recently in India. And nobody really know how more pathogenic state. We are getting very significant contracts for sequencing, also one of the largest stage. Companies in the world and in Europe especially, so we're starting to do a sizable amount of sequencing to help public health authorities state. Trace the virus and more importantly, connect the clinical characteristics or clinical outcomes state of the patients with the genetic sequence of the viruses and the variants present. So this is why it's really hard to know how All things will continue to evolve. We all hope that thanks to vaccines, this will all be brought to a better situation. However, it seems that public health measures will be there for a while. We see countries getting better state. I put things in place to avoid new waves. Of course, there are still local waves state. Active in different countries in Europe and of course in other parts of the world and the whole problem would also around travel. It's not really known if people that are vaccinated cannot still carry the virus back home Because it's really hard to know. It could mean huge demand for a long time or if we are lucky, everything could go back to normal By the end of this year, so we'll start with our objective of 0 COVID testing next year. It looks increasingly unlikely that There would be 0 COVID testing next year in the years to come and the following years, but that's where we stand. In the meantime, the norm in COVID, the rest of our business is doing very well. We are developing new tests, very strong demand in environmental testing stake. For a whole various range of contaminants, our environmental testing business is still affected By the pandemic, because we have to go and sample. So we still haven't recovered the 2019 level, nor have we had growth Compared to 2019 in part of that business in some countries, that means to get to 10% organic growth, actually 11% if we Correct it for public working days. I think the rest of our core business is doing very, very well. In biopharma, we're doing a lot. Actually, we would do a lot even without any work on vaccines and other therapeutics related to COVID. There's So much demand, but we have affected some of that capacity to prioritize some of our capacity for the company developing Obviously, knowing how important this is for the world. So the other thing is we continue to build the content. State. So while we help we do all you just shared in fighting COVID, we continue to build our network of laboratories We have moved in our new food testing laboratory, the medicine now. It is the Largest and most modern food testing laboratory in the United States. It's on par with what we have in a couple of locations in Europe, state. Very high throughput, very efficient, very modern. And there, we can set the standards of quality and turnaround times. Space. Smaller acquisitions, so we continue to add the interesting capabilities or interesting locations to our network, but We probably not exceed our targets for M and A this year. We are prudent on that. Next slide would be Slide 4, please. Day. So financially, as you have seen, we've had extremely strong growth, over 30%, 40% organic growth, almost 45% organic growth We've about 11% adjusted for public working days growth of our core business in Q1. And I have to say, this is not compared to easy comps. Our Q1 and contrary to many other companies, which have strong presence in China, Our Q1 results of 2020 were not so bad. We still had an organic growth over 4% in Q1 of 2020. We had only thought to be affected in Europe in March of 2020. So the comps will start to get better from Q2, but we already see some of the businesses that were affected by I was not down to have record rhythm and start growing beyond where they were in prior to the pandemic. And other businesses are going very, very well. We've had about close to €400,000,000 in revenues from COVID, Actually much more than we expected, a similar level, similar order of magnitude plus within 10% of what we had In Q4 of last year of 2020. So and that is With many countries having much less cases and mostly virus prevalence, so our market penetration is increasing. We are still not doing a lot of safer at work testing because events, workplaces, travel has not really restarted. A lot of governments are talking now. And hopefully, by the end of May, we will know what the conditions are to travel across borders in Europe and internationally And that context and what will be the conditions for people returning to offices and to schools and to events? State. And that will have an impact on how much testing we will do to support those activities. On the financial side, we don't publish full results for Q1, but we've, of course, generated significant amount of cash. So we decided stage. We have too much cash on our balance sheet. And as I said, we're not going to spend it on overpriced M and A at the moment. I will move to Page 5. I think I will not Comment on all of those topics, but we've been very active to develop the right product for the state. Despite the pandemic, and they are changing, we have a range of new tests that we are launching. We're launching serology tests that can differentiate state. If people have been vaccinated or has the antibodies because of the prior infection, we are launching Very specific test and a lot of new variant specific tests because almost every month, the variance of most concern is a different one. State. So we are very fast in our cycles since we have labs all over the world. We have labs in India. We have labs in Brazil. We're very fast to be access Able to access specimens and develop those kits and validate them. You can develop the kit without having extra specimen, but to validate it, you need extra specimen. We're starting to win very significant contracts for sequencing and our biopharma Continue to support the development of new vaccines and the release of vaccines. Some interesting things, We've had interesting partnerships with large organizations. We have partnered with VATA, the International Airlines A travel association to provide global testing. We are one of the few providers of clinical testing that have almost a global network. Day. So we can test for passengers' important departure and arrival. We are well positioned to know exactly what are the requirements of Almost all arrival countries, each country has specific requirements for test, how it has to be sampled, which methods. The The same discussion as the vaccine, which vaccine will be accepted by which country for arriving passengers are the case for test and we are well positioned to Respond to that because we have large in all those countries. We also have a partnership with Uber for having Uber driver bring The samples hold to people, the test kits, so that they don't have to go anywhere and they don't have to wait. So lots of things are happening. Increasing number of contracts, which are about to start. Some of them are starting. Some events are starting with continuing to support Formula 1, for example, And other organizations. On page on the next page, talking about state. As we mentioned for annual results, Eurofins is a strong ESG enabler. All the things we do as a positive contribution to life, to health, to protecting the environment, the environmental and food testing that we do, stage? We didn't communicate enough about that. So we will do more about it. We have increased our team that is working on Achieving our carbon footprint reduction by 2025, which is a fairly ambitious program. We have increased our actions on diversity and equality. We are continuing to increase our contribution through Eurofins Foundation to causes that state. You would be happy to hear that we know of 8 members board We have 5 independent directors and 2 new very well qualified independent directors, one bringing stake. Strong HR and leadership development experience, which is key for our future development And one bringing very good industry experience was a member of the top leadership team of Oddecre, a large global tea company out of Germany, Also providing diversity, diversity of cultures, diversity of origins and equality of men and women in our Board. We will move to the next slide. Our objective, just as you remember, we presented them with our annual results. We should increase them, but we don't know what number to put, frankly, state? For 2021, especially, and the farther out we look, the more the harder it is to really estimate what level of COVID testing will remain, but what is really a good sign is outside of COVID, our core activity is doing very well, And could be. I've always advised against during long term conclusions based on the results of 1 quarter. Now they are very good and Some of you might say, okay, now Eurofins long term organic growth target is going to be 10% not 5%. I would advise against doing that. We need to More quarters, we need to see that our business has fully recovered. Once our business is including environment and some clinical tests, etcetera, state. As fully recovered, we have a better view of the long term growth potential. So we're sticking with our objectives. And as soon as we think there are some really statement. However, the general trend is extremely positive. So to conclude this short introduction before we move to Q and A, we move Slide 9. So very strong performance in Q1 and a lot of progress on the operational side state. On building our global network, developing our new set of IT solutions, developing new tests, new capabilities, reducing debt, generating cash, We will come out of 2021 with a very strong balance sheet. Big acquisitions are not really on the horizon for us at this time. We have A lot to do organically. We are opening labs in Asia. We are also opening labs in the Western world. A lot of innovation in COVID and this innovation ability that we demonstrated in COVID, we do intend to apply to many other The types of testing that are a bit underserved or where the testing capabilities are too expensive or too slow or suffer from other limitations. Day. The first question comes from Patrick Wood with Bank of America. Your question please. Perfect. Thank you very much. I'll give it to 3 please if I can. The first one, I'm just curious if you give a few more details on the drug Discovery Business. Just sort of the trends you've seen there relative to size within the group and the kind of growth? So that's the first one. Second one, similar question, but on the sequencing side of things, I'm just curious how big is that business for you guys now, whether qualitatively or quantitatively and the kind of growth you're stage. And then the final one, just curious on the CFRA of Work program. How are a lot of these structures? Because a lot of events would be quite rapid stage. Thank you very much. Drug Discovery is a Dynamic business was always dynamic. It's I think I don't have the figures in front of me because we have multiple labs, but it's definitely either close to double digits Our significant double digit, we've been adding capabilities, we've been adding footprint, that footprint recently over the last few years and we Definitely benefit from that. We think this would be a booming business for quite some time. It's pharma, biopharma and biotech is Well funded and the first phase is 10.1 is in the early phases, which our Discovery business serves and then this will flow through into The DPT business, which has all been the development work or part of the development work and I'm also looking To our colleagues who do the clinical work, we do a bit of clinical work in our central lab, but we're one of the largest. But overall, our biopharma business stake? It's very well. It's growing very fast and in some areas above 20%. And state. And our leadership there thinks it might be something quite sustainable. And they are confident that they can replace the work that We do for vaccine or COVID therapeutic work with all the biopharma work. Of course, time will tell. Sequencing was nothing last year. We launched product specific sequencing product In June or July or May of last year, and then governments were accepting the UK were not really interested by this topic, stage? And it's very little. And of course, with all the variance, the whole world has realized sequencing is required. And so we're starting to test quite a bit. State? It's just early days because this realization should have occurred at least in December when the problems arrived. It took 3 months for people to get their act together. State. So I think this was mostly growing volumes in Q2. Order of and this could be for a long time, Because monitoring of for example, monitoring of viruses in wastewater is going to be also large programs globally and maybe forever. Space. And I think the world will understand that doing this monitoring is important, both on patient samples and on ambulatory samples. How big would that be for Eurofins, euros 100,000,000 per year, euros 200,000,000, euros 50,000,000, euros 500,000,000, euros It's really hard to say at the moment. Probably, if I had to guess, maybe €100,000,000 on a sustainable basis. And virtually, it depends on state. If the world did what should be done, it would be massive. Whether the world would do that, I don't know. And for safer at work, It's usually multi modalities programs. And one has to know, you know, those rapid antigen tests, they don't really work. So you've got 2 problems. You've got half of the non symptomatic people that test negative are not negative, they're positive. State. And you have a large fraction of the positive that actually are not positive. And so in those events and And I'm not only testing at events, I'm not testing also at offices and factories, etcetera. But even if you talk about events, You need to be able to do pre testing of people with PCR. You need to be able to test the staff. Usually, the staff will be tested with PCR and tested stage. At frequent intervals, all the athletes, if it's a sport event, then you have to offer rapid testing. We do the rapid state. And we can provide the kits with our own rapid testing kits. But then you need to be what is do what is called reflex PCR. Whenever there's a positive, you need to be able to confirm it's with PCR very well. Often, you have to do a random number of PCR tests to check that the rapid tests are Day. I'm not missing too many positives. So the fact that we have everything in the IT systems to run that and the efficiency is very much appreciated By many partners, but then you've got the whole return to world topic, and this hasn't really started because in most countries, at least in Europe, people are not coming back to offices in great numbers. State. Now more and more governments are going to put the owners and companies to keep their agreements safe, and there will be more Cautions on liability, because now it is possible to test and possible to prevent outbreaks. And so companies will more and more proactively, state. At least in any region and country, proactively set a program to ensure there are due diligence and it's not only working in the offices, but Avoiding the outbreak and testing at some frequency depending on the geography is part of that. And then you've got the whole travel scenario where state? I doubt that people will be able to travel internationally without some level of testing, because otherwise, there's no way we can catch the variance coming And of course, it's all subject to all the how the variants evolve, if we're lucky, and the state. Vaccines work very well against all variants and enough people get vaccinated. And maybe we'll be done with this at the end of this year, as we all hoped. Day. The next question is from the line of Edouard Stendly with Morgan Stanley. Your question please. And you mentioned the vaccine work, for example, is included in the biopharma business and not in the €400,000,000 COVID revenue. So if we were being sort of strict on the definition of what's COVID and taking out the benefits state. Of vaccine work or sequencing that falls in the base business, do you have a feeling of what the 10% number would have been? State? That would be helpful to know. The second question, travel, as you've mentioned a few times, is increasingly important topic and you've announced the IATA news. But What utilization is your COVID capacity now running at such that if there were a sudden demand in travel, would you And the industry more generally be able to cope with that surge in demand without prices rising or turnaround times extending. And then Finally, I was hoping to get a tiny bit more clarity on the Safer at Work stuff. The 500,000,000 or 5 state. Million potential revenue, it sounds relatively certain like you know that number, but it sounds like it's based on a Huge number of variables. Can you give a feeling of what the key variable is? Is it the number of people coming back to work or is it the Timing of those people coming back to work, just something that gives us sort of a greater understanding of why that €550,000,000 is possible? The base business, so if we get data corrected For public working days, which is maybe a better proxy, the sequencing actually is not part of our statements. We put all the sequencing testing as part of the COVID testing. So the only thing that will be in our core business is our biopharma work. And our biopharma work, frankly, without COVID, it would have been most likely what it is because we just allocated We just said to some clients, we can't take your work because we have to take some vaccine work, and that's the reality. So state. And I think the vaccine works, the order of growth it would be something like 2%. So you're talking, and it would go from if you remove that and you make the hypothesis, stage, which is not what we think, but in the hypothesis, we wouldn't have done any other work with this capacity that wouldn't have been used for vaccine. Statement. We will be maybe around 9% corrected for or something like that for the and that's you have to also consider that If part of Eurofins is not working, we still have some of our food testing for catering that has been restarted in Europe. We have Our environmental testing, which is still significantly down, especially in North America. So that's a growth. On travel, yes, we built very much extra capacity. So we could cope with big surge and big peaks and that could happen. And we are ramping up very fast where it has to be. Of course, the travel testing will take place in different places than the routine testing, We have to also strong in Scotland. We've got people who go to France and stay in Italy and other countries where we are present during And then you will have to return to Western European countries. It's not really clear yet what the rules will be in the United States. Of course, we're getting ready for that. And but I cannot really comment. I don't have enough information. Stage. And say for at work, yes, it's very hard to estimate exactly the actual numbers. It will depend And also some government decisions as to what is required and for example things like travel, will travel be allowed or not be allowed? State. If there is no travel, there will be very limited testing. It seems difficult for governments To prevent their citizens to go on holiday outside of the country this summer, but that could happen. This way, it's just an objective. It's a target. The events are the same. The exact conditions under which events can occur are still not clear in every country. There are still regulatory questions. State. We want to return to offices. Our governments don't allow that. And it's we have the same question in almost every country. There are a number of variables in almost every country that could influence this both ways up or down. Is the pipeline of activity of negotiating new contracts still growing in Safer at Work? Or is it leveling off? State. It's very active. It's very active. The very question is when will those things start. I mean, some could never start. We have to be clear about that. You never know Depending on the regulations and also the content of those contracts can change. How much will be rapid antigen? How much will be PCR? How much will be Pre testing prior, how much would be testing on-site? That's really an open question. I think the world now As to figure out what they will do to avoid a 4th wave or to avoid those variants. And I think there are still a range of stage. Some countries will be very much necessary. And when things get really terrible, they might react if it gets terrible. And all those might be a bit more proactive. And for us, it's very hard to guess. The next question is from the line of Will Kuegneza with Jefferies. Your question please. I've got 3 also, please. Firstly, just on the COVID testing revenue that fell in the Q1, that €400,000,000 The outlook for the Q2 and then we have seen some price cuts coming through. So even if the volume stays high, I don't know if you have a view on what kind of stake. 1,000,000 we should be looking at for the Q2? And then the final question, just another follow-up around SAFER at Work state. And the strong progress there. Is your sense, have you got a feeling that that is a market leading product, you're Number 1 in this because I can see other operators have similar sorts of products, but I don't think they've gained as much traction as you have. So In Q4 of last year, it was a bit less than 450. It's a touch 400 this quarter. I think it's higher in Q1 than before because really the number of state. Infection is going down around the world. I mean, not around the world, but in the U. S. Definitely and in some parts of Europe. State. So that is not I think we were expecting it to go down faster for the clinical part of it, state. Testing to see if people are sick. For the surveillance part and the safer at work, it's just starting. And so this will be, as I was saying, up to discussions by governments and decisions, what level of surveillance will be required or So it's very difficult to see what Q2 and Q3 will be. Q3 will be the summer season, so it could be a lot of hard travel Day? Depending on the exact requirements, also for vaccinated people, I was reading what the UK Seems to imply, I don't think they have finally decided, but they probably really want everybody, including those that are vaccinated, to take once the first return to the UK. Day. So we are actually, we are trying to support that. We have offered a very cost effective test because it's unfair that people cannot travel because testing is too expensive. Day. And we are testing content before the long term, so we don't want to take advantage of this type of situation where There's not enough testing for people. I think our contribution should be to make those tests easy, available to create huge capacity so people don't wait for their results state? And that they can afford it. And so a lot of logistics is not really on the testing. It's making sure stage. I think our advantage going to your next question is our global network. State. A lot of the clinical testing providers are somewhat local. We are at both ends of the travel. We are in the U. S, we are in Europe, we are in Asia, we are Europe, we are in India, we are in Brazil, we are in pretty much all European countries. And so, if a German tourist that goes space. We probably need to test before they leave and test on arrival. And if they can use the same provider, the state. They know that the result would be acceptable in Iowa because the same thing modality was right. Overall, it's an advantage And the clients, the airports, airline, government also see that benefit. It doesn't make us unique and there are others that certainly can put together offers and state. All of us are better in some local markets because they have bigger network in that country or better connections or whatever. State. Overall, we do have an advantage. Our strategy has always been for clinical testing to be a specialty provider. We never wanted to do the routine tests, which are subject to price cuts and on, but we wanted to have a global network to sell high value specialty tests Where we can innovate and where we can create value by being offering better tests that come from our R and D labs. And of course, we were not finished because the client before were a network of labs, but we were somewhat along the way. And that's really useful for us now to stage. And also cruise ships, cruise lines that want to restart. Also, I don't know when they will be able to restart, but they will need testing. There are lots of industry state. That would be testing to return to normal operations. And our I'll just say that it's not so much a product, it's more the stage. And then the way we deliver it, all the IT behind it. We're a strong company with strong IT capabilities. All the apps We are developing all the websites where people have to log in and keep their Internet. If it's done well, they do it faster, they do it only once. Stake. And it's not that we never have glitches or things don't work, but we have, I think, overall and balance, we're a bit further ahead on the curve than most others. And this won't be a business forever either. So as you know, it's we are in there, we have the experience. I mean, it doesn't make sense for a lot of people to start from scratch for something that might happen just one summer. And then will they gone after that or maybe not? State. Okay, thanks. I wanted to just follow-up on the sort of the COVID run rate. I mean, the monthly implication is like 130,000,000 space. The prices are not coming down so much. We already get discounts sometime ago from last contract. So there is some level of erosion, some of which we do our Because we don't want to gouge people and we're very efficient. So yes, and the level Day. The next question is from the line of Andy Greubler with Credit Suisse. Your question please. Hi, good afternoon. Just 3 from me, if I may as well, please, Couple of which are just follow ups really from previous question. You mentioned that pricing, you were already state. Discounting for large contracts. Some of the indications suggest that government prices are going to fall pretty sharply in the second half of the year. Would that be your expectation as well? Secondly, in the full year results, you talked about 2 stake. $50,000,000 of revenues that were lost in food and environmental because of the pandemic last year. Have you started to see any of that Catch up yet or is that going to be later in the year as we return to work and going out and so forth? And then lastly just a quick financial one. Given The debt repurchases during the quarter, what is your average interest chart interest rate at this point? And what are your expectations for full year interest? Thanks very much. Thank you very much. Stake? Yes. There is some elements in pricing. We haven't seen it so massively. It's a mix of different contracts. We also have contracts that last state? A number of months or quarters, so probably the effect might come later. The big uncertainty will be the volume Over the next few months, I think that's going to be the biggest impact than any pricing impact. And this volume is going to be linked to the evolution of the pandemic and The variance and government decision as to how to deal with the situation. The funny thing is when there is a lockdown, there is less testing, Much less testing. The testing increases when the lockdown stops and people start to be contaminated again. And of course, with the vaccine, everybody hopes that the contamination level will be less, but the variance completely abetted a little bit. State. So but we still haven't upgraded our objectives to this year for that reason. There's just too much uncertainty, but it's going to fall on the right side. It's going to be above our The forecast in any case and maybe enormously above or maybe just significantly above. It's really hard to say. Yes, euros 250,000,000, we started to recover some of that in Q1, Not all of it. I think maybe a third of that is starting to come back on a quarterly basis. It's really, really hard to say. Q1 wasn't so badly affected anyway last year. But so in this statement. So it's really in March that we could compare. But some of the things that we had in March, Last year, we haven't recovered that because in U. S, for example, environment was affected later last year, Maybe in the last week of March, France was very badly affected in March last year. And the advantage of the product recovered the food part not really because catering is state. Debt repurchasing, yes, we will manage our balance sheet. And we have different projects around that We will lengthen our funding and reduce our interest rates, but we still are paying the interest rate that we had on previous instruments. So we will have if we do a make roll or if we repurchase our existing debt, and we are actually bringing Forward the interest cost that we would pay over the period of the instrument. So it's At the moment, we have too much cash in place. The next question is from the line of Neil Tyler with Redburn. Your question please. Hi, good afternoon. Yes, 3 from me as well actually. Firstly, your improved outlook statement, do any of the Factors that you referred to that improve that statement also alter your view of the level of investment required either in personnel operating costs space. Specifically and around advanced therapeutics. And I wondered whether you could perhaps offer Your insights into whether the clinical testing landscape for those products differs at all state. From the landscape and the competitive environment and things like contract visibility in more traditional drug development. And then finally, in food testing, your statement mentions an upswing in the rate of innovation in R and D. And I just wondered whether the source of that new innovation was any different, namely, is it That you have the same customer base that you've served previously. Thank you. Thank you very much. Yes, very interesting questions on that. Stage? Yes, we have targeted about 6% CapEx. We've always said 6% CapEx should enable us To do the maintenance CapEx of 2% or 3% and achieve at least 5% organic growth. And If we were, and I'm not saying we will do it, but if we were to be convinced that the level of organic growth is going to be substantially higher than 5%, We might need to fix more CapEx, not a whole lot more, another capital intensive industry. This is But we are adding capacity as fast as we can. It's the main limitation in tax is finding the team for in some of those areas. State. That might create a limit to how fast we can go. But if we go from 6% to 7% and For a growth that is 10% instead of size, it still is totally manageable. But I'm not saying we're at 10% organic growth. It's definitely Way too early to review on the whole of our business will perform post COVID. State. We're sticking to the 5% secular organic growth, which is, of course, 5% on a non cyclical basis. We don't have the down year stage. All the business will have over the cycle. AT and T, yes, I mean, I think your question is Specifically to the clinical phases on new therapeutic products, etcetera. This is early days, but what we see, we have a central lab That does clinical testing for many things, but we also are doing specialized testing for biologics In all the labs, in our central labs, as part of clinical trials, for example, for the COVID vaccines, we did a lot of testing out of our viral core company state. And to help the team continue to carry out, I think, goes faster. So there are different types of tests indeed That our specialized unit can be carrying out, but they are not typically in a traditional central line. But of course, some central lines are adding those capabilities as they can. Day. And food testing, it's more about the structure of the food industry. If you read a bit about the consumer trends, I think organic food is growing, is really booming, More than 10% growth of organic food. Even very large companies like Nestle are trying to move more organic. But it's consumers are looking at this much more holistically now than organic. They're looking at sustainable farming, regenerative farming, stage? All the things that will make this agriculture more local and the food supply more generally more local and less impactful than the environment We have alternative sources of proteins, insects, of course, vegetables, etcetera. State. It's often smaller companies, but smaller companies that can be extremely well funded. And you've got the giants of the industry like Nestle, which are also investing heavily state. Consumers are also much more attached to understand, not all consumers, but an increasing range of consumers understanding food or health and want to have products that don't have as much transform ingredients, how much rapid carbohydrates, how much sugar, etcetera. So, sugar is becoming more and more, I think, as sugar is also bad, not only side is bad, etcetera, etcetera, which creates a lot of innovation, a lot state. New products and an evolution of the makeup of the food industry and retail and food distribution and that The next question is from the line of Nicholas Thabo with Stifel. Your question please. The first one will be, so first, could you give us an idea of the Overall average PCA price you are charging right now based on discussions with the governments. And if we think a bit maybe 1 year down the road when we have dealt with the COVID crisis in Europe, in the U. S, Have you already had insight from discussion with the government institution about how they will evolve the overall prices, not for PCR testing, but overall clinical diagnostic reimbursement, I mean, have they already said basically the budget wasn't heavy on your side stage. Supporting you guys during the COVID crisis. Now we'll have to shift it back to other places of the economy and therefore we could see the clinical diagnostics segment Underperforming in terms of prices, is it already in discussion or not? And then regarding the cost base, stage. I mean, the reagents were obviously hard to find expensive last year. How it evolving today? How much more investment are you making at the moment state in the colleague testing capacities? How is that evolving exactly? Thank you very much. Thank you. Yes, PCR Price is very different in countries. I think now it's more like $50, €40, something like that on average. Some are lower and stage. And you have to see what you buy, because if you have to deliver a kit with a driver to a patient, state? Wait until the patient is taking his test and as they drive the samples right direct to the lab, of course, this is more expensive Then if we just ship a kit and people test themselves and drop it off in a box depending on the return shipping option and feed. So there's a range of things. Or if we get Thousands of samples shipped to us by the government where we have nothing to do but test, it's also a different price. Or if we have to organize our own sampling station and then the sampling stations. It's a different service. So and for antigen, it's a similar you can have people selling an antigen test for €50,000,000 and state. Others just saying the best to someone for €5,000,000 So it's really a big range depending on the associated services and additional requirements of reporting to governments, etcetera, requirements to do reflex testing with PCR or requirements to do sequencing of the positives for the PCR test. State. So every situation is different and we remain different. As to the pricing of clinical, the reason why we don't want to be big in state. The routine is multi negative. Governments will always, before the pandemic and after, we always try to bring this cost down. That's why there was this In the U. S, already starting in, I think, 2017 or 2018, where Medicare is bringing down the reimbursement space. And similar initiatives all over Europe, and that's why we focus to be a specialist. And you see it before COVID. It's kind of interesting. I think for Q1, Synlab just went public and reported that they're 40% growth and they're pure clinical. And we did also 40% growth, but we're not clinical. Clinical is only 20% of our revenues, which means our growth has been way more, way higher statement. Then the goal for clinical labs due to COVID. And the reason is the mix of our work and our focus is more on advanced testing and less on the routine testing. We do some. We do some. We do some. We do some. We do some in France and a bit in Spain and a bit in Germany. But that's definitely not the majority of what we do and want to focus on. State. As 2 reagents, we make our own reagents. So we have we're fine on that level. And we have always have access to reagents when others do them. Stake. And we have enough supply chains and we even make all the plastics now because also plastics were an issue at some point in the pandemic. The next question is from the line of Alan Wells with Exane. Your question please. Day. Most of my questions have been asked. Just a couple of quick follow ups. On the COVID side, COVID testing side, can I just quickly check, has there been any Changes in Q1 from a regional perspective, I think when we talked before, you talked a little bit about kind of 2 thirds of that revenue was European and about a third state? I'm guessing U. S. Activity is falling a bit further. I'm just wondering if Europe is a bigger part of the COVID testing and any comments you can make On country exposure, that's my first question. And then secondly, just following back up on the environmental testing side where you talked about you've You've seen a little bit of recovery in Q1. Is there an expectation that there's a bit of a backlog that will need to be cleared here? I mean, all of this is kind of mandated space type of testing that will need to be done, whatever. Is there kind of a backlog that needs to be worked through that kind of gives you maybe a bit of a boost Is the market for sampling opened up a little bit now? Thank you. Thank you very much. I mean, with our COVID has been indeed, as you mentioned, Mostly, I mean, bigger in Europe than North America. I think our European teams simply did better than our U. S. Team in contributing. And we are bigger in Europe. Historically, our other businesses in Europe have been able to help more. Our U. S. Teams did maybe better in biopharma, contributed more in the biopharma part of the fight against COVID. Stage. In the Q1 and the last part of the Q1, yes, it's becoming even more heavily biased towards Europe, but also India, state. Asia, Brazil is picking up, unfortunately, and other third world countries where the virus is present. Day. And the West should be careful because you know that these limitations happen in India or if they happen anywhere else in the world, deal this is over. So in sequencing, we're also helping a number of countries outside of core European countries and working with the European Union on that state. To provide the sequencing capabilities to those less affluent countries, because we cannot prevent the virus from traveling, It's going to be very, very hard if there are some extremely dangerous mutations that occur anywhere in the third world to avoid to prevent them from spreading in the Western world Unless we have measures that are strict as Australia and China, which might not be sustainable in a continent like Europe, state. So it's yes, the shift might change around over time. In Europe, we work for a large number of European countries and the focus, which is a bit from month to month depending on how governments react to the pandemic. And as to environmental, there might be some backlog indeed because there are new contracts and so you could see that in the second half stage. We have been now in the U. S. Very fast accelerating sample numbers in April. So that could be part of that. There is another thing to say that we will be a strong beneficiary of the infrastructure programs. The other infrastructure program will be more roads, state. More public works, more building, more energy saving. Energy saving means a lot of work in houses, and we carry out a lot of testing also in that context, Testing of toxic chemicals in materials for asbestos whenever there is work in building. State. So but that will be slower to pick up. I mean, we've seen impact of those infrastructure programs maybe in 2022, 2023. But that could have a long term impact also positive long term impact on our environmental testing business and other businesses that we do on Thank you. And maybe just a very quick follow-up just to make sure I understand your comments around pricing. Obviously, I understand that when you look at the kind of regulated kind of public level pricing, you Comment that there will be some little bit of pressure as that comes down, but there's some puts and takes there. But am I also right in thinking as we think about the rest of the year, state? You'll probably see a mix of volume coming more through from the private side with things like Safety to Work, etcetera, coming through, which is typically higher priced. So actually, On a like for like volume, the pricing might not actually fall that much as the private side of your business probably picks up a little bit work as the market opens up. Is that a fair comment there? Yes, yes. I mean, each situation is different, and it depends on the services we are providing. And so maybe we provide more Yes, a bit more elaborate services to private industry indeed or to people traveling than we do for mass testing for governments. The sequencing, of course sequencing is running a layer of cost of the testing as you have to sequence all the positives. And So the oil in prices, I don't we don't even calculate it, to be honest, because it's so much linked to the type of testing we do, and It's a bit meaningless. We could do the pure lab test part of the testing and do that. We don't do it very much. In the U. S, it was Extremely generous initially at $100,000,000 of sand board. We haven't participated all that much to that type of testing. Stage. And then, Roy, no, there are still open questions. We could go to millions of testing if, for example, with pooling, we could test a very, very large number of samples stage? At very low cost and it could be a part of the instrument for reopening schools in September state. Today would be very regular pool testing. You can only be pool testing if the incidence of the virus is low. If you have like many countries are still at 5% positive. Space. Now in the U. S. And California, they're back to 1.5% positive. When you are at that level, you can start pulling and you can potentially create capacity for 1,000,000 and 1,000,000 of tests, stage. Which could be a good thing to detect outbreaks before they have time to spread. So the things that could have been done in the spring To prevent second and third waves are more possible with the testing capacity and also the change in mind. Stage. The self testing was not allowed. We only got FDA only approved our self testing modality, the DTC, direct to consumer OTC products in A couple of months ago, they were not ready to approve this type of products in the spring of last year, and those products are really important if you want to test millions of people stake. So those are part of the question. And of course, if we do pool testing, which means we test only 1 sample in 10 space. And go back and test individual samples only if we have 1 positive. Obviously, the price per unit will be less, will be cheaper than anti jet testing, by Day. The next question is from the line of Ray Kumar with HSBC. Your question please. It's Surajesh Kumar from HSBC. On the drug discovery comment you made earlier, Can you give us some color on what type of demand is coming back? Is it more Just in terms of understanding, what is the type of backlog you see with your state. Customers who probably prioritize vaccine and COVID related work over other types of work. So If you could give us some sense of backlog on the drug development side. The second question is on basically food testing. You mentioned that there are some stage? Incremental demand from new types of new development in the space. So stage. Compared to the historic run rate, how is the rate of innovation looking there? State. And basically, are we down 10%, 15% or more like 20%, 30% compared to, say, 2018 or 2019? And finally, Paul, you gave some very helpful numbers on the variables that are involved in Cost per test, you refer to a €40 cost of test, but that is for one type. Stage. But give or take, €400,000,000 of revenue equates to €10,000,000 tests there. Now there will be pool tests and there will be mix effects. But just in terms of headline volume trends of COVID testing, how have we seen that trend In biopharma, we have a number of capabilities. The bulk of our testing is our biopharma product testing, where we have worked for a lot of the therapeutics developments around COVID drugs against COVID stage. In this COVID space, which is the tiny part of our biopharma product testing, we did a bit of vaccine development work. Drug discovery is early. It's mainly all the therapies, not necessarily related to COVID. We did a bit of clinical trial work for So clinical testing indeed for the clinical trials of COVID of new COVID vaccines. I can be also preparing the kids that are sent to the hospitals and analyzing the results. And the backlog, yes, there is I mean, we cannot take all our insight to look for a place. There is definitely not enough capacity in the market to meet some of the demand, As you have well heard for vaccine, for production of vaccine, the same applies to the testing. And food testing, it's very hard to put number on the rates of innovation. It's more stage. Qualitative information, there is more demand, there are more products. Also supplements in the U. S. Are going very fast, to dietary supplements and all kinds of botanicals product, more interest for A range of those products and those products are lower volume, very, very if you go to a supplement shop, you will see how many varieties of products you have. State. So each of them needs to be tested. And whereas if you go in a supermarket, you have a different complex, but still each of them state. So that's a general trend, more diversification of food types state. And less transformed food products, more fresh food products, etcetera. And yes, the number of tests, we track it, but it's very difficult. I don't even know how we call the Pooled sample, I think, in India, the government, for example, was mostly doing pool testing, but to reduce the cost. But now they are moving to having to test every sample, unfortunately, because of Yes, the high level of positives. And so I'm not even sure how we count it. I would say the number state? It varies every week, every day, every month. So, I don't really have it in memory. State. But the same orders of magnitude, we haven't seen massive price changes, frankly. And probably next quarter, we won't see so much of that. And again, I would like to reiterate, I think the main and the other, while demand price is going to be volume. And there are a range of scenarios that can impact volume. That's why volume would be increasing the main impact. The next question is off the line of Zoharzini Varanasi from Goldman Sachs. Your question please. Hi, good afternoon. Thank you for taking my questions. One is just as a follow-up to your previous comments that you mentioned Potential benefit from infrastructure programs and environmental testing. Is that mainly in France or is that across Europe, please? Stake. And then the second one, I know it's not a it's just a revenue call, nothing on profits, but I wanted to clarify some of the comments you made earlier Now you mentioned, I think, that you fully written down the value of the machines that are used for PCR testing. Was that taken And so higher depreciation expense or was it taken about EBITDA line just so that we can understand how the dynamics on margins will trend this year? And maybe the last one would be, what's the total value of commissions that you have written off last year? Thank you. Infrastructure programs, I think they will be global. I think it's not only in France or it's all over Europe for sure. State. And I think in North America, there are also infrastructure programs about low loads and public works and also green buildings, Which remain out of work. I'm not sure I understood the second and third question. If I could ask you to repeat it, please? Sure. At least at the full year results, you mentioned that you've actually written down the value of the PCR machines state? You fully just extended almost. So I just wanted to understand whether it was taken as the depreciation expense or whether it was taken above EBITDA Thank you very much. Yes, well, what we've done is we've geared to be fully broken down at the end of the pandemic. And so this should be more or less retargeted next summer, this summer to be done with writing off all this COVID safety because our central hypothesis was no COVID testing next year. And the Write down is it's part of depreciation, so it's affecting EBIT. State. And the value, yes, it was significant tens of 1,000,000 of dollars that we invested in this whole thing. We also worked on some stocks, so Do not have too much stock in case there is an undrawn to change, but we see also shifts on stock from areas where there is less testing to areas where there is more testing And that is that should mitigate that to some extent, that we don't have too much Day. The next question is from Pierre Fournier with Moneta. Your question please. Good afternoon, gentlemen. Can you hear me? Yes. Thank you very much for taking the questions. The first question would be a follow-up on CECIO at work. Just To be sure I understand or how to understand the €550,000,000 figure, in the situation where On the 30th June, we all go back to office, school and airports. Does it mean that Eurofins will You achieved €550,000,000 of revenue in H2 or is it more spread out figure? And maybe another on That work, does it bear the same margin as the traditional business? And then on The 10% growth, which is very impressive. I understood there was maybe a slight catch up effect state. In environmental from clients who could not do their test in 2020, is there another catch up effect from Another sub industry that you are serving other than environmental? And the last question is regarding France. I would just like to know How much is France in percentage of COVID related revenues? Thank you. Thank you. Thank you very much. I don't know exactly when those numbers would fall. We said for Safer at Work, mostly in the second half is what we think. Stage. In each contract, a different kind of events contract and travel depends on where travel restarts and it could continue For a very long time and beyond 2021, depending on government regulations. So that's the best guess we could give you of the magnitude of what we have. We don't see why the margin would be substantially different statement and other things we do. And yes, I think there was a misunderstanding on catch up. I don't think we have seen any catch up of anything. It's more state. Part return to normal that we are seeing so far in part of the work that our clients could not work at all. They are starting To work a bit more normally, the work that could not be done before in 2020 will be done now, I don't know. This is something that might open in the next few quarters, but I don't think that we have much evidence of that right now. It's not like certification where all this has to be done and where a lot of companies are doing certification, there's a lot of work in Q4 of last year because things have stage. In for example, in catering and so on, those things won't happen. Maybe a bit in environmental, but So we see it in the second half of the year in the U. S, for example, for environment, how much of that happens. And then all France is proportional to all of COVID of, space? I don't know. Maybe for what we do in Europe, maybe 20%, I'd say. I don't have the exact figures in front of me, but it's not like state? It's not everything. It is significant, of course, but we also do a lot of testing for other European countries, Even countries where we are not so present in with that network. So, yes, I I think I will take one last question because we are running over. So 20% of European Group revenues? Stage. But it's not I don't have the exact number. It's just an Educated guess. I think it's a roundback. So we can take one last question. There are no further questions at this time. All right. Thank you very much. And Day. Thank you very much for joining our call. I appreciate that we had so many questions. Of course, we can follow-up 1 on 1 or You can follow-up with Gary and Laurent Hugues on Roger separately. So to conclude, I think we've had a very strong Q1. The most important thing is we see our core business doing extremely well, Which is very encouraging for the years to come. We start to see the benefits of all the investments we made in IT, having a very State. State is a very big state of the art network. We see the benefits of all the investments we've made in opening new labs and opening labs in Asia. And basically, it makes us even more positive and bullish about the long term future of Eurofins. So I would like to thank all of you, our investors here for your support for the many years where we're building the company. And I'm happy that now we're coming in a phase where you can see the benefits of all those investments and of your patience. So thanks a lot for your support and It has a very nice day, and I hope that with all our work and that of many governments and testing companies around the world