bioMérieux S.A. (BIM) Earnings Call Transcript & Summary

Good day, and welcome to the bioMerieux webcast conference call. Today's conference is being recorded. At this time, I'd like to hand the call over to Aymeric Fichet. Please go ahead.

Thank you, Ari. Good afternoon, everyone, and thank you for joining us on this webcast. I'm online with Alexandre Merieux, Chairman and CEO, as well as Pierre Boulud, COO Clinical Operations; and Guillaume Bouhours, Chief Financial Officer. Before starting, let me first remind you that today's call is being recorded and that a replay will be available on our website www.biomerieux-finance.com. I will now hand the call over to Alexandre Merieux, and then we will open the call to discussion and questions. Alexandre, up to you.

Thank you, Aymeric. Hello, good day to everyone. Thank you for joining this webcast. So as you have seen, as we have communicated this morning, there's been an evolution in the governance of bioMerieux, as yesterday, the Board of Directors of bioMerieux and has approved the new governance with the separation of the roles between Executive Chairman and CEO. So from July 1, I will become Executive Chairman of bioMerieux, focusing on strategical topics and also working on the CSR innovation road map together with Pierre Boulud. And Pierre Boulud will be CEO of the company, starting July 1. So this is, I would say, a natural evolution of the governance of the company. Pierre has been with bioMerieux for now 7 years, and this webcast is a good opportunity for you to get to know Pierre Boulud, as he will mainly be your main interface with Guillaume on the coming -- upcoming communication. So with this, Pierre [Foreign Language], I'll let you introduce yourself.

Thank you, Alexandre. Hello, everybody, and I take the opportunity to start by saying thank you to Alexandre and the Board of Directors for this appointment. Obviously, I take it with pride but also very well aware of what it takes in terms of responsibility for the whole company. So very glad and very excited to take this position starting July 1. So as I'm new in the job, we felt it was a good opportunity for me to introduce myself. I started my career in consulting industry. I spent a little bit less than 10 years in consulting. Most of them at the Boston Consulting Group in the health care practice. So more or less working 50% of my time with health care companies. After that period of time, I joined pharma, midsized biotech company called Ipsen, a listed company, EUR 3 billion size, more or less. I had several positions at Ipsen. I was, at some point, their General Manager for Ipsen in Spain, in charge of commercial and manufacturing activities, and I was appointed Head of the Global Marketing for Ipsen. Then I joined the Executive Committee for Ipsen in charge of M&A, business development and market access. My last position at Ipsen, I was in charge of the oncology sales for Ipsen. At that time, it was 75% of global sales for the company. And I spent 3 years in the job, enjoying a very solid growth. After more than 10 years at Ipsen, I met with Alexandre and I moved to bioMerieux in 2016. At that time, bioMerieux was organized by region, and I took over the responsibility for Asia Pacific. I was in charge of manufacturing, R&D and commercial activities in Asia Pacific. I was based in Singapore. I -- we had the benefit of enjoying a very solid double-digit growth in the 3 years I was there, enhancing the profitability for the region. We sold the business in Australia. We did a bit of restructuring in China. We also acquired the shares of the joint venture we had in Japan with [ Sysmex ] that allowed us to have our own full-fledged subsidiary in Japan, allowed us to launch BIOFIRE in Japan. And I'm actually very glad and very proud that now Japan is the biggest market for BIOFIRE outside of the U.S. So an amazing job done by the teams in Asia. And as I'm taking over the role of Chief Executive Officer now starting July 1, I'd like to say maybe three comments: The first one is we are benefiting from the very strong performance under the leadership of Alexandre on the last 10 years of bioMerieux. We have demonstrated, with Alexandre, very good-quality performance in the last 10 years, navigating, I believe, successfully COVID phenomenon. And this is, I think, a very strong foundation for bioMerieux as we move forward. The second highlight I would like to make, as I'm taking this position, is that the last quarters, we've displayed a very solid sales performance, demonstrating the quality of our offering in the market, the relevance in the market, the competitiveness in the market. So for me, it's a strong signal that we have what it takes to be successful. And the third comment I would like to highlight, moving forward, is we have a growing market demand. We are seeing the need for infectious disease diagnostics in many markets in this post-COVID world. We are seeing a growing awareness with regards to antimicrobial resistance and the importance of diagnostics to fight antibiotic resistance to protect patients, but also to protect consumer health with our industrial applications. And I genuinely believe, I'm genuinely convinced that the quality of the offering that we have, the investment that we do in R&D to keep bringing innovation into the market and our focus on these growing market segments is actually paving the way for a very solid performance in the years to come. And as I had the opportunity to actually share with you a few months ago in March, we have a very busy pipeline in terms of commercial launches with [ multi-dose ] system, VITEK MS PRIME, with new VIDAS system, VIDAS KUBE, with the benefit of the acquisition of Specific Diagnostics, the launch of VITEK REVEAL. And finally, the launch of SPOTFIRE that's taking place, as we speak, in the U.S. So a lot of good reasons to believe that we have, again, what it takes to be successful in the years to come and very happy to interact with you more frequently in the future. And with this, I hand over to Alexandre.

Yes. No, nothing special to add. I just want to say that we work all in hand with Pierre for the last 7 years. And Pierre, you said, was also COO of the company and in his recent years he has also been in charge of business development and strategy. So I'm very happy with this evolution. And the Pierre, of course, has full support and a full trust to keep on developing bioMerieux to higher grounds. So with this being said, I think we can open the floor to any questions that you might have.

Ari?

[Operator Instructions] And we'll go ahead and take our first question from Aisyah Noor with Morgan Stanley.

Congratulations, Pierre, for the appointment. My first question is on M&A, just to get a sense on your strategy, going forward. Pierre, as I understand it, you were quite involved in the acquisition of Specific Diagnostics last year. As you look at your balance sheet and your healthy cash position, how are you thinking about M&A? And more specifically, given your experience with Specific and your involvement in the integration, should we take Specific as a sort of template for the type of asset you are interested in? Or would you entertain the possibility of a more transformative acquisition? And I guess there's also a question around is this a transition where it's still business as usual? Or do you see scope for something more courageous and more bold here? Second question also for Pierre, I wanted to get your thoughts on the immunoassay business. This is the only business that's seen consistent headwinds in the past few years, whether it's China, COVID, PCT competition, et cetera. And over the past kind of 6, 7 years, on average, this business has been growing flat or slightly down. So how do you think the company should fix this issue? Is it your product portfolio? Are there regions that need more attention? Or could you address this through M&A? Some of your thoughts there.

So M&A question, I can -- Alexandre, you want to start answering or you want me to...

Please answer the question. Please, please.

Okay. So feel free, Alexandre, to complement what I'm saying. So as you -- thank you for your question. As you said, we have a very healthy balance sheet. So we can afford to contemplate transactions and acquisitions when they make sense for the company. In that regard, we keep looking at potential transactions that fits together with the strategic focus that we have. Specific Diagnostics was one of them, bringing a fast AST solution that we didn't have, that was perfectly complementing our portfolio of solutions. As you know, there is a lot of innovation in diagnostics. So we keep screening the market, and we want to be active in this market and make sure that if and when we see an opportunity that again is consistent with the strategy that we have and makes sense from a financial perspective, this is something we're ready to look at. With regards to potential more transformative acquisitions, probably more a question for Alexandre or more opportunistic if and when we see the opportunity.

Yes, maybe I can take this one. Yes, I think we will remain courageous and bold. I think it's important that we do things which can be strategic for the company. As you said, Pierre, we have maybe more room of maneuver than we had in the past. So these are things we'll be able to scout or contemplate, making sure that it's a long-term good strategic fit for bioMerieux.

And maybe just to finish on this one, we have -- as I shared earlier, we actually believe that the company is in a very healthy position in terms of market position, sales performance. So we -- at this stage, at least, we don't feel there is an urgent need for doing something that would be massively transformational. So we keep -- we're obviously open to any kind of option, but no urgent need from that perspective. With regard to the second question on immunoassays, you're right to say this is a franchise that has been struggling in the last few years. We've had a little bit of headwind that relates to internal challenges, but also related to very strong competition in many markets. 2023 is definitely a bit of a year of transition with that regard. We believe, hope that the quality issues are now behind us, and we are dealing with them. We also have suffered with the evolution of PCT sales [ procalcitonin ]. As you know, we were benefiting from an exclusivity kind of position. And unfortunately, this has disappeared and is fading away. However, we still believe there is a strong opportunity for VIDAS in immunoassays in the field of routine testing, mostly in emerging markets. As you know, bioMerieux has a very strong presence for a company our size in emerging markets, and it's a very relevant solution in the emerging markets. So it's on us to make sure that, one, we keep deploying a [ menu ] of sales that makes sense for those markets. And as you know, in the recent years, we've launched [ dengue ], we've launched chikungunya that are very relevant markets for -- very relevant sales for developing markets. And as we speak, we're also launching a new system VIDAS KUBE, which, hopefully, will also rejuvenate a little bit the future for VIDAS. So we don't expect VIDAS and our immunoassay franchise to be a significant factor to bioMerieux growth in the future, but we are actively working to make sure that we can have a very solid, sustainable performance with the VIDAS immunoassay franchise. Did it answer your question?

Yes, it does.

And we'll go ahead and take our next question from Peter Welford with Jefferies.

I've got two. I guess, firstly, just coming back to the acquisitions question, I guess I'm curious, given Alexandre is an Executive Chairman, I guess, it's more a question rather than necessarily on acquisitions itself as to how the roles, I guess, are going to be split between the Executive Chairman and the CEO role? And I guess, what I'm trying to understand is, is the job of seeking out sort of larger deals, not small transactions, but sort of potentially larger deals, like, for example, BIOFIRE was, is that the role of the Executive Chairman? Or is that a role that now will pass to Pierre? So I guess I'm just trying to see sort of where the strategic sort of decisions like that lie. I mean, obviously, the Board ultimately has the say. But how that sort of sits within the two roles? If you can sort of try and help us to understand that, it would be great. And then secondly, just with regards to looking at the business as it is today, you mentioned, obviously, SPOTFIRE is a exciting new launch, that's obviously into the more sort of point-of-care segment, I guess, if you like, relative to bioMerieux's current offerings. I guess I'm curious to know the appetite of management and the Board towards bioMerieux potentially increasing its exposure to that segment and moving away from the lab market or whether or not SPOTFIRE is just an opportunity to leverage your existing platform, your existing technology and it isn't necessarily a sign of where you see future opportunity for bioMerieux to perhaps launch new platforms and new tests as well?

Maybe I can take the first one on how we are going to work together, Pierre?

Sure.

Okay. I'm not sure things will change. In fact, the thing, of course, is Pierre has a full [ ERG ] committee reporting directly to him, and [ Biz Dev ] is also under Pierre. But of course, for big acquisitions or transformational -- or acquisition. Of course, I will be working jointly to agree on the approach. And I think it will be done in the way we operate usually in a company between the Chairman, Board and the management. And I don't see a big difference compared to what was even -- what we did in the past.

Yes. And probably to add to your point, Alexandre, I think it's a little bit of common sense, right? The bigger the acquisition, probably the more the involvement of the Chairman and the Board. So I think the answer to your question is probably that every transaction, obviously, Alexandre will have to endorse and support it, and he will be all the more involved as it is more transformational, I think that's the right way to reach it. But there is no split of responsibility, like very formal between the two of us on this kind of operation. I hope it helps, Peter, to clarify. On the second question, I can maybe take it. It's a very relevant question actually because to your point, we are entering the point-of-care market because of the technology, and it's a technology that is driving us into the point-of-care market. And definitely, this is an area that we are entering and we are learning as we are entering this market. Again, it comes a little bit -- so there is definitely an interest from a strategic perspective in possibly complementing our portfolio with the point-of-care solutions. Now it's -- there are two elements: One, we need to look at the right product offering that would nicely complement the SPOTFIRE solution that we have. And it needs to be a good fit from a product, from an offering, from a technology perspective. And two, the point-of-care market is still very much impacted by COVID. COVID is fading away. So as you know, there are lots of companies that were created in the context of COVID, especially in the field of point-of-care. So what we really want to make sure is that we look at the right assets, and we make sure that if and when we make a transaction in that field, we carefully pick the right company or the right assets.

Our next question will come from Chris Ganet with ODDO.

I am Chris Ganet, ODDO. Actually, three or the two questions mainly. First is for you, Pierre, probably. I'd like to hear what would be your own priority? So if we could say in 1 year, will there be a [ peer ] footprint, in other words? I do remember that when Alexandre arrived, there was -- we have seen some internal reorganization. So I'd like to understand if in this naming, we should expect from an internal reorganization and what would be the priority? That's the first question. And the second question relates on kind of trading update. I have understood that [ DiaSorin ] seems to be a bit more aggressive on pricing. So maybe more broadly on the market, do you have any comments on the recent trend on pricing, competition and volume as well, if possible?

Cool. Thank you, Chris. So let me take the first one, and maybe Guillaume will give you some elements on the second one, and I can complement from what I'm seeing. So priorities in bioMerieux, 1 year from now, so Alexandre said it very well, this is an evolution of the governance. This is not a revolution. The Executive Committee stays unchanged as I'm taking this position. So don't expect a significant reorganization for bioMerieux. I'm going, obviously, in the next few weeks to work together with the Executive Committee and make sure that I'm fully aware and knowledgeable of the different challenges and opportunities that we have ahead of us, most particularly for the industrial applications, for manufacturing, for R&D. And we'll review projects and priorities on the go, but I don't have an agenda for making a significant change in the next few months. And I mean, for good or bad, better or worse, I've been very much involved actually in the strategic deployment of bioMerieux in the last 7 years. So yes, don't think -- it's very much in the spirit of continuities then taking the job. And having said that, obviously, as it was the case under Alexandre leadership in the last 10 years, there were many changes that happened because the company needs to adapt and transform itself right to be able to be competitive and successful. So we'll do the changes. But my agenda is very much to do it together with the existing organization that we have and in the continuity of the strategy that was developed in the last few years. With regards to pricing challenges...

Pricing, yes, we can recap. And actually, we are today in the same trend as we discussed in end of April, which is a very clear focus for us this year on the pricing and price increases, obviously, in a way to pass through to our customers some of the inflation that we have on our costs. I remind you that we are very pleased to say that we had around 4% increase -- price increases in microbiology in Q1 and actually, of course, very much in line beyond Q1, even slightly above that, 4% to 5% in industrial applications. It's also an excellent, let's say, results and acceleration of price increases. As targeted, we are not in a position to look for the same in immunoassay. And BIOFIRE, we already are on pretty high prices, which represent the medical value of the BIOFIRE panels, with a slight price pressure, very low single digit on respiratory in the U.S. that we already mentioned. And that was, for us, let's say, anticipated. So overall, we are very laser focused, and we are pleased with the results so far this year, satisfactory with our team and in the market.

And the market conditions are tough, but honestly, at this stage, we don't have major surprises with regards to the market pressure or pricing pressure. It is very much in line with our expectations.

[Operator Instructions] We'll go ahead and take our next question from Maja Pataki with Kepler.

Congratulations on the change for both of you. My first question, Pierre, is if we look at the next [ 3 ] years, you highlighted the full product portfolio that you have. Can you prioritize which area would be most important for you to see a substantial growth impact? Would that be SPOTFIRE, REVEAL or getting the immunoassay back? So kind of how is the focus prioritized? And then second, you have reminded us on the tough conditions in immunoassay and the competitive environment. And probably one of the main concerns currently in the market for your company is the increase in competition in BIOFIRE. How do you think about competitors entering the space and launching additional panels? How do you think you can keep your leadership? And why don't you think you're going to see the same kind of impact that was seen in PCT.

Okay. So first question on the change in the priorities in terms of franchises, [ volatility ] clear to me. The first priority is very much SPOTFIRE. We see SPOTFIRE as, from my perspective, the biggest opportunity that we have, for two reasons: One is, as we said earlier, we're entering a new market. So it's an opportunity for expansion. And the second one is we genuinely believe we have a very differentiated solution in the market, very competitive, so that the focus for us will be to execute properly the launch of SPOTFIRE. So back to the question from [ Chris ] on potential changes, my first priority will be to make sure that we execute properly the strategy that was defined together with [indiscernible]. So SPOTFIRE is #1. The second priority I have, I'll make it a little bit broader. You mentioned VITEK REVEAL. For me, it's very much around the microbiology product range because VITEK REVEAL is, for instance, in the sepsis continuum, we can actually bring to the labs blood culture with [ virtual ] solutions. We can have fast identification with VITEK MS PRIME or BCID on BIOFIRE. We can bring fast antibiogram solution with VITEK REVEAL or confirmatory antibiogram solution with our VITEK solution. So the entire value of the product range, which, by the way, is -- its value is confirmed that the capacity to increase prices, I think, is going to be an important element for us in next few years. That would be the second one. And the last one, on immunoassay sales, as I said, for us, it's going to recover a little bit from the last few years of challenges and make sure that we have solid, continuous performance. But I don't expect at this stage, we are safe to be a strong growth driver at the level of the entire corporation. So that's the priority I would give. Second question -- I'm forgetting something. Second question, increasing competition. So you mentioned immunoassay. You also mentioned BIOFIRE. So I'm not sure if your question on the way we see increasing competition on [ both ] or just BIOFIRE.

Just BIOFIRE.

Just BIOFIRE. So I mean, yes, the competition is doing its job, right, and strengthening its portfolio. We are the only syndromic testing platform with 6 panels. We have still a very significant benefit over the competition. We are working actively to make sure that our clients actually have as many panels available and [ consumers ] on their platform as possible. That's one of the key performance indicators that we monitor at country level on a regular basis. So at this stage, we see an offering, even though the competition is improving, as still differentiated and competitive. The last panel that we launched, a joint [ infection ], is actually -- even though it's relatively modest market size, is actually performing very well. And with SPOTFIRE, we're actually bringing the syndromic testing technology to a level of performance that competition, as far as I know, has not been able to reach. So being capable to identify 15 targets in 17 minutes, I mean, good luck to the competition to achieve a similar kind of performance. So we genuinely believe we have -- we still have a significant competitive edge in the field of BIOFIRE and syndromic testing.

And it appears we have no further phone questions at this time.

Okay. Thanks, Ari. We have one question online from Simon [indiscernible] from [indiscernible]. So Pierre or Alexandre, if there is no M&A opportunity, can we think you could decide to go to the shareholder return?

Probably more for Alexandre, no? I don't want to push it on you, but...

Sorry, the question was what? I didn't hear it [indiscernible].

If I rephrase, if I may, if there is no acquisition or a significant M&A opportunity, would we increase shareholder return, which means the share buyback or dividend...

No, no, no. I think there will be opportunities to invest organically or externally. So here you go. Okay.

Okay. We're good. Thank you very much.

Thank you, Ari. Thank you, everybody.

Have a good day. Thank you.

Bye.

Bye-bye.

And with that, that does conclude today's call. Thank you for your participation. You may now disconnect.