DiaSorin S.p.A. (DIA) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the DiaSorin First Half 2023 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Carlo Rosa, CEO of DiaSorin. Please go ahead.

Thank you, operator. Good morning, good afternoon, and welcome to the DiaSorin H1 conference call. As usual, I'm going to go through some comments about the business, and then I will allow the CFO, Mr. Pedron, to go through the numbers. As usual, I'm going to comment on the numbers at constant exchange rates. So we had very good quarter. In the quarter, we had an acceleration of revenues compared to quarter 1. In fact, the quarter closed at plus 5% versus Q1 at plus 3%, as it is clearly excluding COVID. And I am going to now briefly comment the 3 legs for the way we look at the business in immunodiagnostics, molecular and the LTG. Let's start from the immunodiagnostics. The immunodiagnostic franchise, ex-COVID closed in H1 at plus 7%, with a very strong quarter 2, with growth over 8%. There has been a very strong performance for our CLIA franchise that, net of vitamin D in the first half, has grown over 13%. So if we look at the different geographies starting from Europe, Europe quarter 2 was plus 6%. Ex Vitamin D, CLIA was plus 11%. And fundamentally in Europe, what we continue to see is an increase in volume, most likely due to rebounding or testing after COVID. We saw this positive effect in Q1, and we continue to see this affecting quarter 2 in all the different European geographies. When it comes to North America, very strong results in H1, 13% up. If we exclude Vitamin D, it's 19% up in the quarter 2, specifically 15% over last year. And if we exclude Vitamin D, it's plus 20%. As you all know, in North America, the program has been mainly focused on the hospital segment. In 2022, we have an investor in doubling our sales force. We completed the hiring end of last year. So effective Q1, we now have a very complete sales force that is serving that the market segment of the hospitals. We have an ambition to close in the next 3 years over 250 hospitals, doubling our hospital presence in the U.S. And as we have discussed many times, we are very successful with combination of the 2 systems we have [indiscernible] and recently [indiscernible] and the products. Mainly, I would like to mention clearly the QuantiFERON together with our stool franchise. These products together also is driving interest of customers that typically in this segment have been selling our products. And with the viability of these products and the systems we provide, we can in-source and making clearly [indiscernible] profit center for the hospital. So it's working very well. When we look outside of Europe and North America and the rest of the world, I believe that the good news is that China, that has been a real drag in quarter 1, did actually stabilize in quarter 2. For the first time, we have seen modest growth in China, and this is certainly very positive. I think that we continue to be very cautious about near-term opportunities in China because of the current, very rapidly shifting policy toward China-made product that continue to become more and more popular in our customer base. Although it is certainly true that we have invested significantly in turning our commercial sales force, in the leadership and changing our distribution network in China, and I think we start to see the first positive effects. The other element which I believe is very important is that now that we are close to opening our manufacturing site is very clear to the customer direction that DiaSorin has taken to become China-based. And this, I believe, certainly helping the business. Again, I'm very cautious about the future, because, as we did comment a few times, Chinese entrepreneur are unpredictable in the short term. So let's see how it goes, but certainly a good news. The other geographies where we are direct, Brazil, Mexico and Australia, we are enjoying strong growth of the immunoassay franchise, clearly related mainly to our traditional infectious disease product line. The other thing that I think I feel very relevant to discuss is the fact that for the first time in the post-COVID, we've been launching new products. And specifically, in quarter 2, we launched 2 new products on the LIAISON XXL, the new antigen test and proADM immuno-diagnostic, a very interesting product that has been developed together with ThermoFisher, with a license coming from ThermoFisher. And so I think, finally, after the COVID, the 2 very difficult years of COVID has consumed our R&D resources in 2021, now starting from 2022, we started development. And you see new products that are hitting the market, taking us back to where we were prior to the COVID pandemic time. So this is, I think, great. The other thing I would like to mention is that specifically related to the U.S., we really start to see the effect of the critical mass that we were able to build as a consequence of the Luminex acquisition. As I think we have discussed strategically, once we enter the footprint in the U.S. and sees itself as a U.S. company when it comes to the future. And it's very clear that the Luminex acquisition gave us the brand visibility, the footprint and the resources, which are not very useful in launching all the new products that they will bring into the market. So it's an intangible or tangible value from acquisition, critical mass clearly is paying out. Last but not least, when it comes to MeMed, as we have discussed I think in the last conference call, we decided to increase our spending in marketing and providing commercial coverage for the launch of the product. We have hired the dedicated clinical reps that are needed to go and solicit demand with the clinicians. The dedicated new sales force now we've staffed have been trained, and starting from quarter 3, we started to hit the market together with other tools like the digital campaign in order to create demand for this very interesting product. Now if we move to molecular diagnostics, ex COVID, the franchise in the first half is relatively flat. It's a combination of low growth in respiratory. And we have a very good performance in the syndromic panel with VERIGENE I, which is partially offset by the few only test that we carry on the MES. I remind you that this is an effect over the last few seasons that was extremely strong in quarter 1 and therefore relatively weak -- sorry, relatively strong in quarter 4, and so relatively weak in quarter 1. In the non-respiratory, we have a decline of roughly 5%, but this is primarily due to the fact that, as we have discussed, we lost a contract with a very large lab for CF. And now in the second quarter, we start to feel almost the full loss of the revenues related to this product. Ex cystic fibrosis, the growth is low single digit. So considering the fact that our molecular business today when it comes to the syndromic, still relies on technologies which are very solid, but certainly they are showing sign of times, to put it that way. And this business is extremely resilient. And certainly, we are waiting for the place to invest from a stable business and go back to growth. When it comes to the flex, we have completed the case studies for the respiratory panel. And we expect filing in Q4 and approval by the next year, respiratory season. When it comes to the LIAISON NES, same thing, proof of study started in Australia, because now as you know the flu season will continue in the U.S., and we expect filing in the U.S. of the ADC, so the full COVID product, at the end of the coming reparatory season. Now last but not least is our licensed technology business. And I think we all need to remind ourselves the fact that quarter 1 was very weak. And we did comment last time that Q1 was weak because we had a backhaul -- significant backhaul still of the instruments due to the supply chain issues that we still encounter until the end of last year. Well, quarter 2 is completely different. As you have seen, we have a double-digit growth of 10%. But this is probably maybe due to the fact that we were able to close our gap, and now we have availability of spare parts, we were able to make systems and we ship all the estimates that were in back order. I believe that, as you have seen from other competitors when it comes to the life science business, we see initial signs of slowdown. Therefore, a little caution that the double-digit growth in quarter 2 should not be intended to be what we believe this business can continue to perform in Q3 and Q4. And we need to understand -- I'll remind everybody that is a B2B business. So we actually sell -- a relatively small portion of these revenues come from direct sales to customer. Most of the revenues in this business come from B2B, with some of the largest life science companies in the U.S. We are waiting to see the way that they're going to be forecast in Q3, Q4 then to provide an expectation to what we believe is going to be year-end and beginning of next year. So just be cautious. Don't take plus 10% of the quarter 2 as a true running rate. A couple of comments. Very good news. We actually received from the FDA on the closing of the warning letter. This was a significant effort by the company and a couple of years of solid work by our quality assurance team and regulatory brought us to -- again, brought the FDA to close the warning letter. So we are going back to the regular business where we made significant investments in the quality system of Luminex, we assembled the DiaSorin quality system. And therefore, we are confident that, moving forward, we are going to be able to work in an FDA environment also at Luminex according to the most recent standards. Last but not least, when it comes to the synergy and integration plan that report that we are on time, and we expect by 2023 running rate between EUR 50 million and EUR 55 million in cost synergies as provided in our long-term plan. At this point, I'm going to turn the microphone to Mr. Pedron and then I'll take questions after him. Please go ahead.

Thank you, Carlo. Good morning, good afternoon, everybody. In the next few minutes, I'm going to walk you through the financial performance of DiaSorin during the first half of 2023. And I will make some remarks on the contribution of the second quarter. Let me please remind you all that consistently with what we did over the last earning calls, to better understand the performance of the business, I will refer to adjusted P&L items. Therefore, stabilizing the impact of the Luminex deal-related elements. As we did over the last few quarters, I would like to start with what I believe are the main highlights of the period. H1 '23 total revenues at constant exchange rate decreased by 16%, whereas the reduction at constant perimeter of consolidation, which means without the contribution of the Flow Cytometry business that we carved out in February 2023, has been 14%. This result, which is in line with the full year guidance, is a combination of the expected foreign COVID sales to carve out of the flow business, partially offset by growth in the ex COVID business of around 4%. To be more precise, ex COVID revenues at constant exchange rate and perimeter of consolidation without the contribution of the molecular respiratory business grew by 4.2%. The contribution of a very good performance of the immuno franchise, plus 7% in Q2, which show an acceleration compared to what we achieved in Q1. Moving from the 6% of the first quarter to 8% of the second. A recovery of the IPG business, which closed Q2 '23 with an increase of 10%, therefore ending the half year with a growth of 2% compared to 2022. And lastly, a slightly negative performance of the molecular franchise net of the respiratory business, driven by the budgeted loss of the cystic fibrosis business that Carlo just mentioned. Lastly, the molecular business -- respiratory business recorded in the first 6 months of the year a performance substantially in line with 2022, plus 2% to be precise. As a combination of an increase in the VERIGENE I respiratory panel, which offset a decrease in the Flu and flu-only molecular testing for the reasons that Carlos just commented. H1 '23 adjusted EBITDA at EUR 190 million or 33% of revenues is substantially in line with the full year guidance. The decrease compared to last year, EUR 79 million, 29%, is mostly driven to the drop in COVID sales, and therefore, to the corresponding worsening of operating leverage. Lastly, we generated EUR 104 million of free cash flow in the first 6 months of 2023, down EUR 34 million compared to last year. The variance. Once again, is mainly driven by the foreign COVID sales, whereas the nonrecurring saving events, which I talked about during Q1 '23 earning calls, have mostly been offset by the expected strong performance of Q2 '23, which grows with a free cash flow generation of EUR 76 million. Now before moving to the P&L, let me provide you an update on the so-called payback system for medical devices in Italy. As you might remember from the previous earnings calls, this measure originally introduced in 2015 by the Italian government and never implemented since then, has been eventually reactivated in September 2022. With the goal of rationalizing public medical devices spending, this scheme requires companies to pay back any sum exceeding the budget allocated by the central government to the Italian regions. Specifically, the law obliges vendors to return to the regions about 50% of the turnover exceeding the medical devices set fixed for the period 2015-2018. Please note that even if September 2022 law decree covers only 4 years, as I said, 2015 to 2018, the payback could be potentially extended in the future to the subsequent years. What is that tenant? So practically, all the operators, including DiaSorin, have filed legal appeals to the competent court to challenge the decree covering the years 2015-2018. In particular, the administrative regional court in Rome has been charged with more than 1,800 courses to suspend and tp null the payback regulations. The payment due date originally set for January 2023, after being postponed a few times, was set for the end of July. And based on the most recent news, might be postponed even further until the end of October. Moving from this very complex situation, a reach of legal controversies, the government recently issued a law introducing the faculty for each company to settle disputes relating to the period 2015, 2018, by paying 48% of the total amounts requested by the region and by renouncing any pending litigation. We are assessing the possibility to adhere to this settlement, but no final decision has been taken yet. Please note that before September 2022, reactivation of the payback mechanism, DiaSorin has already built in its balance sheet a provision based on information available back then and it's relative risk assessment. And therefore, the potential settlement that I just discussed about would be covered with the provision booked in the past and would not, would not, have any impact to the P&L of this year. Now pending more clarity on the legal front for the years following 2019 and the amount already booked for in our balance sheet in the past, we have not changed our provision for the period 2019-2022, and we have not accrued anything for 2023. We will keep on monitoring the evolution of this very complex and daily changing situation and update you during the next quarter call. Moving now to the P&L. H1 '23 total revenues at EUR 576 million, as we said, decreased by 16% or EUR 109 million compared to last year. This variance, completely due to lower COVID sales, which in the first half are down by EUR 15 million or 77% compared to last year, and the disposal of the Flow Cytometry business. I think it is worth noticing that the second quarter recorded some EUR 6 million FX headwind mainly driven by the U.S. dollar depreciation compared to the euro. Considering the current exchange rates and what we had in H2 2022, I believe it is fair to expect this negative FX impact to continue in the second part of the year. First half adjusted gross profit at EUR 379 million decreased by 16% compared to last year, with a ratio of the revenues of 66%, in line with the same period of 2022. The carve-out of the Flow Cytometry business alongside all the initiatives aimed at improving operations, processes and containing costs, some of which is part of our broader cost synergy plan, allowed us to preserve margins and despite the reduction in COVID revenues and the tail of the inflationary pressure we talked about 2022. I believe this to be a remarkable indicator of the relentless efforts that we put in place to safeguard profitability, which has been confirmed by Q2 '23, which closed with a gross margin ratio over revenues of 65%. H1 '23 adjusted operating expenses at EUR 230 million grew by 2% compared to last year, with a ratio over revenues of 40% vis-a-vis 33% of 2022. The worsening of the operating leverage ratio is entirely due to the reduction in COVID sales. Moving to Q2 '23, adjusted OpEx decreased compared to last year by 1% or EUR 1 million, with a ratio over revenues of 40%, vis-a-vis 36% of last year. This OpEx reduction is the result of all the initiatives we implemented to control costs, the impact of the cost synergy plan that also Carlo just mentioned and the disposal obviously of the Flow Cytometry business. Adjusted other operating expenses at negative EUR 4 million are substantially in line in absolute value with 2022. As a result of what we just described, H1 '23 adjusted EBIT at EUR 144 million or 25% of revenues, decreased compared to 2022 by 35%. Adjusted interest income at positive EUR 2 million is better than last year by EUR 6 million, mainly because of improved sales on our cash investment. Whereas the adjusted tax rate at 23% is in line with 2022. Year-to-date adjusted net result at EUR 113 million or 20% to revenues is lower than previous year by 33%. Let me now move to the net debt position. At the end of June, the net debt was negative for EUR 861 million, vis-a-vis negative EUR 907 million at the end of 2022. This improvement has been mostly driven by the operating cash generated in the first 6 months of the year, partially offset by the payment of just short of EUR 60 million dividend to our shareholders in May 2023, and EUR 23 million of treasury shares set by the court. Lastly, we confirm 2023 guidance, as usual, expressed at the previous year exchange rate. Let me finally please remind you that we have built in our assumption an average respiratory season, and the 2023 guidance, as I just said, does not include any possible impact from the payback mechanism in Italy. Since the situation is in flux and the most recent news, which has personally been positive and pointing in the right direction, has made it even more difficult to make a reliable prediction on what is going to happen. Now let me please turn the line to the operator to open the Q&A session. Thank you.

[Operator Instructions] The first question is from Shubhangi Gupta from HSBC.

So are you seeing any impact from biotech funding cuts? Can you me shed some light on that? Secondly, is it possible to give a margin according to the business, like how this molecular diagnostic margins compare to immunodiagnostics and license technologies? And third on Luminex, are you seeing any registered transposition in adopting the test? And what is the workflow for that?

P.G., do you want to take the margin question first?

I will. Sure. So we don't disclose the exact number, not the different margins between business franchises that we have, so immunodiagnostic, molecular diagnostic and LTG. But ballpark number, you should consider that immunodiagnostic and LTG have a higher margin compared to molecular diagnostics, and this is kind of a standard in the industry. So you can, let me say again, broadly consider a difference between those 2 franchises, immuno and LTG, very similar margins, compared to Molecular, which are slightly lower. But we don't disclose the exact margins by product line.

You referred to MeMed and the biotech, I think that it should be clear to you that we don't sell to the end user customer, we sell again to the very large biotech company that serve that market. I see that if you listen to what Thermo has been saying yesterday, reporting yesterday, I believe it is going to be part of the story. I see there is a slowdown in some of the segments. We don't see it yet, but we may see it in the following 2 quarters. And this is why we are cautious about projecting double-digit growth of our LTG franchise. Another effect that we have seen is destocking. This is certainly true because some of the partners, which traditionally been relying on 6 to 9 months of inventory, are reducing inventory. And this has to do with clearly an increased cost of capital and need to manage the working capital, right? Also then, I believe the LTG will continue to be a solid business. I believe that sooner than better all the funding that has been made available in the U.S. and in Europe through the new initiatives will support growth, especially in the academic environment. Again, I'm just cautious about Q3 and possible Q4. When it comes to MeMed, I think it's a little early. Meaning that so far, we have seen that there is a significant enthusiasm by the clinicians because the data that MeMed has been supplying and been used for the registration of the port also with the FDA, did meet our extended commitment. And the value of the assaying rolling out, the bacterial infections, I think is -- so far, all the clinical studies done also by local hospitals to demonstrate the value is there. I believe next step, especially in the U.S., is to find the budget. Because today, as you know, this test is not reimbursed by the payers, and therefore it will be part DRG funds that each hospital get for the emerging visits. So I believe the due result, but what I've seen, and again, is an initial effort is that physicians clearly see the value, okay? Now if the administration, there's 2 things that have to happen. The administration will have to accept the investment, and there are some reasons to do so because there is a significant saving in the fact that if antibiotic treatment and also hospitalization of patients. And clearly now MeMed and DiaSorin are working heavily with payers in order to compute a [ clinker ] study that -- reason going to provide evidence then for the payer to provide a dedicated reimbursement for the assay. That event, I think, if met, would unlock the full potential of this product.

The next question is from Maja Pataki from Kepler Cheuvreux.

Carlo, just to start maybe with your last comment around MeMed. As you said, you believe that getting the getting the reimbursement would unlock significant potential. Do you have any feeling for a potential time line? Are we looking at 6 months? Or is it 12 months from now when you expect to have the reimbursement that could start to drive the growth there? So that's first question. My second question is if you look at the full year guidance on the margin side, you guided for an adjusted EBITDA margin of around 34%, and we were around 33% in the first half of the year. Is it the synergies that start to come through more that are going to drive the margin profile in the second half of the year? Or is there anything from a revenue mix that is going to start to drive margins up? And then lastly, on the Italian payback system, and I'm fully aware of that there are a lot of unknowns there, but did you actually recommended to authorities the proposal that you could pay for the 8% of the current request, financial requests? Would you -- and therefore, you would have to find that you step back from all claims. But would that also mean that you would, in the future, not be able to appeal against it? Or would that basically mean like every time something is introduced, it's a fair new game and you could do whatever happens?

Listen, Maja, one thing -- I'll comment on the payback and let's see if that will be enough. This payback story is a typical Italian soap opera because it goes way back, if I may. And being Italian, I cannot be accused of being chauvinistic. But it's very confusing. And I think it's an attempt to get resources when needed by the health care system, but it's the wrong way to do it. The 48% seem very palatable because it was until a few hours ago, because it was a way to seal the deal, pay for 8% and forget about it, right? But it would be without a course. So we will not be able to then go back and claim -- claw your mind back. I see what would really change the situation has been the ruling of this part of last year, which pretty much said without saying that there are doubts about the fact that this is even possible under the constitution. And I believe that prior to a few hours ago, I think the world was split into some of the large companies that were inclined to pay and carry on the small companies that would have [indiscernible] strong financial impact, not available to pay or to deliver the [indiscernible]. This ruling then seem to move pretty much everybody toward the wait and see, okay? And this is what most likely we are going to do ourselves. But as said, it's an Italian soap oepra. You have seen this many times. I believe that in the future, if well conceived, this is something that can be set in place and we will have to understand how to deal with it. To go back and claw back from the past, I think is unfair, but very confusing, okay? So I'm relatively positive about the payback, but stay tuned because we need to understand how they're going to organize it moving forward. Second thing on MeMed, on the reimbursement with [indiscernible]. You know and I know that in the U.S. to the contrary of the European model, it's the system is profit driven, okay? And I'm not saying it's only profit driven, but certainly, coverage or reimbursement does help in a situation where most of the hospitals, maybe not going back to the pre-COVID situation, which means they're losing money. So we will agree to spend a significant amount of money to make a study intended to provide all the evidence to the payers. And the study started and is going to take, I believe, without being too optimistic or pessimistic, around 12 months to be completed, then we have the filings. So I would say that no less than 18 months before you get a ruling from some of the main players, okay? So for the next foreseeable future, we will need to live with the clinical value and the fact that the hospital receives the reimbursement as they see value in bringing the test in. Clearly, what I've seen my -- and is counterintuitive, right? When you go to the very large institutions where you do have a very strong clinical group, the adoption rate is not as fast as you would think because in the very large clinical institutions, they want to generate their own data, right? So yes, the administration is weaker, but by the same token, all these clinicians, they want to do their own studies and takes time. They also have plenty of technology for standard of care, okay? So it's not that they are lacking tools. They have all the tools that are more expensive, and they would see this clearly as a way to simplify their life. If you go in the periphery, if you go in smaller institutions where they do not have the technology and they're not so sophisticated, this -- the adoption rate is actually way faster, okay? So today, we are forced to go to some of the institutions to create scientific interest, but the real market is actually in the territory. And again, driven by the fact that they need some cheap tools to serve these disputes. So I hope that has been specific enough, but more [indiscernible] to get the money, to get reimbursement.

Maja, this is P.G. speaking. I will take the one on margin, I guess, unless Carlo you want to cover it.

No. Please go ahead.

So we closed the half with 33% adjusted EBITDA margin, and Q2 with a 32% adjusted EBITDA margin. In the quarter, though, in the first part of the year, the motor side, we had some extraordinary legal costs related to the whole legal issue we had with the Italian market authority that we discussed in the past. We believe we are done there at the light of the most recent news, basically done. And that is going to be, let me say, a tailwind in the second part of the year. And then obviously, we have a few other elements that we need to consider, starting on assumption the [indiscernible] board, obviously. But at the same time, the immunoassay franchise is going pretty, very well. And we are seeing, as we commented, a very nice growth in the U.S., where we are enjoying higher margins in a sense. True, there are some uncertainty in China, as Carlo commented, but we might see some hopefully good news there as well. There are some assumptions on the flu season. We said that in our guidance, we have a regulatory season assumption, but that is going to be another factor which we are building into our projection for H2. And eventually, last but not least, there are also some -- as Carlo commented, some assumptions were, from the licensed technology business, where we are seeing some indication which are carrying us that potentially H2 is not going to growth or likely, I would say, at the same speed we saw in Q2. So many moving elements, but when we consider them all, I believe that shooting for a 34% EBITDA margin for the year is still what we have in our line of sight.

Just a quick question. Could you provide us with the Q2 growth on a like-for-like basis ex COVID if you were to adjust it for the contract that you lost in cystic fibrosis?

I'm not sure we can disclose the contract that we have, the amount of [indiscernible]. I don't think I can give more.

The next question is from Aisyah Noor from Morgan Stanley.

Firstly, on China. There's been some very mixed feedback from your competitors this week around the trajectory of growth and [indiscernible] in the quarter. Can you talk a bit more about what you're seeing and why you're seeing some moderate growth already in Q2? Is it because you are exposed to kind of specific pockets of growth? Or do you think you're gaining market share? And how do you also compare what your expectation about pricing potential pricing declines in China on the BP development? That will be helpful. The second question is on MeMed, I mean, this is probably is in response to the next quarter bit that you shared at the ACC this week. I believe you mentioned before about targeting 100 hospitals in the first wave of the program. Just curious to see how far along you are and how many hospitals have you covered versus the 100 target? And do you have scope to increase that once you start seeing more positive readouts from the hospitals in the coming months? And then the third one, I guess, is a more broader question about your midterm guidance and whether you have any new thoughts about when you'd like to revisit that or perhaps you can take that with the investors in the capital markets in the coming 6 months.

Okay. I will take the China. And when I leave P.G. with the guidance. Look, as said, China is extremely volatile. So it looks like that, as far as we are concerned and in the immunoassay segment, we saw volumes in the provinces where we operate to bounce back. And that clearly did help in the quarter 2. It looks like, from our own projections that we may have moderate, very moderate or no growth in Q3 and Q4, but without really seeing the level of loss risk that we have seen before. And this is again because of the COVID volume, pre-COVID volume coming back. Everything else that everybody is discussing is still -- so you have pricing going down 30% in regional tenders, more Chinese preference towards Chinese products, and blah, blah, blah. When saying good quarter 2, and Q3 and Q4 there are not going to be a drag when it comes to next year. I think need to close -- closely and then we're going to see that happen. In parallel, though, I am comfortable because I think we've turned the corner and when it comes to the manufacturing side and perception of the [indiscernible] Chinese. And that, as you know, doesn't really happen because we are starting to make first validation lots in our manufacturing site in Shanghai. So that's very good. When it comes to MeMed, I think, as you have -- I believe you have discussed yesterday at the ACC, the -- you have seen -- well, you've been at the event and you've seen the clinical data are pretty impressive that were presenting yesterday. And our -- clearly, our -- the people that we hired are going to go and target customers, hospitals in different regions where we have an existing system because we do want to -- we want to accelerate revenues and we don't want to actually have placement of new system dedicated. Volumes of these tests are relatively low. We are talking about between 2 to 7 tests per day. So from a volume perspective, it's nothing. But clearly, with the pricing effect, then it became a significant business. But as I think we may have discussed yesterday, we go to the installed base primarily on the East Coast and some very selected areas in California. P.G.?

Yes. The question on the midterm guidance. I believe that, as we previously discussed, we will be hosting an event where we will be updating the financial guidance, the midterm financial guidance. As I said that all the strategic projects and trajectories that we discussed about at the end of 2021 all are valid. In part, considering the latest events, the filing of the [indiscernible] of the net with take-up rate of MeMed, what's going to happen in China, the payback, all of those elements for which is kind of more challenging making a projection. I believe that by year-end, some of those data points, some of those elements will be clearer. And that will allow us to review, refresh the financial midterm guidance. Once again, as I said, that all the strategic projects and trajectories are exactly the ones that we discussed about the end of 2021 during our Capital Market Day.

The next question is from Hugo Solvet from BNP Paribas.

I have a couple of follow-ups. First on latent TB testing. We have had some discussions about large European diagnostic players potentially entering the TB testing market sometimes next year. Can you confirm that? And what's your volume price/mix expectation within the long-term guide? Second on molecular diagnostics, I think you were about to complete some of the respiratory studies around now to file in Q3 or Q4 2023. Can you confirm the time line here? And any update on the [indiscernible] panel?

I will not certainly comment about what other players are going to be doing with the LTB. It's a large market. We expect people to look at this market. [indiscernible], as you know, already did it and they already the product. So it's not a simple product to make. Also Kaizen developed the CD4, CD8, the 2 subs, which is certainly differentiating. QIAGEN has been in this market for 15 years, with gazillion publications supporting the product. It doesn't say that somebody will show up and try to make a run at this market. But I am not -- I have no information was well except for a ton of gossips, and realistic type of gossips about who is coming to the market. So said that, wait and see. And when the very famous large player is going to show up, let's see what they have. When it comes to molecular diagnostic, you may miss -- what I said before. Yes, we completed the flex respiratory clinical, and yes, we will resume it in Q4. GI, I'm not available as we speak to give any update on GI, of blood. Understandably, we believe that blood is going to be actually the panel that we saw [indiscernible] realizing that with a very good one in the U.S. We have almost 30% market share in this segment. So it's a segment we certainly know well. Anything else?

The next question is from Louise Gustavo from Stifel.

I have a couple of follow-ups, if I may. Two on financial first, I was looking at your adjusted EBITDA margin, you mentioned [ 33% ] in Q2. Could you run us through kind of a bridge what do you think are the triggers to go up to 35% in order to -- over Q3 and Q4 in order to achieve 33% 34%, sorry, about the full year? The second one is about your payback issue. I was wondering you mentioned that the provisions were in line with what you could have to pay for the 2015, 2018 period. Could you give us a number there and maybe an estimation for 2023? I'll stop there, and maybe I'll come back to my other question later.

This is P.G. speaking. So I'm not going to provide you a specific bridge from Q2 to -- which closed at 32% EBITDA margin, as you said. To get to the 34% guidance, I believe a few minutes ago, I tried to explain, I think it was to Maja, why I believe 34% for the full year is still, in our mind, of side, and therefore, we are confirming our guidance. So I just refer to you to what I just said to Maja, because that's the reason why we see 34%. In terms of payback, we have a provision in our growth which we did in line with the maximum -- and the risk we might have coming from the payback. But please bear in mind that the law is covering the period 2015-2018, right, and that is the period for which we are kind of assessing the possibility. That element, if we decided to do so, is going to be just short of EUR 10 million, which once again has been fully provided for in our balance sheet. The law is completely silent for periods after the 2015 to 2018 time frame. The thing is that even if we decided to settle and [indiscernible], as Carlo was saying, even if we decided to settle we would still have the possibility -- that would not prevent the possibility to fight back, to challenge legally any potential additional claim from the government for the period after 2018. The decision we will take once again for the period of '15, '18 is not going to impact, in any shape or form, what we might want to do for the period after 2018. I said that the situation is really in a [indiscernible]. It's changing literally every day. And unfortunately, I do agree with Carlo, this is an Italian soap opera or saga. But let's see and see what's going to happen.

My other question was about the strategic programs you mentioned earlier in this call. Do you maybe pass some more information to us on what they are doing to reach private insurance reinvestment, the impending of the DRG that you talked about, you said maybe in a year. Do you have some data points we may have missed on this one?