DiaSorin S.p.A. ($DIA)

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the DiaSorin First Quarter 2026 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, sir.

Thank you, operator. Ladies and gentlemen, good afternoon, and welcome to the Q1 conference call. As usual, I will give some color to the financial results. And then I will let our CFO, Alberto Donati, to take you through the numbers. I'm going to make my comments at constant exchange rate. In quarter 1, 2026, as anticipated during our full year results call. Quarter registered a slightly negative performance, minus 3% and mainly as a result of the following factors. First one, as reported by all our competitors, the softness of the flu season with declining volume by roughly 25%. And this clearly has affected the performance of our molecular diagnostic platforms since good chunk of business today, especially multiplexing, is related to products in the respiratory area. As far as LTG, if we did comment before a tough comparison with the same period of last year last year. But in this case, we expect that by -- in the second half of the year, the trend will revert. And then last but not least, the QuantiFERON TB performance that in the U.S. has been driven by the reduction of immigration-related testing, which specifically for us, resulted into a one-off event of destocking of some of the large commercial labs in the U.S. that were typically this testing happens. Now -- I will now deep dive into the three business lines. The immuno grew 1%. And compared to last year, molecular diagnostic declined 12% and LTG declined 7%. So now let's go one by one. When it comes to immuno, as I said, it grew 1% over last year. If we exclude China, the growth was 2%. North America was growing 1% and the rest of the world, including Europe, 2%. China decline continues to decline 22% as the effect of VBP broadens and now also is hitting the performance of the company in Shanghai and Beijing that until last quarter were not actually affected by VBP. When it comes to QuantiFERON. The performance of QuantiFERON globally was weaker than the previous quarters. The QuantiFERON franchise grew globally 6%. And this is due to our one-off destocking events of the QuantiFERON product in some large commercial labs, and this has been driven by a decline in demand for TB testing, which is required for immigration for the visa issuance. We expect this to recover already starting from quarter 2 because I said, this is related to the fact that some of the large labs have canceled orders in Q1 because they're -- to bring their inventory level back to where it's needed. We continue to see stable double-digit growth in U.S. and in Europe outside the commercial labs. And this has been driven by the launch of the new high throughput version of the LIAISON QuantiFERON TB Gold Plus 2 test, which has been recently FDA cleared. As QIAGEN reported, we see no changes in pricing or competition. So QuantiFERON continues to grow double digit in hospital market continues to grow double digit in Europe. And we saw, again, this slowdown in the commercial lab in the U.S. Net of this impact -- sorry, let me just add a couple of things. We also experienced in January and February, but with a recovery in March of general softness of U.S. testing volume as reported by some of the commercial labs due to the severe weather conditions in the U.S. asset, which affected some testing volumes at the states, and we saw a recovery of this started from March and in April. The third element when it comes to immunodiagnostic is that we continue to see the normalization of testing volume in Europe as we have been anticipated in previous calls. Net of these impacts of immuno base business continues to grow steadily and perform strongly as discussed before the U.S. hospital strategy continues to be on track, and we are now approaching close to 550 hospitals by [ ED ] and by year-end, we should get to the mark of the 600 hospitals, which actually was part of the -- our '23-'27 plan, and we are 1 year ahead of expectations of this strategy, again, is working very well. And the second element of this is that our specialty testing which clearly goes into this installed base of systems in hospitals in the U.S. continues to grow. And there's a strong momentum in areas like gastroenterology and other -- and some of the infectious disease specialty areas. If we look outside U.S. and Europe, as said before, the only geography where we are experiencing a slowdown, if China continues to decline, again, in the quarter, 22%. And what we saw is that on top of that is hit in the industry. Now we see that some of the provinces and cities that supposingly we're not supposed to be hit by VBP now as a combination of price policies driven by competition and/or the fact that hospitals do apply the VBP policy anyway. We see that the price erosion continues to be very strong in China again. This, I believe, has been reported by everybody that operates in this sector. When it comes to our direct business, ex U.S. and ex China. So we are talking about Australia, India, Mexico and Brazil, we continue to see mid- to high single-digit growth. These markets continue to perform very well for the company. Last but not least, our export business is displaying a result in line with the expectation with clearly the exception of the Middle East region that has been impacted by the current war, and we estimated that the effect in the quarter is close to EUR 1 million. Now let's move to the molecular diagnostic the molecular diagnostic total franchise declined 12%. And as said before, this is fundamentally driven by the very weak respiratory season. As we have discussed previously, I will comment the different segments and different platforms. The LIAISON MDX franchise, and then I will talk about our multiplexing franchise and make a few comments about the LIAISON NES. So let's talk about LIAISON MDX franchise, which annually represents roughly EUR 100 million of revenues. The franchise declined 7%, but as we have discussed, there are different trends in this product line, we have the respiratory, which is declining 40%. Again, it's all volume-driven. We have the targeted specialty, which is growing 41%, and this has to do with the fact that we continue to benefit on the uniqueness of our product offering. Today, the targeted specialty represents roughly EUR 45 million. So it's almost half of this franchise. And then we have the ASR. ASR is for us a relevant business. They represent 40% of this basket. It's -- these are reagents that we provide to hospitals and commercial labs to develop their team. It is highly affected by ordering patterns and -- because clearly, hospitals do buy the gadgets in bulk. And in Q1, we -- the business declined 10% versus last year, but we expect that this will normalize and get annualized to small growth, starting from Q2 this year. Then let's move to molecular multiplexing franchise, which is approximately, again, EUR 100 million, [ no less ] revenues in Q1 is flat, not with -- and it is flat, notwithstanding the fact that there is good portion of this business, which is respiratory, which clearly is very negative, but it's counterbalanced by the fact that we are growing the flex customer base. And so we have additional business and additional respiratory business, although it's again, from a volume perspective is not where it's supposed to be due to the weak season. And then we have launched the blood and the new panels, which clearly are not seasonal, and they contribute to the net growth. So if we look at the performance of this segment, which, again, strategic is flex-based is flat. But it is on the matter, there is a strong growth, which is compensating the decline of the respiratory component of this business. When it comes to customer split, which is an information, I believe, we have been starting to provide to the market by now, 90% of the customer type are hospitals, and 10% are commercial labs. Clearly, we expect this to shift even more towards hospitals, which is the fundamental market for this technology. When it comes to the contribution, though, to the total revenues, 30% of the contribution comes from commercial labs and 70% comes from hospital labs, and this has to do with the fact that as we have presales, we have signed up now installed our LIAISON PLEX in some of the major large commercial labs in the U.S. We expect the GI panel clearance within days. So I hope that we will be able to provide some good updates, good news during our analyst day, which is going to happen on the 20th. Now I am going to give some qualitative comments about the LIAISON NES because has been just launched. On April 1st, we have both distributors, Thermo Fisher and McKesson now operating in the U.S. with the LIAISON NES. Because of the wait this business works, there is in the next few months, we expect to install systems. And then the system is clearly going to generate regional revenues during the flu season, so starting from late Q3 and beginning of Q4 we're going to give way more color during the meeting on the 20th, but I am happy to report that the launch has been, so far, very successful. Now last remark on LTG. As you know, this -- the LTG business for DiaSorin is a B2B business. It's always related to bulk orders that are coming from our diagnostic clients as well as the life science clients because of the way of the order impact in 2025 versus 2026. We expect that H1 is going to be lighter than last year, and we expect H2 to show strong growth compared to last year. And overall, we confirm our expectation that LTG will deliver low to mid-single-digit growth in 2026. And one element that I would like to comment on is that we see an improvement of the life science sector. I think as reported by some of our clients in their comments of Q1, whereas the diagnostic business is has always been traditionally very strong and clearly more predictable. I'll now comment on the Investor Day. So everybody is invited to attend to our Investor Day, which is going to happen on May 20th. We're going to host our Capital Market Day at our innovation in Milan, where we're going to unveil our 2027-2030 strategic plan. This event clearly will offer a unique opportunity to experience our innovation percent, including live demonstration of all our platforms, which will be led by either R&D or our marketing team. And then the session will then continue with a comprehensive presentation of the new plan, and I warmly invite everybody to join us either in person or connected through the web. Now I'm turning the microphone to Alberto, who is going to take you through the numbers. Thank you, Alberto.

Thank you, Carlo. Good morning and good afternoon, everybody, and thank you again for joining the DiaSorin Q1 2026 earnings call and also for the continuous interest that you're all showing in our company. In the next few minutes, I'm going to walk you through the financial performance of the first quarter of the year. And then I will turn the line to the operator for the usual Q&A session. As we navigate through these results, you'll see that while we faced some expected headwinds this quarter, we also remain confident that we're going to be achieving our full year guidance. So let me start from the revenues. Q1 2026 total revenues came in at EUR 287 million, which is down 3% at constant exchange rates compared to Q1 2025, which is in line with the trend guidance we shared in the previous conference call and as Carlo just outlined. At current exchange rates, current exchange rate revenue declined 8%, reflecting a significant ForEx headwind of around EUR 17 million. As a reminder, Q1 2025 benefited from an extraordinarily strong U.S. dollar with an average of around 1.05 compared to an approximately 1.1-7, 1.17, in Q1 2026, which a difference of more than EUR 0.10. So overall, Q1 2026 was particularly impacted by the exchange rates, even -- so given a very tough year-on-year comparison. Moving to profitability. Q1 2026 adjusted gross profit came in at EUR 186 million, down 5% at constant exchange rates compared to Q1 2025. At current exchange rates, the decline was 9% with a headwind of EUR 10 million due to the ForEx -- to the exchange rate. The adjusted gross margin remained, however, quite stable at around 65% at both constant and current exchange rates, slightly down from the 66% of 2025, and this is primarily due to the negative impact of the tariffs in Q1 2026, which as you all know, were not yet present in Q1 2025. And this is also despite the unfavorable leverage of fixed cost, which is also demonstrating the continuous capability of the company to deliver a diligent and rigorous cost management measures in order to maintain profitability. The Q1 2026 adjusted operating expenses were EUR 119 million that are substantially flat compared to 2025 with a ratio of revenues of 41% vis-a-vis 39% last year. This increase at constant exchange rate is around 4% and as a result of a normal increase of expenses and most notably, the commercial investments for the launch of the LIAISON NES platform, which were which we commented during the last call and accounts for north of $10 million for the full year. Q1 2026 adjusted EBIT came at EUR 67 million, which is down 17% at constant exchange rate, while the current exchange rate, the decline was 20% because of a ForEx headwind of EUR 3 million. The margin -- the EBIT margin was 24% at current exchange rates and 23% at constant exchange rates. The adjusted interest expenses at EUR 2 million are compared to an income of EUR 1 million in 2025. And this is a difference loan because of the lower yield on our cash balance, which is coming from not only the reduction of the interest rates, but most importantly to the lower cash balance due to the share buyback. Year-to-date adjusted net result came in at EUR 49 million, which is 17% of revenues and decreased by EUR 16 million or 25% compared to the previous year. Now let me move to the EBITDA Q1 2026. Adjusted EBITDA totaled EUR 90 million, which is around 31% at both constant and current exchange rates. And this decrease compared to last year reflects some of the headwinds that were previously mentioned in the VBP tariffs as well as decision of investment investing for the success of the next commercial launch, but most importantly and significantly, the unfavorable operating leverage due to the lower revenues in the quarter. Turning to the balance sheet and the cash flow performance. We delivered a solid result despite the challenging revenue and macro environment. Our net financial position showed net debt of EUR 711 million at the end of Q1 compared to EUR 580 million at the end of 2025. This variance of EUR 131 million that primarily reflects on one side, the good operating cash generation, the free cash flow came in for Q1 at EUR 32 million. But on the other hand, this was more than offset by EUR 154 million for the cash outflow to support our share buyback program that is, as you know, aimed at the shareholder remuneration. And as a reminder, we think the authorization approved by the shareholder meeting on January 27, and the Board of Directors approved the launch of a share buyback program for shareholder remuneration for a total cash outflow not exceeding EUR 250 million. As of today, the company purchased over 3 million shares, completing roughly slightly above 80% of the total program. Now in light of the Q1 results, we are confirming our full year 2026 guidance at constant exchange rates for 2025. We continue to expect revenues to grow between approximately 5% and 6% with adjusted EBITDA margin in the range of 32% to 33%. Please note that as we mentioned already last -- during the last call, this guidance does not account for further potential negative impacts from the prolonged military conflict in the Middle East, which could further impact the group. Specifically, it excludes the possibly indirect effect of extended logistical and distribution difficulties. And most importantly, the potential future inflationary effect on material cost on one side and supply chain on the other, which were not significant in Q1. Now before turning to the operator, allow me a quick update on tariffs. Because as you all know, the U.S. government adopted an exceptional tariff framework in 2025, while in 2026 -- in early 2026, the legal landscape shifted significantly. On one side, the U.S. court ruled termination of the APA duties and also a nationwide order for customs to refund eligible amounts while at the same time, the administration introduced also, you all know, a temporary 10% global tariffs under the section 1 to 2. As a result, DiaSorin initiated a refund actions through the newly established mechanism. So we are now closely monitoring the situation, and we expect to have updates from customs within the next 90 days at the latest. I will now hand it over to the operator for the Q&A session.

[Operator Instructions] The first question comes from Aisyah with Morgan Stanley.

My first one is on QuantiFERON, which you mentioned on the call was growing 6% globally. So my understanding is QIAGEN last week reported a 5% decline in their QuantiFERON franchise. So what is explaining this difference. And could you quantify the impact of the destocking effect for QuantiFERON in the quarter for you? My second question is on the Diagnostics market outlook. So we heard from [ Bia Maria ] a few weeks ago that the instrument sales development in the market has been weaker than expected due to cost pressures in IBD? Just wondering if you are seeing a similar dynamic. And if you could remind us what the kind of split in sales, or what was the development of instrument sales versus consumables for you?

I'll take the call. I'll take the question. On the QuantiFERON, unfortunately, what you cannot really compare our revenues to the QIAGEN revenues for two reasons. First one is that they have -- they report CLIA, and they report ELISA. And so when they see -- so the overall franchise. And so when they show a decline, and I think they've been talking about the effect of tenders in the Middle East, they clearly refer more to the ELISA technology. And therefore -- and this has been really impacting the overall franchise, whereas we only see the pure CLIA effect, and so we don't suffer from that. Typically, if you remember, our QuantiFERON franchise was growing 15%. And so now this slowdown, as we discussed, is primarily driven by commercial led segment in the U.S. in destocking. North America has been soft in that sense. So it's been declining QuantiFERON minus 3% as a combination of that effect. So I cannot give you the destocking value, but I give you enough data that you can do the math yourself. My observation is that starting from the beginning of Q2, which is what we've experienced so far. We see that there is a normalization in QuantiFERON volume. So this has been Again, some of the large labs that are actually doing all this visa testing, that had a lot of inventory that they decided to consume so they stop ordering for almost a quarter. And now they started again. When it comes to the instrument sales comment of [indiscernible], and again, I believe -- I don't know, I believe you are referring to the spot fire, correct?

No, I think the comment was on broader instrument appetite for instrument CapEx in the diagnostics market overall. So this would also be relevant for the immunodiagnostics business.

Look, I would say that the vast majority of our business today is on reagent rental, both in -- certainly across all the European countries. In the U.S., there was -- after COVID, I believe we went back to the normal course of business. And so I would say that 80% of our placement today are all reagent rental. So the sales really make a small portion of our revenues. So on the LIAISON NES granted, we -- I have four weeks under my belt and so not enough experience. But we actually had served the market pretty well the POL market, which is where this system goes. And what it was very clear to us is that if during COVID, and I would say until 2023, 2024, there was availability, cash availability by these customers to buy the systems, today is 90% reagent rental because for a very simple reason, the customers cannot predict the revenues that they're going to be generating because it's seasonal. So think about this season, right? For these customers, POLs testing for respiratory is actually a revenue line for them, and they don't feel comfortable about projecting the revenue line because they are dependent as we are on the season. And they, I think, revert back to what was the typical model in this space pre-COVID, which has always been a reagent rental.

The next question comes from Odysseas Manesiotis with BNP Paribas.

Firstly, on the cost lines. I mean considering sales seem to have come such below by EBITDA seems a bit [indiscernible] Could you give us a bit of color on how the different cost lines move, and why you stopped disclosing them? And secondly, on the -- sorry, 1 second, yes, on the net interest so far, Carlo, you don't have a long weeks under your belt to get a good feel of the interest so far. But from the few clients that you might have gotten assets, what are the huge points of differentiation of the platform that have appreciated the most so far?

I will take the second question, and I will leave to Alberto for the first one. I think that is just one clarifying question to you to be able to answer. So second -- so you're asking about NES, and why we think the is different. I hope you're going to be in Milan next week, but I will but I will -- actually in two weeks, but I will show you when this is different. And this is a very simple platform, is really like Lavasa coffee machine to be showing it, and you just put inside the cartridge, you push a button, you get the result. If you look at the spot fire, for example, there is a hands-on. It's been a very successful platform, by the way, but there is hands on time, hands on that, I mean, customers have to do it. The POL space, again, four weeks under my belt, but it's a very unsophisticated space. And I believe the advantage that we have today compared to some of the legacy systems, but is a good example, or even more recent systems is that we are really hand free. Let me remind you that this system was designed originally for Walgreen when we started this, it was a Walgreen system for pharmacies. And I believe that today, what customers experience is two things versus [indiscernible] pretty much, it takes 17 minutes versus 40, 38 versus other competition that provide results in similar time frame is simplicity. Okay. But I hope you're going to be in Milan and next week, and I'll show it you. Alberto?

Odysseas, allow me just to clarify whether you were asking for the split of the cost line, so the OpEx split and -- or did I misunderstand your question?

Yes, I was looking for a feeling of how the cost lines moved in the quarter. And yes, a feeling of whether there were substantial decreases in any of them to justify the stronger margins and our expectations.

Okay. Okay. So let me start from the cost line. As I mentioned before, the growth in our operating expenses was compared to previous year. Now this is the combination of fundamentally two things. On one side, the salary increase that as we discussed and commented in the past, then it is done in July every year. So in Q1, we had an impact roughly 1/3 of the increase -- of the overall increase is simply given the salary increase, the carryover effect of the salary increase that we had in Q3 of the previous year. The second element, as I mentioned before, in terms of OpEx is the investment for NES launch, which, again, $10 million -- north of $10 million for the full year. We started very early with investments since the beginning of the year. We hired the team, almost the full team since the beginning, so that contributed around 1/3 of the increase and then 1/3 is purely driven by the normal increase of expenses, infection increase of expenses that we usually have. From a gross margin standpoint, as I said, we have a gross margin that is substantially flat and similar to previous year. We closed 2025 adjusted gross profit at 66%, while we closed Q1 this year, 65%. The 1% difference is fundamentally driven by the tariffs, while at the same time, we were able with strong cost management to offset the negative operating leverage. So from a gross margin standpoint, in Q1, we were substantially in line with our expectation.

And are you going to continue not disclosing the lines going forward? And could you give me a feeling of whether anything changes on the R&D side, please.

So in terms of disclosure of data, we're going to be consistent with what we have disclosed so far. So you're going to receive the same level of information and data that we've been providing.

From an R&D standpoint, another distant point, let me just make a comment. We have been investing a lot in our platforms in the last three years. There has been a surge in R&D spending, which has been very significant and clinical spending because we've been taking to the market three platforms. So what you have to expect, and I think what you will start to see from second half is that there is going to be a normalization of R&D expenses, which doesn't mean that we are not going to be developing products because you will see during our our Investor Day next week will be committed in terms of new product development, but certainly not to the intensity level, which was necessary to develop three platforms in the last three years. So again, normalization starting from April.

The next question comes from Kavya Deshpande with UBS.

My first one is just around the reiteration of guidance. So it employs slightly faster revenue growth than previously over the rest of the year, but if I'm not wrong, I think it still looks like it's implying flat margins over the next three quarters versus last year. Alberto, you were very clear on the press as you face on margins in Q1. But I guess, something underlying feels like was better, whether it was cost control and the benefit of the German factory closure. I was wondering whether you could just elaborate on those tailwinds and whether you expect them to continue over the rest of the year? And then, Carlo, just on your expectations for China given everything that's going on there. On the last call, I think you said you were expecting a EUR 5 million decline there. Is that also -- is that expectation [indiscernible] guidance?

Let me take China first, Kavya, and then I'll let Alberto discuss about the rest. Look, I am -- you need to consider that we have been very clear about China a while ago when everybody else was a little bit changer about it. And I'm telling you the situation is not improving and is not improving as a combination of a couple of things. A, we all thought and hope that the VBP would be -- would actually stay within certain provinces. And we all thought that we would be sheltered in some very large markets in China. I'm telling you it's not happening and is not happening as a consequence of two things: A, some of these hospital administrators do implement VBP anyway. Second, and now when you have companies, very large companies leaving on the table, hundreds of millions of dollars in price as some of the very large players have reported, the market become nasty. And nasty means that in order to preserve the business that everybody has, then we kill ourselves with pricing that, in my opinion, doesn't make sense. So I believe we are very fortunate with the fact that if it's not EUR 5 million, it's going to be EUR 7 million, okay, but it's a relatively small damage. I believe that when it comes to the whole industry, there is going to be another level of pain that will surface in this market moving forward is a combination of three things. The market becoming, again, very aggressive being extended. And last but not least, I believe I'm starting to see Chinese players that now are moving not only out of clinical chemistry, hematology and immunoassay but they're also getting a more Specialty segment.

Thank you, Carlo. So going back to your first question related to gross margin, and what is our expectation. So allow me to start from the end, and then I'll walk you through some of the elements. Fundamentally, yes, we do our gross margin to be stable and then the EBITDA to improve so that we go back within the guidance range of 32% to 33% as the effect of the operating leverage. So let me now further clarify. We do have positive and negative elements affecting our gross margin. On the side of the negative elements, of course, we have -- we're going to have -- and we're going to foresee a negative an unfavorable mix coming from the growth of the molecular franchise that, as we know and we discussed in the past is dilutive in terms of margin for our group, so the growth of the revenues in that franchise is going to be slightly dilutive for our gross margin as well as, as Carlo already mentioned, a further deterioration on China. Now we plan to offset those, thanks to you mentioned it as well. Germany, the closure of the Germany, so the optimization of our industrial footprint, the fact also that in the second half, we're going to have a lower impact on tariffs compared to what we had in the second half of last year and simply the positive effect of the operating leverage.

Okay. And if I could just clarify on the German factory closure. I think PG had previously said you expected a EUR 6 million to EUR 8 million benefit. Is that still the expectation?

Yes, indeed.

The next question comes from Jan Koch with Deutsche Bank.

You mentioned in your press release that you expect several headwinds to ease from Q2 onwards. What gives you confidence that this actually happens? And then secondly, on QuantiFERON, and sorry if I missed that, but how much of your QuantiFERON revenue is exposed to immigration testing in the U.S. and in the Middle East region? And then finally, on the phasing of your sales growth this year, do you think that you can already be in line with the full year guidance range in Q2?

So I'll start from the guidance. We are -- so when we disclosed the guidance last month, we already showed the progression. And so we showed the progression quarter-on-quarter. And you can see that while we were expecting for Q1 to be slightly negative. We also expect Q2 to be slightly positive. We're going to be within guidance by the end of the year, thanks to the contribution of the second half. So by the time we closed H1, we're not going to be yet within the 5% to 6% growth.

I feel the question is different. Look, I understand what -- so you're saying -- so what you're asking what are the headwinds that you're not going to have? I think primarily too. One is an assumption that I think everybody is making that we're going to have a normal flu season in Q4, right? Second element has to do with the LTG. As explained last year, if I remember correctly, LTG grew 15% in H1, it declined 14% in H2 and eventually the growth was around 1%. We expect that overall, by year-end, the business will grow low single digit to mid-single digit. It really depends how life science will perform. So -- but growth anyway, Q1, we -- I think we closed with minus 7% again, which is all to do with order impact. So this is going really to get an effect on the H2 performance versus H1. Let me also remind you that the LTG -- the fact that LTG carries more weight in H2 is really contributing also to the growth of the margins because it's a very profitable business. So it will contribute to an improvement of the mix. Next?

Sorry, did you have another question?

Yes, on QuantiFERON and exposure to immigration testing.

Look, as you know -- as you very well know, QuantiFERON is a QIAGEN business. And so I cannot really comment too much on QuantiFERON. I know that there had QuantiFERON day yesterday. And unfortunately, I didn't have time to listen to it. And so I don't know what we discussed about the immigration, whether you quantify it, but I really invite you to actually refer to what an discussed yesterday.

Got it. And then one follow-up, if I may, on the commercial investments for the NES launch. How much of the planned EUR 10 million investments were already booked in Q1.

Less than 2.

The next question comes from Anna Ractliffe with Bank of America.

I wanted to ask about the reiterated guidance in the context of the slightly softer quarter. Do you still see a pathway to the high end? Or should we be thinking more about the low end for this year? And then also, I appreciate you are including Middle East impacting your guidance. But if you could help us directionally with the exposures. I think last quarter, you said every month, the price is oil is about $100. That's a $5 million impact. Is that still the right way to think about it? And do you have any levers to offset that impact?

Look, believe me, I'm not in a position now to say I am [indiscernible]. I'm saying that we feel as comfortable that we're going to hit that range. And I believe that -- let's see what happens in Q2, and then we may comment differently about which side of the range we're going to be. Related to your second question about the effect of oil, I think Alberto is going to shed some light.

Thank you, Carlos. Yes, indeed. So as we mentioned before and during the last call, during the last call, Carlo already mentioned that there are -- we've estimated at least EUR 5 million of potential increase between the supply chain cost. And also a further potential increase on materials that we have not quantified coming from the increase in material costs due to the plastic, the increase in plastics. Now this is not included in our annualized, absolutely. This is not included in our guidance because it was not material, not significant in Q1, and we cannot make an estimation of what it could impact within 2026 yet.

But one -- just one clarification. There was no impact in Q1. Correct?

Yes, correct.

The next question comes from Natalia Webster with RBC.

I have three, please. The first is on the immuno business. Just following up on immuno U.S. growth. I appreciate the numbers around QuantiFERON, but are you able to provide the level of impact that you saw from the adverse weather in Q1 and then what the underlying U.S. growth look like, excluding both of these effects. I'm interested to hear what you're expecting for both QuantiFERON growth and underlying U.S. growth for the remainder of the year? And my second question is on immuno growth in Europe. You previously talked to normalization in volumes. And specifically, you mentioned that German testing volumes fell to around 1% in 2025. Has this stabilize in Q1, or do you see further downside risk here? And then thirdly, just following up on that last question on the Middle East impact. I appreciate you said that the impacts were material in Q1. But are there certain mitigation measures that won't necessarily continue going forward? And are you able to just help us a bit around the potential exposure if you're not able to offset these in the longer term?

Let me start from the last. We will, for sure, that our business in Iran, most likely is going to suffer from this situation, right roughly Iran did represent for us EUR 3 million to EUR 4 million. And so far, clearly, we're not able to ship anything to the country or we know what is going to happen at the end of this because we had a distributor there and honestly, we don't know who the distributor is these days. So that is an element. The rest of the region, we assume that the problem today is more to do with the logistics actually. We know it's logistics because Dubai was our port of entry for many of these countries, and we had slowdowns or distributors have been working with inventory that they had. So depending on how long this will continue, clearly, it's going to get to a point where they're going to run out of inventory and then it is going to be a problem. So today, I don't know it can be temporary, or you can have an effect moving forward. When it comes to the volume, look, today, what we see -- when we said normalization in unit means that we continue to experience quarter-to-quarter growth, which is as low as 0.5% as high as 2%. Clearly, again, you need to a bit difficult on a monthly basis. And this is why I'm saying we are saying it's around 1%, 1.5% compare -- but really compares to last year where you were around 6%, right, in second quarters. So this is why I'm saying we believe that we fundamentally reading these numbers, we are back to pre-COVID time, where the European market was growing to these levels. And I don't know -- didn't pay attention, I don't know if any of our competitors gave any indication about volume. U.S. growth, let make it simple for you. If you strip out these two effects, which is the destocking plus the weather effect, and the weather effect, again, did hit some of the states because others have no problem. But unfortunately, in some of the states like the East Coast, we have very large customers. I would say that if I look at March, March pretty much normalized. And therefore, if we strip out QuantiFERON, and you strip out the weather effect, the rest of the business has been delivering in line with what we have seen in the previous quarters.

And just on the QuantiFERON growth going forward, are you expecting this to improve into Q2 and H2?

Listen, as I said before, shouldn't listen there. I believe you should be talking to and listening to QIAGEN. And just following the indication about what they expect QuantiFERON to be. Again, the only thing to be cautious is that they have an ELISA component to it, which clearly is sold in a certain environment, whereas we only have CLIA, and our business is fundamentally U.S. and Europe, whereas their business is global because in many geographies, they say they sell ELISA. So when you talk to them, you -- I think you need to ask from them more color on the geographies in case you're interested.

The last question comes from Philip Omno with JPMorgan.

Just one more technical one. The DNA charge in Q1 come a bit lower, at least versus what we expected. And I know you guys have spoke to higher DNA given the launch of NES. So can you give us a bit more color on what we should expect as a run rate going forward from here? And then second question, just on QuantiFERON again. And I know you guys don't want to talk too much given the QIAGEN business, but are you able to help us understand if there's anything baked into the full year guidance sort of incoming competition in the [ latent ] TB testing area?

I'll take the second one. We honestly -- we are eagerly waiting to see what Roche is going to say. I think in their diagnostic day, but to be honest with you, I don't expect any material competition in 2026. So our guidance does not take into effect any effect from the launch of Roche products in Europe, by the way, it looks like that they've been talking about Europe. But I think it's a matter of hours and then they're going to unveil the strategy. First question, you take it.

Yes, thank you. I'll do it. Thank you, Carlo. So from a DNA perspective, we can confirm the expectation of growth in the second half. Just please, you mentioned to components, the launch of the new products, which for us is in 2 components, the NES and the PLEX. Why do I mention both? Because on one side, NES was officially launched on the 1st of April, so you don't see the full impact and the full effect in the first quarter. And second, because we do have also the expectation for the GI panel to be registered and launched in a matter of weeks and days. And so we will also start the depreciation and amortization of those panels. This is from an intangible standpoint. And then from a tangible standpoint, again, given the fact that the NES has just been launched, the installation of instruments is going to happen in the coming weeks and months. And so we do expect that with the success of the platform, you're going to see also an increase of the precision amortization related to the instruments that we will be placing in reagent rental.

Mr. Rosa -- gentlemen, there are no more questions registered at this time.

Thank you, operator. Take care.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.