Good afternoon, ladies and gentlemen, and welcome to the J.P. Morgan Healthcare Conference 2025. I'm Nikhil Gondalia, and I'm a Vice President in the J.P. Morgan Investment Banking Healthcare team. This afternoon, we have Pierre Boulud presenting, CEO of BioMérieux. Over to you, Pierre.
So thank you, Nikhil. I joined bioMérieux 8 years ago. I was appointed Chief Executive Officer 1.5 years ago. So it's actually a pleasure for me to present for the first time at JPMorgan, an update on the company. I know I'm the very last presentation before your dinner. So I hope you'll stay with me for the next 20 minutes and then 20 minutes of Q&A.
So when I took over the responsibility for being Chief Executive Officer 18 months ago, I've actually -- my very first decision was to start with a strategic review for the company. I have been in the company for 7 years, but I felt it was a good moment to kind of review where we were together with the leadership team, and we involved close to 100 leaders in the organization, looking at the strengths and weaknesses for the organization, opportunities and challenges moving forward.
So that helped us to build a long-range plan, a strategic plan that we call GOo28 plan, and we presented to the market on April 9, 2024. So what I'm going to share with you today is a bit of an update on who we are and where we stand in 2024 and what's our plan for the years to come, an update on our GOo28 plan strategic plan. You are familiar with the usual disclaimer that relates to forward-looking statements that I'm going to make in the next 40 minutes. So you can actually find the detailed disclaimers in the presentation that will be available on our Internet website.
So I'll start, before going into '28 strategy, to say a word on who we are and where we stand as we speak. So it's a busy slide talking about the company profile. I'd like to start by giving an update on where we stand after COVID. bioMérieux is a pure play in the field of diagnostics. Everything that we do relates to diagnostics. So obviously, we are massively impacted by COVID-19, impacts on sales, revenues, costs, and we had the impact on the waste significantly impacting the analysis of our performance.
So what we are doing here is we're comparing 2019 pre-COVID, COVID was not existing, with 2023, post-COVID, COVID was kind of normalized. And when you compare apples with apple, 2019 without COVID with 2023 post-COVID, what you see is we've actually increased our sales by 40%, 4-0. We've increased our profitability by 50% faster than sales, reaching EUR 610 million operating income.
The second highlight I would like to make on this slide is the field of diagnostics is full of different segments that are relatively discrete. We are a specialty diagnostics player. So we have focused on specific segments where we aim at having very strong positions. So we're a very strong player in the field of high-plex molecular. We don't compete in the field of single-plex, high-throughput molecular testing, but we are #1 in high-plex molecular. We are #1 in the field of microbiology. We are #2 in the field of food and pharma quality control testing that we call industrial applications, where we leverage our clinical applications for the benefit of food and pharma industry.
Finally, we're an innovation-driven company. We invest 12% of our sales in R&D. We've been investing consistently, 12% of our sales in R&D. And this is very much the DNA of the organization. We aim at growing sustainably by bringing innovative new diagnostic solution in the market and bringing innovation to our clients, hence, the investment of 12% of our sales in research and development.
So this is who we are today. And as I said, COVID has a significant impact on us, and we actually exited COVID significantly stronger than we entered the COVID period. So the question for us as a team was what's the next stage of growth for bioMériux? What's the next chapter of growth for bioMériux? And that's what we're trying to address with our GOo28 plan.
So as I said, we shared during the Capital Market Day, on April 9, a long-range plan. It was the first time we're actually sharing a long-range plan in 10 years, giving visibility to the financial markets on a growth perspective, from a sales and profitability perspective. So there are 4 dimensions to this plan.
The first one is we're a growth company. We aim at growing our sales, 7% on average on the period 2024 to 2028. We want this sales growth to be profitable growth. So actually, we aim at reaching an operating income of 20% of our sales at constant exchange rate in 2028, so increasing by 340 points -- basis points of profitability. 15,000 employees at bioMérieux, and we genuinely believe that the success of bioMérieux will be very much founded into our capacity to engage our teams all over the world. So we expect engagement to be in the first quartile of the health care industries by 2028.
And finally, it's not only about profitable growth, it's also about sustainable profitable growth. So we have a heavy CSR agenda for the years to come. And the one element we'd highlight is our engagement to reduce greenhouse gas emissions by 50% between 2019 and 2030.
So back to the growth. How do we -- what I'm going to share now is our plan to generate this 7% sales growth in the years to come. There are 4 growth drivers for BioMériux in the years to come. With the BIOFIRE franchise, it's a company we acquired close to 10 years ago, we have created the segment of syndromic testing, high-plex molecular testing with a respiratory panel. We've been amazingly successful with the respiratory panel during COVID because we were diagnosing 21 pathogens, among which, COVID-19. It allowed us to grow significantly our installed base. We have now 26,000 instruments.
So the next chapter of growth for us is to actually leverage this installed base and this expertise to grow what we call non-respiratory panels. It's about gastrointestinal, syndromic testing, meningitis, pneumonia, joint infection, blood infection, tropical fevers. All those panels are available on the same platform, and we aim at growing 10% year-on-year, grow sales in the years to come. We'll do that because we believe we have a very unique solution, fastest time to result, broadest menu available and 5-star customer service.
And the growth drivers will come from our capacity to cross-sell, building on our respiratory panel success, but also building on expanding our installed base mostly outside of the U.S. The second growth driver is an extension of the BIOFIRE technology in the point-of-care market. We basically used the multiplex molecular testing to be able to apply it to the point-of-care market.
So how did we do that? By simplifying the instrument so that it's CLIA waived, it can be used by non-lab technicians, by accelerating time to result from 1 hour to 15 minutes and by bringing a menu for respiratory symptoms, 5 plex, 5 parameters and 15 parameters. We have a very significant performance. It was launched 1.5 years ago. We've just released installations for Q4, 900 installations in Q4 only. And we believe we have a superior solution. So with $450 million target, we aim at taking more or less 10% market share in this $4 billion market in the years to come.
The third growth driver is the microbiology franchise. So I talked about molecular solutions, BIOFIRE and SPOTFIRE in the lab, in point of care. So with molecular solutions, we identify the pathogens. With microbiology solutions, you're actually capable to say which antibiotic is going to work optimally at which doses for that pathogen. So it's a very nice complement to our molecular offering.
We have a #1 position in this segment of the market. We expect to grow 6% to 8% annually, 8%. We have a superior offering with a lot of innovations. We acquired, 2 years ago, a company called Specific Diagnostics, very close to here in San Jose, which is bringing complementing our offering with a fast antibiogram solution that we're actually launching in the U.S. market as we speak.
And finally, I talked about industrial applications, so diagnostic solution for manufacturing processes in food and pharma. We are using our clinical solutions to be able to make sure that the products that are released for the consumers are free of contaminants. So we actually look for negative results so that we can release the product for food and pharma products with no contamination. In this market, we have a very strong #2 position. We have very good leverage and synergies with the clinical business. We expect to grow 7% to 9% in the years to come.
So when you put together those 4 growth drivers, together with the respiratory panel business, together with the immunoassay business and you do the math, you end up with a 7% year-on-year organic growth between 2024 and 2028. Now as I said, beyond giving perspective on our sales growth for the years to come, we wanted to give visibility on our capacity to grow, profitably, our sales.
So we have a commitment to achieve a 20% operating income over sales at constant exchange rate by 2028. Three comments I would like to make on this slide. First of all, unfortunately, there is no silver bullet into our capacity to improve our profitability. It's coming from a range of projects, work streams, activities that will translate into the operating improvement. So there are more than 50 actions that were identified in the course of 2023 that we are actively engaged into implementing for now and the years to come.
The second element is, in terms of sources for productivity improvement, there are basically 3 areas: first, manufacturing costs and supply chain costs, where we believe we can improve our profitability; second, commercial costs, by being strong market share leaders in segments of the IVD market, we can leverage commercial costs; and three, G&A costs, so 1/3, 1/3, 1/3, where we expect profitability to increase in the years to come, again, supported by more than 50 initiatives on each of those segments.
Finally, we wanted to make sure that those profitability improvements were not too much backloaded at the back end of the plan. It may happen. So we actually gave a guidance that we would increase by at least 10% every year. our profitability. So every year, increase in profitability, faster than sales at constant exchange rate.
Now capital allocation. So with the cash flow that we generate, first of all, we'll invest the cash flows into the business, so into capital expenditure, 8% to 10% of our sales in that. As we grow 7%, we need to grow capacity, manufacturing capacity. We need to grow our installed base with [ phased management ].
As I said, we'll keep investing into innovation, 12% of our sales invested into R&D over the next few years, meaning that the profitability improvement that we talked about is not done at the expense of reducing our R&D investment. We keep 12% R&D investment to make sure we maximize the innovation that we can bring to the market by 2028 and beyond.
And finally, we have shared with the market that we plan to share a dividend of 25% payout ratio, i.e., 25% of our net income being paid to the shareholders so that when our net income grows, we can actually share a bigger amount of money with our shareholders.
Having said that, we have a very strong balance sheet. We have almost no debt. So we are actually in a position where we can proceed with M&A and do some M&A activities, licensing activities. And I'm very glad to share that earlier this week, we've actually communicated on a very -- bolt-on acquisition, an immunoassay company in Norway for point-of-care solution.
It's a solution that brings -- very easy to use. It takes a drop of -- it takes, with a drop of blood, it allows to do the test. So you don't need to go to the lab. Really, 1 drop is good enough. It gives results in 10 minutes next to the patient. And it was tested with troponin marker, high-sensitive troponin, which is a cardiac marker for cardiac arrest and gives lab quality results, i.e., as good a performance as what you can get from systems installed into the lab.
So we invested actually earlier in 2024, 20% into the company. We loved what we saw. They published in the Journal American College of Cardiology, a very strong performance of their test for high-sensitive troponin. So we've decided a couple of months ago to accelerate, to move on with the full acquisition of the company that we can accelerate the launch of their product in the years to come.
So why is it that we acquired this company? So you understood the strategic focus that we have in the field of point of care with SPOTFIRE, what we want is to strengthen the portfolio that we have in the point-of-care setting. So we have SPOTFIRE working very well, 900 installations in Q4, very successful launch, but we want to strengthen our portfolio and bring additional solutions for the point-of-care setting. So SpinChip will help us to do that with the same commercial effort that we have to do, so no additional cost.
It's also an opportunity for us to leverage immunoassays expertise. We have a VIDAS franchise that is not expected to grow in the years to come, but we have very strong manufacturing and R&D capabilities in the field of immunoassays. So we see an opportunity for synergies with SpinChip within bioMérieux, not only on the commercial side for point-of-care, but also on manufacturing and R&D with our immunoassay expertise that is in Europe. In terms of revenues, we expect actually not a significant impact in our GOo28 plan. We expect the first launch to happen in 2026 with just 1 parameter and just 1 region, Europe. So we expect, actually, the growth to accelerate and be more significant in the later years of the plan and probably more after 2028.
In terms of financial impact, we've also made the decision that we would fully fund the development of SpinChip innovation and development in the U.S., in Europe and the rest of the world within the envelope of R&D and the 12% of our sales involved into R&D. So obviously, it means that we have to reallocate resources within our R&D portfolio to make sure that it fully fits into the 12%. It's a very healthy exercise that allows us to keep the 12% R&D investment, but improve the quality of the R&D portfolio that we have and generate additional revenue growth that we didn't have initially into our plan. We acquired the company for an enterprise value of EUR 138 million.
So as a wrap-up, as we speak, we can't disclose the number for Q4 2024 and the full year results. But I just want to remind you a very strong performance at the end of Q3, with double-digit sales growth, 10.3%, significantly faster than the market, which was in the region of 3%. In September, we revised our initial guidance upwards. Our initial guidance was 6% to 8% sales growth and above 10% profitability improvement at constant exchange rate, very much in line with the GOo28 plan. Actually, what we said in September 2024 is that we would be able to beat that guidance and to get to 8% to 10% sales growth together with a profitability improvement between 12% and 17%.
So as we speak, we are very confident with the guidance that we gave at the end of September. We'll obviously give the full year results early March when we close the accounts. But we are already on track and probably a little bit above the guidance that we gave for the full GOo28 plan. And with this, I'm happy to move to the Q&A questions with you, Nik.
Absolutely. Absolutely. Thank you very much. [Operator Instructions]. Thank you very much for the presentation. I'd like to talk a little bit more about some of the long-term targets that you've put out there, in particular, kind of your target of 7% growth all the way to 2028 as well as your profitability targets of 20% on EBIT. What are the kind of main drivers, main levers that are going to help you achieve that?
So as we shared for the sales growth drivers, so we are -- this year, we are planning to grow 8% to 10%. What, for me, is important is when we are talking about GOo28 plan, it is ambitious, but it's very grounded. We are actually generating sales growth as we speak on all of those 4 growth drivers. I mean, be it BIOFIRE, we just released the number of installations for Q4, it was 500. So we are seeing that we have very nice momentum. SPOTFIRE, 900 installations; microbiology is growing very nicely; industrial applications, growing very nicely. So it makes it, in my mind, a very solid plan because it's very much building on sales growth that is existing as we speak.
With regards to profitability, it's newer for us because we don't have a history of communicating profitability improvements. But again, 2024 revised guidance, 12% to 17% improvement of the operating income is, I think, showing that it's a very solid ambition, and we are actually walking the talk in terms of delivering the profitability improvement that we're talking about.
Excellent. I will continue with questions unless you have some from the audience, so feel free to put up your hands. How are you finding the respiratory season so far?
I'll take it -- so what we see, a medium to high respiratory season. And I'm saying this because the beginning of the respiratory season was kind of average. And the last few weeks of December were actually significantly stronger at the level of what we saw last year, which was strong. So it kind of moved from medium to high respiratory season across Q4. So that's what we're seeing. And that's what we're seeing for the U.S. And in Europe, it's overall a relatively strong respiratory season. So yes, that's how we see -- of course, we cannot comment Q4 numbers for BioMériux, but that's how we see the respiratory environment for us.
Yes. I think we've got a question in the front.
Yes, related to this question, as a follow-up. How about [indiscernible].
Yes. Can we get back on the mic? Yes. Sorry about that. Would you be able to do it on that mic, sorry.
I can.
Yes, sorry. Sorry.
Sure. I'll be brief. So my question is related to H5N1 story. We hear in the news about cases in animals and in humans. And my question is related to how prepared your company is for maybe an outbreak or WHO declaring maybe emergency at some point?
So as we speak, there are very few cases in humans, as you know. There is a widespread, unfortunately, dissemination of H5N1 across animals with cross-species contamination, very few cases in humans. I think there is one case of death recently. So obviously, we are preparing for it. The good news is our test today identify H5N1. So all our respiratory tests are capable to see a sick patient and identify a sick patient.
And our R&D teams are working on making sure that we can type it properly and identify it separately. Today, it would show into our test as a flu A, a normal flu A, which is not. So we are looking at seeing ways to separate it from the reporting. But the good news is, I mean, should it happen, which obviously nobody hopes, should it happen, our diagnostic solution will be ready for diagnosing that [ at the beginning ].
We just got one at...
Okay. So for the BIOFIRE syndromic molecular diagnostic market, do you see any future threat from sequencing-based metagenomics and whether you are considering adopting the NGS technology in that field?
So 2 answers to your question. Short term, we don't see a significant threat. And the reason why is the molecular solution bring -- in this business, what's challenging, it's not only the performance of the test, it also comes together with the capacity to automate the test so that you can run a big number of tests and the cost. And you need to optimize those 3 to make it a routine testing. And we're seeing molecular testing as we speak as the gold standard, right? So we don't see -- in the short term, that kind of threat happening.
For the medium to long term, we are seeing sequencing for infectious disease as a very interesting technology to work on. We actually made an investment in an English company called Oxford Nanopore, where we have a 7% equity stake. We have R&D collaboration and working together with them to develop specific sequencing line of this that would allow to complement the offering that we have.
The first test that we are developing is for multi-resistant tuberculosis, because I was talking about microbiology solutions for multi-resistant tuberculosis. It takes weeks to grow tuberculosis to be able to assess what is the right antibiotic that is going to work against tuberculosis. With sequencing, you get it in a few hours. So that's the kind of opportunity where sequencing really brings value. At some point, when fully automated and at much, much lower cost, it may actually end up replacing some of the molecular solutions, but it's a medium- to long-term perspective.
I've got a few more that I'd be interested to ask as well. So one thing I'd be interested to hear your view on it, Pierre, is tariffs. So kind of what are the impacts going to be on your business for the forthcoming years?
Hi, everyone. I'm Guillaume Bouhours, CFO. So on tariffs, basically, what we sell in the U.S. in terms of finished goods is -- a vast majority produced in the U.S. on BIOFIRE, microbiology ranges. So we would have no topic or no impact on finished goods. Yet, of course, to produce these finished goods, we import a lot of raw materials, chemicals, biologicals, components from Europe, from China, from -- a bit from Mexico and Canada. So we would have, definitely, potentially depending on an impact on -- from tariffs on imports into the U.S. of raw material.
We would, again, probably be at par with, let's say, U.S., other U.S. companies and then look at the way we would, let's say, be able to pass this through to our customers. The other impact to mention on tariffs is actually the China possible countermeasures. We are very present in China. It's a second country for us, 7% of revenues with -- including localized manufacturing. So we will also be, let's say, careful on how we manage and mitigate potential countermeasures that, quite for sure, might come.
You also talked about, Pierre, your recent acquisition of SpinChip. Could you tell us a bit more about what the rationale for the acquisition was and kind of what your M&A outlook and strategy is kind of going forward?
So let me start with the first part of the question, the strategic rationale. As I said, we have a bit of a weaker franchise in immunoassays. By the way, that -- in 2024, we are very happy with the sales performance and profitability performance that led us to review our guidance upwards. However, for immunoassays, we are below our expectations. And we really believe that it makes sense for a diagnostics company to have a strong immunoassays franchise. So SpinChip is really, for us, a way to think about our future in immunoassays beyond our VIDAS platform, bringing a point-of-care solution that really fits the needs of the patients in a very relevant manner for the future.
So I've mentioned the fact that it's strengthening a point-of-care solution. I've mentioned the fact that we have already R&D and manufacturing immunoassays expertise. So it's really a good fit. I can add to what I said that we actually identified immunoassays point-of-care as a very nice opportunity. We had a comprehensive review of multiple companies solutions in the market that led us to a short list of a few companies, a few technologies that we're interested in.
That led us to invest into 2 companies, one U.S. company and this Norwegian company. And we ended up -- so it's -- in a way, it's a very successful conclusion of a long process from a very strategic thinking to focusing on one solution that we believe is the best that we can find in the market. So I have to say beyond the good news of having SpinChip colleagues joining bioMérieux, it's also a very healthy and disciplined process to complement our offering.
Now the second part of your question that relates to M&A strategy for the longer term. What I'm sharing with investors and analysts that -- when I meet them is we've communicated the plan. It was now 9, 10 months ago. So my very first focus as the CEO of the company is to deliver the plan and really walk the talk and show our capacity to deliver the plan. We had some very positive comments on the plan, but we're also having a few questions from investors and analysts on, "Show us your capacity to deliver the targets on a regular basis."
So H1 was definitely a positive signal. Hopefully, when we communicate H2 and full year results, it will be an additional confirmation of our capacity to deliver. So when we are looking at M&A, our very first short-term focus is to make sure that we have bolt-on acquisition of that kind that help us to strengthen and reinforce our equity story beyond making much larger acquisitions that are a bit of a derailer and probably a little bit early into the deployment of our strategic plan.
Perhaps one more for me. In terms of syndromic high-plex molecular biology, you're, by far and away, the leader with 75% market share. Could you tell us a little bit more about the competitive dynamics you're seeing, who the players are and how you're positioned? Are you gaining, losing market share?
So there are basically 4 players in the market. So we have 3 competitors. By the way, none of them is new. They've all been in the market for many years now. One is GenMark that was acquired by Roche 3, 4 years ago. One is QIAstat that is owned by QIAGEN. And the third one is Luminex that was acquired by Diasorin. All those acquisitions took place years ago, and those solutions have been in the market for a number of years now. And we've happily competed with them in the last few years. So it makes us confident that we can compete for the future.
We have a lot of respect for those competitors. And we believe we have a superior solution in the market in basically -- on basically 2 dimensions. First was the time-to-result, especially on the respiratory panel. Even though the other solutions were launched after BIOFIRE, no competitor is capable to give a time-to-result at 45 minutes. We are the only ones who are capable to do that. And that's a benefit for the patient, but that's also a benefit in terms of workflow for the labs. So we believe it's a very unique competitive advantage.
And the second element is the menu. So we have the opportunity -- we can give the opportunity to the lab to use, on the same instruments, 7 different panels. And the best competitor is capable to bring 3 different panels. So from a menu perspective, we believe there is an opportunity for differentiation. So again, we want to be careful and humble. So we are watching competition. There is a lot of noise and development that has been happening in the last few months. We are actually very reassured by our 2024 performance.
So at the end of Q3, our respiratory panel was growing 14%, 1-4, which is the most competitive panel. And our guidance, I remind you, is 0% between '24 and '28. So we're already growing 24% in the first 9 months of 2024. Our installations, we've managed to install, in the full year of 2024, more than 1,300 new instruments, which is close to an increase of 5% of our installed base of 26,000 instruments. So again, super careful, super humble. We have formidable competitors. And we believe that in 2024, we've managed to hold a very significant market share.
Perhaps one final question from me then. So your total installed base for SPOTFIRE, I think you had on your slide at 3,000, but you've announced that you installed 900 in Q4?
Yes.
Could you tell us a bit more about the dynamic of that 900 versus 3,000?
So on SPOTFIRE, you have to take into account the fact that there is a seasonality in terms of new installations because it's an instrument on which we have only respiratory tests. So -- and it's point-of-care. So what happens is at the end of the respiratory season, like Q2, April, May, June, there are very few new installations, because the doctors don't bother with having a new equipment. It's mostly placements.
In Q3, July to September, it's back-to-school, so they start to get more installations. And in Q4, preparing for the peak of the respiratory season, which is December to Feb, then they want to have their new instruments installed. So that's where you're seeing a peak of installations. So we are very, very happy with the 900, which is -- since we launched, we have never done that many. Vast majority of those installations are coming from McKesson, which is a distributor we are working with in the U.S. We're also installing very well in Japan, very strong success in Japan.
So we are very happy with the number, but it's fair to say there is an element of seasonality. So we had some questions when we communicated Q2 numbers, because it was only 250, but it was actually very much in line with our plan, 600 in Q3, 900 in Q4. So we are seeing very good traction and very good adoption.
Thank you very much. Are there any more questions from the audience? Okay. In which case, I believe there are no more questions at this time. Thank you.
Thank you.
