Interview Transcript

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

We could start with a brief introduction of you. II'd love to hear in your own words about your path and how you came to CellaVision.

I was with Siemens and Beckman Coulter for about 20 years before I came to CellaVision. I spent a lot of time in laboratory and hematology, serving as both an area manager and a sales representative for many years in New York City. I interacted extensively with customers and laboratories.

About 20 years ago, CellaVision introduced this technology, which I always thought was a unique idea. I saw its benefits in the laboratory and believed it could have a significant impact. At that point in my career, I was getting a bit tired of just being a manager at Beckman Coulter, so I decided to join CellaVision.

At the time, the company had only 40 employees and was quite small, but I truly believed the technology would change the market. They had sold a few units in Europe but hadn't done much in the United States. I had previously worked for a company called Coulter, which sold a product named IMI, one of the first digital imaging systems and a predecessor to CellaVision. Unfortunately, they made many mistakes and went bankrupt; they were based in Miami, Florida, I think.

Having that introduction convinced me of the positive future for this technology. When I had the chance to interview with CellaVision, I took it immediately. They offered me the job on the spot, and I accepted, taking a chance by moving from a company with 10,000 employees like Beckman Coulter to one with just 40 people.

It looks like you were right.

I made a gamble there, and it turned out to be the best move of my life. Initially, I was the only salesperson in the United States, showing the product to people, and everyone loved it. If you're a med tech doing microscope work, this is a big relief. It really helps laboratories tremendously in such a manual part of lab testing.

In the first year or two, I did a lot of work but I only had two or three sales, which was disappointing. But understandably, labs don't buy a $150,000 item with lunch money; they have to budget for it. In the third year, we went from two units to 78 units sold. It was just a matter of waiting for the market to catch up and get the money. From there, sales almost doubled every year. We hired more people and expanded to Canada and Latin America. I became the area director and president of CellaVision Inc. in the US about 10 years ago.

I was responsible for growing the business because we had made a huge impact in the United States. They wanted to expand, adding Asia and more people in Europe. I was responsible for hiring more people and developing the market further. We contemplated selling direct, but the infrastructure required for service support was overwhelming. So, we decided to go with distribution partners. Almost every hematology company wanted to partner with us because everyone wanted CellaVision.

Fortunately or unfortunately, Sysmex came along and became number one in the US, dominating the Americas. They were selling 85% of the CellaVisions out there. Siemens and Beckman Coulter felt like they were losing business because Sysmex had a nicer-looking system. They have a specially made CellaVision that automates the entire process. So, they went with Scopio, our first competitor. Scopio has done a lot of marketing and made a big impact. Beckman Coulter and Siemens are going with Scopio, but the reality is they, along with Abbott and HORIBA, barely share 15% of the market. 85% belongs to Sysmex.

I spoke last week with someone who distributed CellaVision for Beckman Coulter. He mentioned that, like you said, the large labs and hospital labs are 80% Sysmex. Beckman Coulter is a bit stronger in smaller labs, at least according to him. He mentioned Scopio, but said in the end, everyone wants CellaVision. It's well recognized. You've mentioned a couple of things I want to dive into, like distribution.

Maybe we can take a step back. You have the market of labs that do hematology. How would you split that market? You might have hospital labs, Labcorp, Quest, those types of laboratories. I'm curious, at a high level, how do you look at it in terms of segmentation?

I'll share my screen because I want to point out something to you. Let me just see. I have a presentation here. Are you seeing it now?

There's a presentation, and you can access it directly on the CellaVision website. There's no need for me to send it to you. It includes a presentation from a year or two ago with a lot of information. You might ask about sales. If you look at the bottom left graph, you can see the Americas in green. We experienced unbelievable growth for 10 years before Covid, which was the first year we saw a slight dip. After that, sales continued to outpace the world, with the Americas leading in substantial sales of CellaVision products over the years. This presentation covers many other areas, so I encourage you to review it.

They mention very large labs where CellaVision is very well penetrated, not just relatively but very well. Then there's the next layer of smaller labs for which the DC-1 is created. I'm curious if there are any nuances in the market that you consider when thinking about your distribution strategy, or is that a pretty accurate reflection of your approach?

It is quite compatible because when people invest in a hematology system, they often include CellaVision as part of the purchase, rather than making it a separate capital expense. Integrating it with a partner that has already budgeted for it was the logical approach.
Our initial target was the large laboratories, starting with our first large system 15 years ago. It gained traction quickly. However, the large reference laboratories took a bit longer, as they tend to conduct studies and reviews before adopting new technology. Eventually, all major reference laboratories in the US began using it.

For large hospital laboratories, it became more about patient care and turnaround time, whereas for large labs, it was about processing power and speed of reporting results. Both sectors adopted it, and once hospitals started using it, it became known as the essential method for performing differentials. Most hospitals either wanted it or already had the technology when the large systems were introduced.

In the US, there was a significant need because large hospital systems were acquiring small hospitals, which lacked integration and expertise in the main laboratory. A large hospital might have 15, 30, or even 40 affiliated hospitals, and the laboratory manages all these smaller labs. While CellaVision was fantastic, spending $150,000 on each of 35 small hospitals was impractical. This highlighted the need for a smaller system for low volume, leading to the development of the DC-1 over a couple of years.

Since its introduction, the DC-1 has been one of our best products. It allows networks to coordinate their work through the main laboratory, improving quality and speed. Hospitals can purchase the Sysmex integrated system for their main lab and DC-1s for smaller ones. This has been significant since its introduction. Although the first few months were slow due to Covid, demand surged once restrictions eased.
The DC-1 also caters to independent hospitals that can't afford $150,000 systems. They can opt for a $40,000 or $50,000 DC-1, buying two for less than the cost of one larger system. In price-sensitive regions like Latin America, having a lower-cost alternative was crucial. The DC-1 has been flawless since its launch.

CellaVision is also exploring specialty testing, such as body fluids and bone marrow, where the DC-1 is ideal. You wouldn't want to halt a large system processing hundreds of samples to run a single bone marrow test. The DC-1 fits this niche, serving as a backup for the main system and for specialty testing. I foresee it as a significant growth area in the future.

Just to picture it, you mentioned selling in New York City. For example, with a system like Northwell, right? I don't know them personally, but I know them by name. I've done enough work in medtech to know that in New York, Northwell is a major player.

They've bought everything. That's a great example. One year, they bought 29 CellaVisions on the last day of the year. It was a great end of the year.

Yes, I can imagine. With Northwell, 29 is more than I would expect. But still, they have all these hospitals and a handful of very big labs running a lot of volume for which the DM96 or the DM1200 is a good fit.

In case it's a DI-60, the Sysmex version that's integrated.

Let's talk about the Sysmex integration. I'm quite curious about it. How does that work? You have the cell counter, right? Then there's an integration with CellaVision. How would you describe how that works? How the device is integrated with CellaVision and how that might differ, especially in terms of workflow, from having just a cell counter and later doing the review in a CellaVision? I'd love to hear your perspective on that because that's where I'm not as well-versed.

When you look at an integrated track like the XN line, you can select different components for the system. You have a loader, analyzers, a slide maker stainer, and the option to integrate CellaVision into the line. I believe 90% to 95% of systems are sold with CellaVision because it eliminates hands-on work completely.

If a test fails or a flag is generated by a cell counter, the message is sent automatically to prepare the slide and put it on CellaVision. When the technician returns, they don't need to search for the tube or slide; the results are right there on the screen. That's the real advantage of integration.

The hardware itself is identical. The 1200, the 9600, and the DI-60 are internally very similar products. The 1200 is for a batch system, handling 12 at a time. The 9600 is an autoloader, allowing you to load your slides into a cassette, place them on the system, and walk away. The DI-60 takes slides directly from the slide maker.

Sysmex is very strong in automation. We designed the DI-60 to accept slides from their track, which picks up the slide, loads it, reads it, and places it in an output rack. That's the difference. Sysmex's integration made it a differentiator from Beckman Coulter or Siemens. They had a system that could be plugged directly into the track.

Beckman Coulter, lacking an automated system, has dragged their feet for years. Even after taking on Scopio, they haven't made significant sales. They still can't compete with Sysmex's integrated system. They must manually handle slides, adding extra steps and decision-making that an integrated system automates.

This approach is ideal for large laboratories, and no one else has anything like it. Beckman chose Scopio as an alternate partner, thinking they were losing sales due to CellaVision's advantage for Sysmex. However, that wasn't the reason for their declining sales. They had numerous other issues.

They blamed CellaVision for giving Sysmex an unfair advantage and thought Scopio would be a clever move. Over the last two years, it hasn't worked out for them, and it hasn't changed their market position.

I'm on the website now, looking at the DI-60. Interestingly, they don't mention CellaVision anywhere. Is it on the DI-60? I'm on the Dutch website, so maybe it's not the same.

What Sysmex has done is they've branded it as their own. It says DI-60, but customers will always recognize it as CellaVision. The sales reps will confirm, saying, "Yes, it's a CellaVision. We just put our brand name on it." The case says Sysmex, but if you look at the back, it says CellaVision. So, yes, it's our system, but Sysmex has branded it. I'm very happy they did that because making it their own means they are committed to its success. If you install one, you can't blame CellaVision; it says Sysmex on it. This gives Sysmex a huge commitment. I believe CellaVision just signed an eight or 10-year contract with them.

Yes, recently. When I saw the new agreement, I thought, "This is one of the longest agreements I've ever seen," unless you're investing hundreds of millions in something. What do you think about the Sysmex relationship? Clearly, it's been successful, right? As you mentioned, 85% of CellaVision systems are sold alongside Sysmex.

That's my personal experience. Worldwide, in Asia and Europe, the numbers are different. Those numbers are really for the United States, Canada, and a bit of Latin America, where Sysmex has dominated. I was with Beckman Coulter as a hematology manager for 15 years, and when I left for CellaVision, almost all my reps went to Sysmex. My old team from Beckman now works for Sysmex, so I knew almost all the sales reps from being their manager for years. It was a cozy relationship, to say the least. It helped us a lot in getting CellaVision recognized and included all the time.

We work very closely with Sysmex. There was a time when we didn't, and Sysmex didn't treat us as an equal partner. This was about 20 years ago. There was some difficulty, and a decision was made to include Beckman and Siemens. Suddenly, Sysmex became interested in what we could do for them. They were upset with us for a few months, but then they came up with the idea of building an integrated system only for them. That changed everything, and we became best friends. They've been wonderful. They use us, we use them, and we often collaborate. We have market support specialists who are experts on the product and support Sysmex salespeople and applications people. We also have a strong education department with e-learning and training materials that Sysmex uses in their own training. The relationship has improved over the years.

How do you think about the risk of being quite reliant on Sysmex to sell your product?

Beckman and Siemens are not making significant progress. We've aligned ourselves with the current winner, and they're succeeding globally. I don't see Beckman making a comeback, and Siemens isn't likely to buy or relabel the HORIBA System, which is what they're currently selling. To my knowledge, they haven't sold any of those systems. Both companies seem to be stagnating. I believe we're in the right position. In my experience traveling to Latin America, I notice a brain drain, and they excel at replicating things.

They used to distribute CellaVision in China, right?

Yes, they did. They sold quite a few in China and then attempted to replicate our product and create their own. However, they're unable to penetrate many markets. They're not present in the US or many Latin American countries, although they have a strong presence in some countries because their products are half the price of competitors and function adequately. The biggest long-term challenge is addressing competition in China and Latin America, where they compete on price with a product that works reasonably well. They have successfully copied us, but they only offer one product.

They launched it around the time I started looking into it. I remember one of my first calls was when they ended their relationship with Mindray and launched their own products. That was about three years ago, which isn't too long ago.

The relationship with Sysmex is positive. They've renewed it, so it seems sustainable and mutually beneficial. How do you view the economics of this relationship? With Sysmex holding 80% market share, have they ever pushed back on the revenue CellaVision receives from the buy?

They've been very good. We implemented price increases, they're in the contract, and I think they've been fair about that. The real focus with Sysmex, especially in the Americas and probably worldwide, is distribution. I've been retired for a year and a half, but one thing they offer is our distribution.

We bought RAL a few years ago, and their stains are excellent. They also produce MCDh, a methanol-free stain, which is environmentally friendly and likely to be preferred by every lab. The quality is exceptional. I believe MCDh will be the future. The smaller system uses a stainer from us with MCDh stain, and Sysmex is selling that.

The hope is that Sysmex becomes our distribution partner, especially in the Americas. If we could convert 85% of the market for stain, which are Sysmex's customers, from their current traditional stains to MCDh from RAL, and have it distributed by Sysmex, either private labeled or as RAL stain through Sysmex, it could double or triple our European sales.

Europe, particularly France and neighboring countries, have been receptive to RAL, but transporting it over the ocean has been challenging due to packaging and special handling requirements for the alcohol content. Sysmex has the capability to package and ship it. We could ship it to them, and they would handle it. This presents a significant upside potential, possibly equaling or doubling our current hardware sales. Acquiring RAL was a smart move.

Yes, that's exactly what I think matters over the next five to 10 years, although it may change as I speak with people. The Sysmex relationship and distribution, along with the additional RAL consumables, are key. If we look back to before the RAL acquisition, what were the consumables associated with CellaVision?

That was another issue. With Beckman, there wasn't enough residual business after the sale. They would barely install it once the customer bought it because if it didn't work, they weren't losing revenue. The consumables were oil and magazines, which were minimal, just a couple thousand a year, unlike the half a million you get with immunochemistry where reagents flow after a system sale.

The Beckman sales guy mentioned 7,000 or 8,000 a year in consumables, plus a service contract of 15,000 to 20,000. Compared to 150,000 to 200,000 for the instrument itself, that's not much. It's not much at all compared to others. So, the status quo was not even 10,000 a year.

Yes, that's the problem. It was nice business and contributed to our income, but having a consumable like a stain is guaranteed business forever. Once they start using it on our systems, it will become a reliable reagent stream.

How much would that be compared to the 7,000 or 8,000?

It depends on the size of the laboratory, but I think it would range from 7,000 or 8,000 to probably 50,000 to 100,000. In terms of consumables, it's quite a bit.
It's replaced every six hours. You're constantly draining and refilling. It's a nice consumable, and they're already spending that money. If they buy a CellaVision Sysmex system, why not use the manufacturer's stain, which they're familiar with and can maximize for the application? Most stainers are open, so they could use anyone's stain, but most people use the manufacturer's stain. Beckman Coulter does that, and Sysmex does that as well.

I think the first potential is certainly Beckman. There's been talk about whether Siemens or Beckman want our stain. They've claimed they do, but they don't move quickly on anything. Beckman has been difficult and is struggling. I think there's some resentment towards CellaVision because we've managed to grow and do well while they're still struggling. There's envy or something going on with Beckman. Management changes almost monthly at Beckman Coulter, so you never know.

We've been studying Danaher for a long time.

I worked there for years.

They do a lot of things right, but it's not for everyone, that's for sure.

They're financially driven, which sometimes means your product doesn't arrive on time or is six months late. They're driven by profitability, pretty much, in my opinion. It's short-term thinking, but it has kept their stock up.

Yes, you don't have to worry about that. That's one part that's been going well forever.

Regarding the stock, I'm sure you've seen why you're interested in CellaVision. We've exceeded almost every company in the medical diagnostic industry for 15 years, being number one.

That's amazing because the product is fantastic, and people want it now. But when everyone has one, what do you say? In my opinion, aiming for 15% growth every year might be a mistake from a stock perspective. If you said you're going to grow 12%, you'd be four times greater than the average market growth of 3%, and you'd still look good. When you hit 12%, you look like a hero. But if you say 15% and hit 12%, they say you missed your target. I think CellaVision should be careful in the future. Fifteen percent was gangbuster growth, and the future is strong, but making big claims is risky. It's great for the stock market this year, but long-term, you have to be careful. The fundamentals are there, and you have potential. There's replacement; you'll have to replace these instruments every cycle. You have a huge base of instruments, thousands out there every cycle, every hematologist cycle, which is every five to seven years.

It's a life cycle. And about the service contract, I found a tender from some GPO where the service contract was, cumulatively for different parts, about $20K to $25K. How does that compare to what you'd typically expect for a service contract?

Are you saying the $25K is for a typical service contract on an instrument?

Yes.

That's typically for a big chemistry or hematology system where service is needed probably once a month, replacing expensive parts. Beckman Coulter lowered their service costs. Sysmex has been very good at service. Companies can charge $12K to $15K for a CellaVision service contract because it's still less than most other instruments. The cost of service is low; if they do one service call a year, it's a lot. The instruments are robust and reliable. It's the first time in my career I've sold an instrument that almost never breaks, which is nice. The service cost goes to the bottom line because they don't spend much on servicing. Sometimes they discount it because they know they don't have to spend that money, which isn't good. They should keep their margins up. They set their own service pricing, and it's market-dependent. They probably base it more on market value than the cost to service the equipment. If it were based on cost, they could do it for less, but they charge what they feel it's worth in the market.

And about the DC-1, realistically, how much do you think about the market for the DC-1? How many units a year is a realistic goal to sell?

If you take a look here, you'll see the larger systems on the top of the screen and the DC-1 with the manual slide stainer, our specialty reagent stains, and the smear-making capability on the bottom. This is the kind of system that a small hospital or a doctor's office might purchase. The entire system is under $50,000, while the larger one is $180,000 and the smaller one is $115,000.

The market segment targeted by this system is likely smaller. You see varying numbers for the market size because defining what constitutes a lab is challenging. The consensus we've reached is that the opportunity is probably twice what it is for hospitals. Some estimates suggest it's six times greater for small labs, but we believe it's likely twice as large as the hospital market segment. The runway for the DC-1 is significant, nearing a saturation point where innovation, new products, and replacement cycles will drive growth. The idea of acquiring a CellaVision system has driven growth for the past 10 to 15 years.

For the first installation of new technology. The downside is they need to replace it every eight years. When they purchase a new cell counter, they'll also buy a new CellaVision system. The replacement market should keep our margins strong. Continued growth will come from adding stains through Sysmex for revenue growth and continuing hardware growth with the DC-1 in smaller laboratories. Selling to smaller labs is different, but Sysmex is strong in small labs. Abbott is a strong distributor of CellaVision and performs well in small labs. HORIBA can sell DC-1s, but Sysmex will likely sell most to doctor's offices. Beckman isn't as prominent in small office laboratories.

Fundamentally, my understanding is that when you put a blood sample through Sysmex, it flags something. About 15% of the time, it requires further review using either a manual microscope or a DCM like CellaVision. How has that 15% number changed, and how could it change?

That's a good question, and it has many answers. If you're at Memorial Sloan Kettering Cancer Center or MD Anderson, where they have CellaVision, almost 100% of the patients are sick cancer patients. So, every sample gets flagged and reviewed.

In contrast, at a reference lab like Quest or Labcorp, they're mostly conducting blood checks, so only about 3% of samples may have a flag. However, that 3% is out of 5,000 or 10,000 samples they run in a night, so they still handle a high volume, even though the percentage is lower. The number you mentioned, 15%, is what many people consider the average.

Cell counters may improve, but that doesn't mean they'll significantly change that 15% rate. They get better at identifying true positive samples, which are the ones you want to review. The cell counters are designed to flag samples that indicate a problem, such as cancer or another disease, so you can review them.

As they improve, they won't decrease the review rate; they'll just get better at picking positives and not flagging negatives. In the past, there was a high negative rate where the system would flag something, and half the time, it was an error by the cell counter. As technology advances, better cell counters will eliminate that issue.

Another topic is using flow cytometry on samples. You could use a cell counter as a screener, and if it fails, send it to a full flow cytometer. However, this requires expert review, as the gating is mostly done manually by the operator, and it's extremely expensive, so it's rarely done. Beckman had the idea of replacing slides with flow cytometry instead of CellaVision, but that idea has died over the last 15 to 20 years due to cost and expertise requirements, which would double the cost of doing CBCs.

I don't see the review rate changing because you have to consider the population. In a sick population, like a cancer center where 90% are positive, you want that review rate. The cell counter won't reduce the review rate for sick patients. Hopefully, it won't miss anything and might even increase the review rate.

Right, that's what I'm thinking. It may even go up. I don't have a strong opinion either way. I'm just considering how it could change up or down, which would affect the volume through CellaVision. Perhaps the volume is more valuable because it's better with less waste, or you flag more because the cell counter is better and can flag things it couldn't before. There are many ways to think about it that might affect that number.

When there is a review and the medtech is using the software, I've been looking for reviews from lab professionals. How good is the software at automatically labeling specific cells?

Are you referring to CellaVision?

Yes, the CellaVision software. It includes automatic identification and labeling features, right?

It uses artificial intelligence to pre-identify cells. Here's the catch. I'll give you a number, 90% or 95% of the of the cells are probably put in the right category by CellaVision automatically, which changes the process. You see 100 pre-identified cells, and maybe three to five of them are in the wrong place. But these are often problematic cells. Either they're cancer cell or they're a band. The system calls it a band, it's really a sag—according to that laboratory. Another lab may call it a band.

The beauty of CellaVision is that it handles 95% of the work, leaving the questionable cells for experts to decide on. Each hospital and technician might classify cells differently. CellaVision allows managers to review and question why certain cells are labeled a certain way. It provides a quantifiable system while still allowing operators to use their expertise before releasing results. I've seen instances where the instrument did a better job than the technician, who misclassified cells. Supervisors can now identify operators who struggle with cell identification and provide training.

CellaVision adds incredible accuracy and consistency to the differential process. It helps identify technicians who might not recognize certain cells, like blasts, and provides a record for training and consistency. Customers appreciate the quality improvements, which are immeasurable. The simplicity it brings to the laboratory is amazing. Doubling quality while simplifying processes explains its popularity. However, not everyone agrees. On platforms like Reddit, some experienced technicians resist it, preferring microscopes, especially if they're close to retirement.

I understand. It's important to take such opinions with a grain of salt. Often, those who are most upset are more likely to post about it, leading to a selection bias.

What's funny is that when we go back to people who initially say, "I don't like it because the cells look different," I respond, "Yes, they might look a little different in color, but they're still the cells." After they get accustomed to it, after six months or a year, they often say it's their favorite instrument and they love it more than anything in the laboratory. That's what you hear 99% of the time. For those few customers who aren't happy, I always say we need to spend time with them, give them encouragement, and show them how easy it is to use. Once they understand, they really get it. Labs trust it incredibly now. You're right, on platforms like Reddit, people who dislike something tend to speak up more than those who like it. But when you look at the comments, if someone says something negative, about five people usually come back to defend it. They all know.

Yes, exactly. I wanted to follow up on the RAL reagents and consumables business. The acquisition was in 2019, and now it's 2024.

With Covid causing disruptions, to the best of your knowledge, where are they now with integrating the consumables into the distribution? Has it taken too long?

Initially, the first year was about getting RAL in line and increasing their capacity since they were lower volume. A significant investment was made in new equipment to boost stain production, which was affected by Covid. They've likely been in discussions with Sysmex. Distribution is challenging because you can't just open a warehouse and start shipping. You need specialized warehouses for flammable materials. There's also the decision of whether to ship concentrated and reconstitute locally or ship heavy materials overseas, which takes weeks or months.

Finding the least expensive method of market entry is crucial, especially with handling issues in Asia, where the market might be scattered. Discussions with Sysmex have been ongoing. They've reviewed and tested our products, made suggestions, and this process takes time. I believe Sysmex will probably be the preferred distributor. They can handle it all immediately, and once they agree, we could start switching customers over. I think they're waiting because they have a new product coming out and want to launch it alongside the new stain system, possibly at ACC next summer.

The new product, do you mean the DC-1 or the bone marrow stuff they're trying to launch?

It's going to be incredible with the new DC-1, the bone marrow application, and the RAL stain. I think all these things will launch next summer. CellaVision has a solid base, but the upside potential lies in ensuring these launches happen. Over my 15 years with CellaVision, I've seen two or three companies come and go, and we've outperformed them all. Everyone compares their products to CellaVision and prefers CellaVision. They have a unique, trusted brand name now. I believe their bone marrow application is far superior to what I've seen from Scopio. At the show last year, people mentioned Scopio claims to have bone marrow capabilities, but it's not even FDA cleared, so it's a non-issue right now. They make a big deal out of it, of course.

I'll have to chat with some people at Scopio. I'm curious to hear their perspectives. On a different note, what's your view on CellaVision's management nowadays? Zlatko Rihter left in 2020.

Zlatko was unique, very calm, but confident, and he made things happen. I love Simon Østergaard, the new management. He's a really nice guy, and you can trust everything he says. He's so honest, sometimes I think he should just leave it as a good message. He'll tell you the good and the bad, and sometimes less is better. If this presentation on my screen came from him a year or two ago for the market, it's designed for you guys to see exactly what we're doing. You'll see his pictures in there. He's a nice guy and pretty smart. Simon is a PhD with a lot of experience, so I think he's fantastic.

My impression of him has been good. The business has done well, and I try to differentiate between the business being good versus new management making an impact. I think he's been doing decently well. Wasn't the CFO supposed to leave at some point? Magnus?

Yes, Magnus Blixt. He decided to stay. I was surprised. I don't know if he had a conflict with the board or Simon. That was around when I was retiring, so I didn't get the full picture. They probably thought the CFO leaving isn't a good sign.

Magnus is a great guy. I did my budgeting with him every year, and he's an excellent CFO. I could speculate, like you, why he almost left. Maybe he got another job offer and decided staying with CellaVision was the better choice.

If I remember correctly, the sequence of announcements was that Zlatko left, followed by Magnus Blixt saying he was about to leave. That made me hesitant about the company because having both the CEO and CFO leaving at the same time seemed concerning.

Magnus became the CEO of another company. Matthias, who was my boss, was responsible for sales.

They might not have announced it, but I recall Magnus was about to leave six or nine months later. I kept an eye on the company and noticed his name still there, which made me think he hadn't left.

It's a good sign he stayed. Financially, the company has continued to perform well, supporting operations and research and development, even during Covid. I own a lot of the stock, having bought it when I joined the company and it was first listed on the Swedish Stock Exchange. It's been a rewarding experience. It's probably still doing well.

Holding onto that one company makes you a better investor than 99.9% of professionals out there.

CellaVision has been really good. It's a small company compared to Beckman Coulter or Siemens. A small company can double their sales, which is significant for them, but a rounding error for Siemens.

Yes, it's orders of magnitude smaller, with around 80€ million in revenue annually. That struck me because the stock performance and financials warranted a closer look. It's impressive that the business generates such margins at a small scale. If it were a US business, they might run it at break-even until reaching a billion dollars in revenue.

We grew it.

Yes, that's true. It might be a feature of the market size, but Sweden has many such companies, which is why I like looking there.

If you were in my position and trying to monitor the company, how would you keep track of the rollout of RAL Stainers through the Sysmex distribution? How would you approach this? Obviously, they have public reports and all that.

For us, the rollout has been slower than I would have liked. I thought we could move faster and encourage Sysmex to prioritize our products for sale on their slide makers. However, Sysmex is a smart company with a long-term perspective. They plan their launches carefully to improve and innovate. The delay in the launch is partly due to their strategy.

The MCDh will be a game changer because it will be methanol-free, reducing waste and costs for hospitals while being less hazardous. I believe it will set a new standard. The bone marrow and other products, like the DI-60 plus, are also promising. They acquired the FPM technology, which is not discussed enough but is a game changer. CellaVision's releases show its potential to revolutionize the field.

The DI-60 plus will be 10% to 20% faster. The DI-90, expected in about two years with Sysmex, will be three times faster due to the FPM technology and will offer better images.

Yes, that's significant. Scopio uses this technology, and we own it, which limits their capabilities. It's a smart move. The DC-1, FPM technology, bone marrow, body fluids, RAL, and the DIFF-Line entering smaller markets all represent fantastic growth opportunities.

The only negative aspect is setting expectations. I struggle with them consistently aiming for 15% growth. I wish they would set lower targets and exceed them. If you aim for 15% and achieve 12%, you're still outperforming the market, but it appears as a failure. People read about CellaVision achieving 13% growth and see it as falling short of the 15% target. In a mature market where we've dominated, growth might slow to an impressive 12% instead of 15%.

And then you push harder on the DC-1.

Yes, and I think it's still about consumables, right? That's probably why they're keeping the 15% there as a target. You have the consumables with RAL, which will affect more than just the business model. It will impact the business model because you have recurring revenue every month. They sell software, services, and supplies for the meager, as you mentioned before, it's a smaller amount per instrument, but they have thousands of instruments out there now. So even a couple of thousand on each instrument is a nice income for CellaVision. I think they're in a great place. It's just about what you're going to claim and how fast the RAL stains will kick in, how fast the bone marrow takes off in its particular space, and how fast DC-1 accelerates. The growth has been incredible so far. Now we have the stain that goes with it and the smear maker that accompanies it, which I think will be very positive. If I could make those predictions, I would have your job.