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.

{audio:0:00:20} Alain, could you give us a quick introduction to your background?

{audio:0:00:26} I have been working for almost 30 years in the in vitro diagnostic field, firstly with bioMérieux, then Novartis Vaccines and Diagnostics that was Chiron and is now Grifols. Later on, I worked for DiaSorin for about six years, until two years ago. Since last year, I have been working for QIAGEN. Just to make it clear, I am in the exit process from QIAGEN, because I joined as the head of some business but I have been asked to execute what the management is telling me to do and I don’t feel as if I have any interest in staying. I am open to any position, right now.

{audio:0:01:19} While working for QIAGEN, I have also been collaborating with DiaSorin, because I am dealing with the tuberculosis business and, indeed, I have been working, from DiaSorin, together with QIAGEN, until two years ago. Because nothing changed much over that period, for the last year, I have been helping to start the collaboration between the two companies. When it comes to DiaSorin, I would say that I was working for six years in the commercial operations, dealing with sales, marketing, operational business development, managing distributors or setting up new direct operations or managing a set of direct operation companies across the world, but mainly in Europe, the Middle East and Africa. Whilst I was working for DiaSorin, I had the chance to work in Latin America for three years and, later on, in the Asia Pacific. More recently, I have also been dealing again with Asia Pacific.

{audio:0:02:33} The only countries I have never touched are the US and Canadian market, Brazil – which was outside the scope of Latin America – and China. But I have worked extensively in Europe, the Middle East and Africa, as well as quite some time in India and Australia. More recently, I have also been working quite a lot in Korea, Vietnam and Thailand. Due to the fact that I was working between DiaSorin and QIAGEN, I was doing some consultancy activities for companies willing to expand their business outside their countries, or to attract partners as local distributors. I was doing that for almost a year, before joining QIAGEN.

{audio:0:03:30} In DiaSorin, I was directly reporting to the COO, Chief Operating Officer, Chen Even. I was 10 meters from his office and 12 meters from the office of the CEO. DiaSorin is still a mid-sized company but, in terms of head count, it’s a very tiny company. This also explains why the company is so profitable, because they don’t have many employees and each employee has to do a lot of different jobs. Indeed, I had quite a lot of interaction with CEO, with the COO and with the top management and this is where I believe, when it comes to DiaSorin, I have some visibility that, perhaps people worked for DiaSorin remotely did not have, because I was working with those guys on a daily basis.

{audio:0:04:39} You mentioned that they don’t have many employees. Is that really a strategic focus of the CEO, to make it a lean operation?

{audio:0:04:55} I was going to talk about the mindset of the company later on, but I will touch on it now. In DiaSorin, the company is product oriented. They have product and they put it on the market. They don’t trust many commercial operations as such, even though they know that they need it. They also don’t trust exotic countries much; they have had past experiences where it was not so easy to sell in such places and, therefore, they have been limiting the countries where they operate. It is mainly in Western Europe, the US and also China, for the same reasons as everybody else. Besides that, they have always been reluctant to invest a lot in terms of head count. It is only R&D investment that is put in place and, after that, they don’t like to spend money. They always want to limit the recruitment of people so the growth of the head count in DiaSorin was due to the acquisition of new companies. I don’t know if you have seen it over the years, but it’s quite flat. They managed with the same number of people over time and even when they operated in more complex countries, such as India, with a low cost for head count, they were reluctant to recruit.

{audio:0:06:32} The head count is an indicator that they want to see at a lower level, across all geographic areas. It also explains why, in the US, they have been working successfully in a different way and why they collaborate with companies that are larger, such as Beckman. DiaSorin do not want to put a lot of money into commercialization and developing sales while they believe they are not able to do it on their own or it will cost more than they would keep for profitability. Profitability is the key word. In DiaSorin, they do not want to compromise with the margin. I have had many opportunities of big contracts, such as in Turkey, where we had multi-year and multi-million-dollar contracts, but when it came to the way that they were reporting it, they preferred to either step back or to find a way to maintain higher margin even if, in terms of revenue recognition, you reduce the revenue, rather than getting the full revenue but having the full cost.

{audio:0:07:46} For instance, when it comes to Turkey, it was a three-year contract of almost €18 million, but inside this €18 million, we had to sell some Tecan equipment to the local distributor and it was almost €6 million, with 10% margin. DiaSorin was buying equipment from Tecan and, with the contract, was forced to have a cost plus 10% maximum. They preferred to let Tecan sell directly to the Turkish distributor so that they did not dilute their margin.

{audio:0:08:32} The company really focuses on high profit. All the communication that they have been doing for years evidences that. Ultimately, the head count is a driver. The lower the head count, the better it is for them. This is why all the businesses that they have been acquiring in the last few years is the only reason that their head count has increased. Over time, if it became less interesting, they would stop the activity. That was the case with ELISA, that they purchased from Murex. They closed the factory in South Africa, after a few years. For molecular, they bought NorDiag from Norway and they moved it to Ireland, for both tax purposes plus the fact that, in Ireland, they had another acquisition, called Biotrin, for parvovirus. Later, they closed all the NorDiag activity. They don’t want to have incremental head counts.

{audio:0:09:35} More recently, they took the same approach with molecular, outside the US, as they were not able to succeed. The panel of tests were not matching what the customers wanted, mainly in Europe. Therefore, they were investing in limited head counts but, after two or three years, when they saw that it didn’t work, they stopped it. They did it with NorDiag some years ago and the molecular business dropped. Then they acquired Focus Diagnostics from Quest, in the US, five years ago, which was mainly for molecular and it has been successful in the US, thanks to Covid. It has been successful in Australia but everyone else decided to step back. They sell in a passive as opposed to an active way and they are not increasing their head count.

{audio:0:10:26} This is why Luminex is coming in at the right time because they have a problem. They always said that they would have a second pillar, besides the immunoassays, which is the historical test but, in molecular, they were not successful enough and Luminex will also be a way towards the multiplex and syndromic approach to fight with the big giants. There are some bigger companies out there, such as QIAGEN, bioMérieux but also Roche. Roche recently undertook the acquisition of GenMark as well as Hologic which is now entering with the acquisition announced last week of Mobidiag. People are moving on; Cepheid was already there, as a Danaher Group representative. I don’t know much about Siemens or Abbott in that respect. I would say that the big players are out there, with DiaSorin also entering with this acquisition to come.

{audio:0:11:30} That’s very helpful detail and it actually segues into a very important area of questioning which is, how does DiaSorin decide which disease to go after? The second part of the question is, how does DiaSorin continue to do so well while some of these big players that you just mentioned – Roche, QIAGEN – are also very much present and competing head on? Why and how do they allow DiaSorin to be so successful?

{audio:0:12:12} Historically, DiaSorin was a radioimmunoassay and ELISA company. Thanks to that, they acquired some other companies, such as BYC Sangtec in Germany that gave them access to autoimmunity, thyroid and some other parameters. Then they had an opportunity in the US, with Vitamin D. Theirs were the only products sold, in many geographies, including the US, because they were alone and because there were a lot of prescriptions; it was also a fashion to do that testing. All of a sudden, many competitors entered over the last six, seven or eight years and the reimbursement dropped or the indication to prescribe it dropped because it was abused. There were some countries that were prescribing Vitamin D across all kinds of screening, without limiting it to specific parameters. It came back to a normal level and because there was competition, the price also dropped.

{audio:0:13:24} Indeed, DiaSorin, six or seven years ago was flat every year because Vitamin D was robbing them of revenue and volume. In parallel, they were forced to develop the menu. The menu was developed thanks to the acquisition, firstly, of Murex, from Abbott, with the ELISA. It gave them the access to hepatitis and HIV and also raw materials.

{audio:0:13:50} How do they choose those? How do they choose the diseases? Do they stand back and say, I’m going to choose this?

{audio:0:13:56} No, because Abbott was selling the Murex ELISA. All of the company moved to chemiluminescence or other platforms; ELISA is the old-fashioned format and it was for sale. But it was not just the product and the customers who were using it, also the access to the raw materials that was the opportunity for DiaSorin. The CEO of DiaSorin always said that he bought Murex to be able to apply the hepatitis and HIV parameters of Murex on the LIAISON, DiaSorin’s chemiluminescence platform, and it became an opportunity for DiaSorin to expand their menu. Even if they didn’t want to go into the blood transfusion business – which the market forced them to enter, and the CEO was always reluctant to do so – at least for the general screening this gave them an opportunity.

{audio:0:14:56} When it comes to Beckman, Beckman has been very weak on that. For years, they did not develop anything beyond Access HIV and, at the time, it was Sanofi Pasteur who had the patent for HIV, 25 year ago. They did not develop infectious disease within Beckman. Because of some interaction in China, while DiaSorin did not want to enter into all those hospitals because it was a huge investment, with limited skills, to enter there, Beckman was a very strong and large organization and they agreed to have this collaboration because it was very positive for both of them. They agreed to develop the parameters for the US market. DiaSorin invested a lot into the UK into the old Murex factory, for a specific line of product for the US, for Beckman. Beckman partially financed this development and, over the last couple of years, they have announced that those parameters that will be sold with Beckman – either with Beckman selling it or when DiaSorin has their own system, through DiaSorin – for the US market.

{audio:0:16:18} This has been opportunistic for both companies but the mindset of DiaSorin has always been to keep a mid-sized footprint; not to be playing against the big but to try to move out of the small players. Because they have a huge menu in infectious disease – maybe 100 to 120 parameters – this is quite unique and with some specific parameters where they are very good and recognized as a reference. Many big players saw an opportunity to connect the total lab automation – all those big track systems that connect all their different equipment – and they agreed to let DiaSorin connect to them because DiaSorin is a small player; it is not risky for those few parameters that are unique to DiaSorin. Those are the few parameters that the customer will ask to have but they will never buy from those big players if they can continue to do so from DiaSorin.

{audio:0:17:26} This why, when DiaSorin decided to have full automation, with a company called Inpeco in Italy, that they also provide to Abbott and Siemens, DiaSorin was thinking of offering the Inpeco system on their own, but in Italy, not many customers were interested in it because it’s a big cost. You need a lot of LIAISON XL DiaSorin equipment to cover the need of large labs with this total lab automation.

{audio:0:18:04} On the other hand, they have access to Abbott, Siemens and Thermo Fisher was also interested in connecting. Then also GEM and Beckman because of the agreement. They all accepted to be connected to the small LIAISON XL, for a few parameters, to some customers. It is also sometimes a lock-out specification because, in the past, maybe customers wanted, definitively, the Vitamin D from DiaSorin, the parvovirus, the Epstein-Barr virus or the herpes simplex virus that are quite unique in terms of automation; nobody else has it. They agreed to sign a contract of connectivity, with LIAISON XL, on their total lab automation solution.

{audio:0:18:55} I can tell you, at the beginning, I was fighting to be connected, at DiaSorin. They were afraid of being acquired by those big players. They also had an agreement with Roche on a new platform, to connect DiaSorin’s LIAISON XL to this new platform. I am not sure if they have more than two or three in the world now, after eight years, but it was the first agreement with Roche. For DiaSorin, it also showed that they were going to play with the big players but, in terms of revenue so far, it’s nothing because it was a new system from Roche. But it was some movement towards collaboration with others; Beckman, because of China; Siemens and Abbott because Inpeco’s equipment for total lab automation are the same as the same as those that DiaSorin agreed to have for themselves, initially. Therefore, this provided a unique opportunity, but it was market driven and not strategic from the company.

{audio:0:20:02} At the company, they were reluctant to connect any LIAISON XL to any system from a third-party company and we were struggling from a commercial standpoint. The reason we signed with Abbott was that, in Qatar, a small country in the Middle East, Qatar was forcing Abbott’s EMEA head to have the DiaSorin solution connected on their platform and Abbott won the business, at that time. Three years later, Abbott lost to Roche but DiaSorin was still connected because the customer wanted the DiaSorin tests connected to the full automation platform of those big players.

{audio:0:20:49} In the end, I think, by chance, DiaSorin found a good opportunity, but not to position themselves against those big players, because they could not. One of those big players could acquire DiaSorin but DiaSorin was always too expensive, from what I understood from some of the other big companies. But it gave them the opportunity to be in those big labs and to promote some of their tests. You always need a second supplier, in any laboratory, when your main supplier has a back order for products, when there is a product recall or when you want a second method to do some testing. Indeed, with Abbott, Roche or Siemens, they preferred to see DiaSorin with them, rather than having Abbott in front of Siemens or Beckman. They decided to collaborate with DiaSorin because the market forced them.

{audio:0:21:58} The first time it happened, all those big players tried to be independent. But because customers pushed – and later on, DiaSorin learnt how to push some customers – they were convinced it was feasible to have a DiaSorin solution with those big players. They established big tenders and those customers, when they were strong enough, forced the big players to share a piece of the cake or some parameters, with DiaSorin. This is how DiaSorin has been able to work and collaborate with all the main players, by having a total lab automation solution; all that big tracking, with pre-analytics systems and the conveyors, providing full automation in the lab. This is what made DiaSorin still visible in big labs and still growing. Otherwise, DiaSorin’s platform is too small.

{audio:0:23:04} You hit on a couple of very important points there. If I just use Vitamin D as an example, obviously, DiaSorin was very successful early on. Over the last few years, a lot of big players and a lot of competition came and DiaSorin’s volume and pricing has come down. That is one of my biggest fears and I’m going to turn it around and ask you, in your mind, what is the biggest challenge for DiaSorin, as they continue to expand their offerings, both on immuno and molecular?

{audio:0:23:46} They have one immunoassay with LIAISON XL and they decided to launch LIAISON XS, a smaller platform, where the main competitor is bioMérieux because they are the only competitor having such a large menu of tests in infectious disease. Additionally, bioMérieux has just entered into tuberculosis, with their own IGRA test, which is going to compete against the QIAGEN/DiaSorin solution. They are head-to-head, but LIAISON XS is a way for DiaSorin to attack the huge installed base of the VIDAS system from bioMérieux.

{audio:0:24:26} Again, it’s for small countries. For the big countries, you need to go for the full automation and the uniqueness of DiaSorin is to be able to be part of those big labs thanks, sometimes, to the partnership with the big players and, perhaps, some parameters. Vitamin D is in the past because now, I think, there are seven or eight big players who have Vitamin D. DiaSorin developed additional tests around Vitamin D that were complementary and, again, smaller volume but much higher price, with a higher profitability, so it helped DiaSorin to maintain profitability. Also, some DiaSorin tests are unique, such as Epstein-Barr virus, herpes or the Borrelia – Lyme Disease – or the varicella disease. Additionally, this applies to the stool diagnostics where, again, bioMérieux has recently entered.

{audio:0:25:32} The first full and big automated solution for stool diagnostics was DiaSorin and they have been working on that a lot. Of course, they have also got some other parameters. But they are not strong enough in what we call immunochemistry tests, such as thyroid or cancer markers and so on. That also applies to autoimmunity where they don’t have the menu.

{audio:0:25:58} But in infectious diseases, they have been developing and, thanks to Covid recently, they have also been developing a number of other things. They have developed for Zika; there was no cell, but they developed the Zika parameter. It also shows the investors that DiaSorin, like the big players, plays well with the investors or the stock market, in terms of communication. Everybody was demanding Covid on LIAISON six months ago, but now there is not much interest; only the molecular is still growing on Covid. The serology test or the antigen test is not as big as they were expecting and, of course, every company has entered into that and it’s a price war, I believe. DiaSorin does not want to enter into a price war and doesn’t want to drop their price much, so they have not been so successful in that area.

{audio:0:26:59} When it comes to immunoassay, I think they have found their niche, being complementary to big players, for big labs and being able to collaborate – with Beckman, for example – on a large menu in China, but also in the US, finding a way to be complementary and get a piece of the cake. When it comes to labs, they have the LIAISON XS. I don’t believe that they will be very successful unless they are able to drop the cost of the machine because it’s quite high, proportionally, to LIAISON XL. But it is designed to fight against bioMérieux that had a huge installed base on VIDAS, all over the world.

{audio:0:27:41} DiaSorin’s problem has always been in having a second foot, which was molecular. This why, 10 or 12 years ago, DiaSorin invested in the NorDiag company, with the Q-LAMP technology that was from the Japanese company, called EIKEN. Some other companies have been using this technology too. But DiaSorin’s problem was that the menu was too small, with not enough parameters to be attractive to the lab. Indeed, they launched it mainly in Europe.

{audio:0:28:14} When they acquired Focus Diagnostics from Quest, five years ago, because the technology is very interesting and innovative, they were able to grow the molecular business of Focus, in the US and Australia, because the menu matched their needs. But it’s not a menu for Europe. They stepped back and I know they stopped having dedicated people to push more in Europe around that, while they continued to do so in the US and Australia. But in Europe, they still have some business and, also, thanks to Covid, they have some molecular business. Luminex is the way for DiaSorin to, definitively, have a second pillar and not just the immunoassay.

{audio:0:29:04} They are clever because they always try to not go head-to-head with the big players. They try to hide themselves and get a piece of the cake. With the acquisition of Focus Diagnostics, it gave them a better footprint in the US market, to have access to more customers but they still don’t want to have 100 salespeople to promote their products. This is why, maybe, they are not as successful, because they don’t want to compromise their margin. With Luminex, I don’t know, because it’s a big elephant for DiaSorin.

{audio:0:29:42} With that transaction they have said they know they will have more employees in the US than in Europe. Going back to Luminex, just another follow up question with respect to some of these JVs that they currently have. Is it DiaSorin or the OEM who benefits?

{audio:0:30:38} It is the right question to ask. QIAGEN had the ELISA solution for the tuberculosis test. On ELISA, the technology depended on other equipment from other companies, such as DYNEX in the US that was very expensive, or any open ELISA reader systems, so there was not full leverage. Competition was coming and the CEO of QIAGEN, Thierry Bernard, was former bioMérieux and, incidentally, was my boss. Tuberculosis tests require a lot of testing; you do four tests to get one result. This means that you use a lot of the equipment capacity. Therefore, VIDAS is only for the small TB labs. 

{audio:0:32:09} They could go to Siemens, Roche or someone else, but they were too big and they would lose their knowledge completely because it’s IGRA technology – Interferon Gamma Release Assay – where it’s the T-cell response that is done on ELISA, to read the result. Then they wanted to move to chemiluminescence and, through some discussion, they found that DiaSorin could be a solution. From DiaSorin’s standpoint – because I was at DiaSorin at that time – when they saw the IGRA technology could apply beyond tuberculosis, to many other parameters, they saw it could be a way to relaunch immunoassay testing, a new approach and, again, be unique. They took this opportunity and I remember the Chief Medical Officer and the Vice President for Research and Development, were all excited about the next test.

{audio:0:33:12} You may not be aware but now, on their LIAISON platform, DiaSorin has just launched a Borrelia test – a Lyme Disease test – with QIAGEN’s IGRA technology. This has been done in a better way. The first agreement between the two companies was not well done. The top management of both companies said that they were interested in collaborating but from an execution standpoint, it was a disaster. It is still not working well, except in the US and Australia. 

{audio:0:34:33} You visit a customer and they want a solution; they want the tube and the CLIA, but they have to buy from two partners. It has been a mess but it is improving. Now, for Lyme, a solution has been found which is a fair solution. DiaSorin is getting the tubes and the test that they sell and they are autonomous. The other parameters will move in that direction. To be frank, it will certainly be the model in some other countries for tuberculosis.

{audio:0:35:12} The only specific thing for tuberculosis is, who is deciding to prescribe IGRA tuberculosis tests? It is the clinicians. DiaSorin visits labs; they don’t visit prescribers. This is where QIAGEN has this expertise. The labs just execute the tests that are prescribed. When it’s IGRA technology, there is not alternative. You have bioMérieux coming and you also have a Korean company, SD BIO on ELISA. Beyond the Lyme test, others will come with IGRA technology and DiaSorin will have the full responsibility.

{audio:0:36:20} For immunoassay, this is where I believe they can continue to be a specialty test provider and to still attract the big players to connect their platform to their total lab automation solution.

{audio:0:40:10} I would like to pose a hypothetical question. If you were the CEO of DiaSorin, who would you be most afraid of, as a competitive threat and what would be your strategy for the medium to long term?

{audio:0:40:28} If I were the CEO, I think there is something that is critical today which has been a concern for some years, is Gustavo Negri who is 84 or 85 years old. That is besides the fact that they wanted to have a second pillar with molecular, with Luminex, which they have succeeded in acquiring, because it’s not easy for a European company – especially Italian – to acquire a US company. They have seen it in the past, with Focus, in California – imagine Italian versus Californian – while the older DiaSorin company is in Minneapolis. In terms of mindsets, US states are a bit more closed than Europe, but they have been able to manage with the Californian company. Therefore I believe, with Luminex, they could. But the main concern remains Mr Denegri.

{audio:0:41:33} Is his son, Michele, still involved?

{audio:0:41:36} Michele is Vice President. I had the chance to have some interaction with him for other reasons, because he lives in Paris, with his wife and children. He was not happy with the schooling solution in Torino and we discussed that because I myself moved my family back from Torino in Italy, to France because we were not happy with the school. Indeed, he opened a Michelin star restaurant in Torino and he is more interested in using the family money to refurbish all the palaces or hotels or buildings. He is more artistic than focused on business. He is Vice President because of his father and because the other son is not directly in the loop. I think he is in London, working with private equity. I don’t know much about the other son.

{audio:0:42:38} But the father has been the driving force from his past experience and, also, because the father was very close to the father of Carlo Rosa, the CEO. It’s not a family business at all, because Mr Denegri is very demanding and demands a lot from Carlo Rosa. But when there was an MBO in 2000, together with Mr Denegri, Carlo Rosa got 8%. Chen Even, the COO, got 5%. Altogether, the three of them, have the majority of the company. The risk is when Mr Denegri dies, which may happen quite soon, what will happen. I don’t see Michele Denegri continuously being involved. He was an artistic guy, among financial or scientific people. I’m not saying that he does not understand the business; I cannot judge. But this is the risk for the CEO. I think, for Carlo Rosa or Chen Even, who have been supported by Mr Denegri with him also challenging them to grow the organization and also supporting them for the Luminex acquisition, what will happen if he is not there?

{audio:0:44:05} For me, I have always thought that DiaSorin would be interesting the day that Mr Denegri says, okay, it’s for sale. He had been talking a lot with Alain Mérieux from bioMérieux. Alain Mérieux is not very involved now but, many years ago, every year he had a dinner with Mr Denegri. Alain Mérieux speaks Italian and has a house in Italy. Every year, this was what was talked about in DiaSorin but also I have learned the same from bioMérieux, later on. Every year, Alain Mérieux would say, when are you going to sell your company? Mr Denegri would say, I don’t want to sell at the moment.

{audio:0:44:48} More recently, Alain Mérieux has been saying, you are too expensive to be acquired. For bioMérieux, not having a big solution for a big platform for immunoassay, DiaSorin was a good step as bioMérieux has a smaller platform. In terms of European mindset, Torino and Lyon are 300 kilometers apart; they are neighbors. From many aspects, it would have been a good fit but it is too expensive and now, with Luminex, they can forget about it.

{audio:0:45:23} Is a big player or newcomer willing to try? I don’t know. For sure, Mr Denegri is the one that certainly makes the CEO think about the risk, in terms of the company. They also started some point of care collaboration with an Israeli company, MeMed; they have tried to enter into different segments in intelligent ways, not by going head-to-head with the big players, but by trying, when possible, to collaborate with them.

{audio:0:46:07} The only thing is that Covid has certainly made their molecular business in the US grow very quickly and, if the testing drops, it will come back to a lower level which is not something that DiaSorin likes, because they always want to show incremental revenue but, mainly incremental margin. If you look at their annual reports over the last years, that is what they are trying to do. It would be really bad for them for it to go down. Thanks to Luminex coming at the right time, it might be a way to dilute any negative Covid affect.

{audio:0:46:51} Alain, you started off by talking about how DiaSorin has a constant focus on keeping the margin high and, in the process, doesn’t have as many employees as some of the other diagnostics companies. Across the spectrum of all these diagnostics companies, how is it that Roche is the only one which has consistently generated an on par or slightly better margin than DiaSorin, while everybody else – Quidel, the San Diego based Covid company, Abbott, GenMark, BDX, QIAGEN – all struggle to put up anywhere close to what DiaSorin has generated, both in terms of revenue and these healthy margins? Is SG&Athe primary driver of that healthy margin? Or, in addition to that, are there other aspects, in your opinion?

{audio:0:48:01} I think it’s a mix. I think it has been in the DNA of the company from the very beginning. For instance, they didn’t want to enter much into getting instrumentation; they don’t want to take the risk. When you hear about the other companies having their own equipment and instruments, you need to provide servicing, spare parts and so on. It’s a huge cost. Also, some of them also have some live sales and that needs capital investment; you sell mainly equipment. DiaSorin wants to focus on selling high-value, high-margin tests and they don’t want to spend too much time in promoting it. They want it to be so unique that people come to you as opposed to the other way round, where you are required to promote it and have a large number of sales people and this is, typically, what has happened in the US. They were always reluctant and they did things in a different way with LIAISON immunoassay and molecular. They had a completely different approach in the beginning and then they tried to merge the organization. More recently, I don’t know where they are. I think they have tried to maintain this high profitability.

{audio:0:49:16} When they are focused on the diagnostics, they can show they can have a technology that is not costly, in terms of instruments, and with high profit. You can perform so many tests with one instrument and that allows you to absorb the cost of the instrument and, additionally, the instrument is very small and of very low value. Now Luminex is completely different. Luminex is also in live sales and they have big equipment and take a risk. But thanks to this syndromic testing, with those panels that allow companies to sell and invoice testing at a very high price, whilst the cost is not so high, they are able to main a good profitability. I read the announcement that the acquisition of Luminex will not dilute DiaSorin’s margin.

{audio:0:50:16} They have always been very cautious, in terms of spending money except on research and development. They don’t like spending money when it comes to activities that are extra, such as instruments, servicing and also logistics. They tried to externalize the supply chain and they failed. They tried to get DHL to do everything for them because they wanted to save costs and reduce their head count in each of the countries. They have drop shipments, all over Europe. From Italy, they deliver to all the end users without having any warehouse anywhere.

{audio:0:51:03} The only thing where DiaSorin was still not in the same mindset was in manufacturing sites. They acquired one site with NorDiag and they acquired one site with Biotrin, for the parvovirus; they had Ireland when they acquired Murex and they had South Africa and the UK and it took time for them to close some of those and now there is only the UK left. They have production in Germany, because they bought BYC Sangtec, which gave them the LIAISON technology. Of course, they have Italy and the US, with a focus in California for molecular. Now they are entering in China, trying to collaborate with local partners like every big player, because it is the only way to increase their penetration in China and they will have to go for manufacturing too.

{audio:0:51:59} They always try to minimize any kind of cost for anything. The company did not even attend the main exhibition events. In the US, they did not want to attend the AACC Congress that is the most important for the company and, in some years, they said they were not going. The US team was obliged to go at a much lower scale with lower spending. They really count every euro and every dollar, which may be a bit limiting because all the money they invest is for R&D, to have this agility to react quickly to develop tests. They were among the first companies to have a chemiluminescence solution for Covid, for instance and the same applies for Zika previously, even if, sometimes, it is more for a communication purpose than for revenue generation.

{audio:0:53:04} Once the Covid pandemic dies down, which particular disease and the associated product do you think will dominate on DiaSorin’s platform?

{audio:0:53:17} For DiaSorin today, Covid is mainly the molecular solution, in the US, with a little bit across some other countries. When it comes to the LIAISON immunoassay solution, they have launched multiple tests, such as IGG, IGM and a new one that allows you to monitor vaccination or people post-infection, to have better tracking and, of course, the antigen. They try to have a menu. Which one will be left, I think it’s a crystal ball because many companies are trying to develop many things. If they want to move to a fully automated solution, DiaSorin would, for sure, be jumping into that because they have the knowledge and they are already collaborating.

{audio:0:54:38} The only thing is, today, like many of the Covid tests, it’s for research use only and it depends on literature publication and it requires time. But if, at the end of the day, it’s a good solution and it is a product that you can really commercialize. I read literature and I also saw that PerkinElmer acquired Oxford Immunotec, another TB player, having an IGRA solution, but they also have a SARS Covid solution. There is a way for DiaSorin to sustain both their molecular Covid and their immunoassay Covid but nobody knows exactly which way it will go.

{audio:0:55:39} Just from a competitive point, you mentioned how the biggest competitive risk, in your opinion, was really the owner and founder dying and the family breaking up. Is there any real competitive risk from the larger players or any other company that could really start to encroach into DiaSorin’s business?

{audio:0:56:01} The only risk is that all those big players would decide to develop those specialty tests and do not need DiaSorin. But they don’t want to enter into those small volume tests. Therefore, if they have not done it so far, why would they choose to do it tomorrow? The only risk is being acquired by a big player, if they think it is worth acquiring DiaSorin; they are already collaborating. When it comes to a head-to-head competitor, the only one really in front is bioMérieux because the menu is the same and the focus on infectious diseases is the same. As I said, they are head-to-head with tuberculosis. The only thing is, bioMérieux has never succeeded in having a larger immunoassay platform and they are still using VIDAS. They are currently on VIDAS third generation which is a 20-year-old technology or system. It is equivalent to the LIAISON XS, DiaSorin’s smaller LIAISON. Indeed, DiaSorin is trying to attack bioMérieux rather than the other way around.

{audio:0:57:09} From a menu or technology standpoint, I would say, from my understanding, bioMérieux is the only potential threat to DiaSorin, if they were to come with a larger platform. Using their own technology for tests – they have a huge menu in infectious diseases – if bioMérieux managed to apply that onto a new system, then that would be a big problem.

{audio:0:57:41} Is that a focus for bioMérieux? Are they really competing with DiaSorin like that?

{audio:0:57:48} No; the problem in bioMérieux is that they have left the immunoassay franchise, more and more over the years, because they acquired BioFire in the US. They also went further in all susceptibility and anti-microbial testing. That is where they are very strong and their main competitor has always been BD. When it comes to VIDAS, they had a sepsis test or tests for some specific markers in some markets but were not promoting their large menu anymore, for customers using multiple tests because their VIDAS platform is too small.

{audio:0:58:29} Just for your information, when I joined DiaSorin, I started to go to bioMérieux distributors who were successful in markets where the labs were growing and where the volume was growing and when the customer has the VIDAS system they are happy. But when the volume is too big, they come to bioMérieux and eventually ask for a second VIDAS but, in terms of automation, it is not as good as a bigger player, so then they go to Abbott or Roche. This where I was dealing with bioMérieux distributors in some countries, asking them to consider DiaSorin LIAISON as a solution because it was less risky for bioMérieux, at that time, than going to the big players. If they were to go to the big players, bioMérieux may lose the distributor, at the end of the day.

{audio:0:59:26} We did it in three countries and, because I worked at bioMérieux, I also discussed this with the bioMérieux people and they had no problem because the LIAISON XL was a big machine, in comparison with VIDAS. But now, with the LIAISON XS – the smaller LIAISON – they see it as a threat. It was a threat some years ago where, some years ago, at a Congress, I saw Christophe Mérieux who is the son of Alain Mérieux and is now the CEO of bioMérieux, and he saw me at a booth and we spoke a little. He was asking me a lot of questions about the small LIAISON and I completely understood the questions they had. If DiaSorin comes with a smaller platform, they will attack the huge installed base of bioMérieux.

{audio:1:00:20} How could bioMérieux react? What would they do? Would they cut off the distributor relationship that they had with DiaSorin?

{audio:1:00:28} Those were tiny countries because bioMérieux goes direct where they need to be direct. They were sending immunoassay tests on VIDAS, for very niche markers, which means they are not really competing. On the other hand, LIAISON XS is not yet available. It has been announced; it is the same as LIAISON XL but it is very costly to operate. Therefore, I don’t see DiaSorin spending too much unless they could cut the cost of the instrument. They buy the instrument from StarTech, a Germany company providing instruments; they don’t develop it themselves. But they have good costs from StarTech for the LIAISON XL. Again, just to show that all the companies are interacting, StarTech was providing the Panther machine to Gen-Probe Hologic and when it was Novartis Diagnostic the Panther system was at X price and 90% of the components are the same as LIAISON XL from StarTech. But DiaSorin got half price as compared to what Hologic or Gen-Probe were paying for the Panther system. Half price. It means they know how to source product from StarTech or the other company was not as efficient.

{audio:1:01:57} I don’t see LIAISON XS, the small LIAISON, being so widely developed. Again, DiaSorin is now moving towards a larger scale and they don’t want to spend too much time on small customers with a small volume, unless a local partner or distributor can afford to purchase that equipment and manage the region’s rental. The majority of instruments are provided, for free, to the customers and you need to have enough revenue. LIAISON XS, proportionally, is a high-cost per test. There will be, let’s say, a small overlapping with bioMérieux but not head-to-head.

{audio:1:02:46} The main competitor will still be bioMérieux and the main risk is if they move towards a higher immunoassay platform. I was still in bioMérieux at the time they tried with a system and, after one year, bioMérieux withdrew this system because it was not working well. This was about 13 years ago and I still haven’t seen any new systems.

DiaSorin & In-Vitro Diagnostics

Former Commercial Director at DiaSorin

inpractise.com/articles/diasorin-and-in-vitro-diagnostics

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DiaSorin & In-Vitro Diagnostics (May 5, 2021)

Alain Charalambos

Former Commercial Director at DiaSorin

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