MEDTECH & SERVICES / PHARMACEUTICALS : Roche Diagnostics Day first take and readx on TB and Molecular

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MEDTECH & SERVICES / PHARMACEUTICALS : Roche Diagnostics Day first take and readx on TB and Molecular

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Investment case, valuation and risks

DiaSorin SpA (Neutral, Target Price EUR65)

Investment case

DiaSorin has developed unique expertise in converting manual ELISA immunoassay

tests into CLIA automated versions with one of the largest menus of specialty tests,

which are run on the Liaison platforms. In 2021, DiaSorin made inroads into Molecular

Diagnostics with the acquisition of Luminex. While the strategic rationale initially made

sense, the group has notably underperformed its mid-term targets of HSD/LDD growth

due to a series of product launch delays and slower-than-expected commercial traction.

With a lot of these delays now behind us and the products launched, we expect

earnings growth to improve, but a touch slower than consensus expects. We think the

group's small discount to peers reflects this concern. We rate the stock Neutral.

Valuation methodology

Our valuation is based on a DCF, supported by a multiples analysis.

Risks

To the upside:

Market opportunity on QuantiFERON TB and Lyme. Faster than expected strengthening

of the footprint among small/mid-sized labs in the US. Successful integration and

commercial development for the Luminex portfolio of products and faster commercial

roll-out of MeMed.

To the downside:

Risk of indirect pricing pressure from Medicare reimbursement cut for IVD given the

company's high exposure to Immunoassay. The single supplier strategy deployed by

large US labs means discounts might be required to stay on their lists. Competition on

QuantiFERON-TB increasing in the mid-term. Longer time to build market access for

MeMed. Additional delays for the Liaison Plex on the largely penetrated multiplexing