While the recent buzz surrounding DiaSorin centers around its newly approved LIAISON Plex platform and the exciting potential of MeMed, a closer look at the Q4 2023 earnings transcript reveals a fascinating strategic detail that seems to have flown under the radar: the continued resilience and surprising strength of the VERIGENE I platform. DiaSorin, like many other diagnostic players, saw its molecular diagnostics revenue decline in 2023. This was largely attributed to the expected drop in COVID-19 testing and the loss of a significant cystic fibrosis contract. However, within the CEO's commentary, there is a nugget of information that shines a light on a potentially overlooked aspect of DiaSorin's molecular strategy. The VERIGENE I platform, acquired through the Luminex acquisition, is holding its own, even demonstrating slight growth. This is remarkable considering the platform's reliance on manual processes and the prevailing narrative that favors fully automated, high-plex systems like the LIAISON Plex. So what's fueling this unexpected strength? DiaSorin attributes the platform's resilience to two key factors. First, the base business, primarily focused on gastrointestinal and blood-related panels, has proven remarkably stable. Second, the company has successfully implemented a 'flex' concept on the VERIGENE I, allowing customers to select specific assays within a panel, offering a cost-effective solution that caters to a specific segment of the market. This flex concept, while initially seen as a temporary measure until the fully automated LIAISON Plex came online, has proven to be a surprisingly attractive proposition for customers. It addresses a crucial need for cost-efficiency in a molecular diagnostics market dominated by high-priced, all-inclusive panels. DiaSorin's CEO even expressed surprise at market commentary suggesting ethical concerns around the flex concept, emphasizing that customers appreciate the flexibility and see no ethical issues in choosing which assays they run.

Could VERIGENE I Carve Out a Unique Niche?

This raises a compelling hypothesis: could the VERIGENE I, with its flex concept, carve out a unique niche in the molecular diagnostics market, co-existing alongside the high-plex LIAISON Plex and addressing a growing need for cost-effective, targeted testing? Here's why this hypothesis holds weight:

Market Segmentation: The molecular diagnostics market is not monolithic. While high-plex systems dominate, there's a growing segment of customers, particularly in mid-sized hospitals, who prioritize cost-efficiency and may not need the comprehensive coverage of a high-plex panel. VERIGENE I, with its targeted panels and flex concept, perfectly addresses this segment. Complementarity: The VERIGENE I can act as a strategic complement to the LIAISON Plex, allowing DiaSorin to capture a wider range of customers and testing needs. Hospitals could employ the LIAISON Plex for its high-plex capabilities in specific cases, while using VERIGENE I for more targeted and cost-effective testing in others. Market Dynamics: The focus on cost-efficiency in healthcare is only going to intensify. Payers are increasingly scrutinizing costs, and laboratories are under pressure to optimize testing algorithms. VERIGENE I's flexible and targeted approach positions it well to thrive in this environment.

Analyzing the Numbers

Let's consider some numbers to further explore this hypothesis: DiaSorin's molecular diagnostics business, excluding COVID-19 and respiratory, grew 6% in 2023, with a double-digit acceleration (10%) in Q4. While some of this growth can be attributed to the traditional DiaSorin MDX business, the contribution of VERIGENE I cannot be ignored. Assuming a conservative estimate of 2% growth attributed to VERIGENE I in 2023, this would imply a revenue contribution of approximately €4 million. With the potential for further growth in 2024, driven by the continued success of the flex concept, the VERIGENE I could be generating significant revenue and contributing positively to profitability.

Revenue Breakdown (Hypothetical)

Reference: Based on analysis of and conservative estimates.

Growth Trends: Molecular Diagnostics (Excluding COVID-19 & Respiratory)

Reference: Based on analysis of and conservative estimates.

Conclusion

It's worth noting that DiaSorin has not explicitly detailed its plans for the VERIGENE I platform moving forward. However, the CEO's commentary suggests a potential shift in thinking, with the possibility of the platform carving out a distinct role in the company's molecular diagnostics portfolio. This presents a compelling opportunity for investors to dig deeper and assess the potential value of this hidden gem. By understanding the market dynamics and DiaSorin's evolving strategy, investors can gain a competitive edge in a rapidly evolving diagnostic landscape.

"Fun Fact: The global molecular diagnostics market is expected to reach $25.2 billion by 2028, growing at a CAGR of 8.7% from 2021 to 2028. This booming market presents significant opportunities for companies like DiaSorin, particularly those with innovative and cost-effective solutions."

References

Q4 2023 Earnings Transcript: Link to Transcript Q3 2023 Earnings Transcript: Link to Transcript