DiaSorin & In-Vitro Diagnostics
Former Commercial Director at DiaSorin
inpractise.com/articles/diasorin-and-in-vitro-diagnostics
History of DiaSorin
Relationship and risks competing with larger players
LIASON XL positioning
Margin drivers and lean cost structure at DiaSorin
Management quality, tenure, and culture
Alain Charalambos
Alain has over 28 years experience in in-vitro diagnostics. He enjoyed 16 years at bioMérieux, then joined Novartis Vaccines and Diagnostics which Grifols eventually purchased. Alain then moved to DiaSorin for 6 years where he was leading commercial operations across Europe, MENA, and APAC, with full P&L responsibility. Alain currently works for QIAGEN. Read more
Alain, could you give us a quick introduction to your background?
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.
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.
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.
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.
You mentioned that they don't have many employees. Is that really a strategic focus of the CEO, to make it a lean operation?
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.
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.
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.
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.
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.
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.
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?
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.
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.
How do they choose those? How do they choose the diseases? Do they stand back and say, I'm going to choose this?
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.
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.
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.