Great. Thank you, everybody. Thanks for joining us today. Welcome to the JPM Healthcare Conference. I'm Casey Woodring from the Life Sciences Tools and Diagnostics team here at JPM. I'm pleased to be joined today by QIAGEN. We have CEO Thierry Bernard here for a presentation. We'll go through the presentation portion about 20-25 minutes, then we'll jump to the Q&A session afterwards. So with that, Thierry, take it away.
Thanks, Casey, and good afternoon. For those on the line, I mean, good evening. I hope not too many good night or good morning. But it's a pleasure to be with you once again, and thanks for your interest and attention on QIAGEN. It's my fifth year now presenting together with you on QIAGEN, and today I'm going to spend time explaining why what I consider to be a unique positioning of our company is helping us delivering for the last years, but especially also in 2023, a very, very solid performance. But let me start with an anecdote. Couple of months ago, in September of 2023, I was invited in Cambridge, in the U.K., to deliver a keynote on innovation in diagnostic and healthcare.
The audience was made of roughly 250 PhDs all over the world, from emerging countries, developed countries. At a point of the presentation, I candidly asked a question saying: "Who among you guys have ever used a QIAGEN product, and especially in sample tech?" And every... Thank you, sir. Every single hand was raised. And this really, more than ever, showed, if necessary, to me, that our unique positioning, our leadership position in sample tech, is helping us taking leadership positions in clinical and life science. For those of you a bit newer with QIAGEN, let me remind you about who we are. For the last 40 years, QIAGEN has been developing molecular solutions for life science and clinical laboratories.
It is quite fair to say that this company literally democratized access to molecular solution for thousands and thousands of laboratories all over the world, and especially with our so-called spin column in Sample Tech. There is definitely in molecular biology, a before QIAGEN and an after QIAGEN as well. For the last years, especially for, from 2019, we are enhancing this unique position with a clear mindset, driven by balance and focus. Balance across a smart continuum, positioning between life science and clinical diagnostic. Both are 50/50% of our activities. So balance in activities, but also balance in geographies with a worldwide presence. And this balance is fundamental, especially in the volatile environment, because it always allows you to compensate for any kind of downturn on any market. Second, and perhaps more importantly than balance, focus. QIAGEN is a midcap.
A midcap has one fundamental challenge always, it's critical mass. Therefore, where you are a midcap, roughly $2 billion revenue, 6,000 QIAGENers all over the world, it's fundamental to invest only where you can take leadership position between the number one and the number three position in the world. And this is why we came up, back in 2019, with that strategy based on pillars of growth. But if you look at those pillars of growth, you also see that themselves are balanced. Two of them between already leaders on their market, and we want to strengthen that leadership. Sample Tech, once again, and latent tuberculosis QuantiFERON interferon-gamma testing. Three others are made of highly differentiated solution, driven by very dynamic market. Digital PCR with QIAcuity, syndromic testing with QIAstat, and PCR in infectious disease, diseases with NeuMoDx.
I think that, COVID-19 proved two things, among other things. One, is clearly the relevance of diagnostics in the healthcare value chain. The second, is the superiority of molecular diagnostics, either for life science or clinical, in the diagnostics value chain. And I know that given the volatility of the market for the last two years, some people are taking huge swings in the assessment of our market, but I disagree with that. I really believe that we operate first in a very solid market. The key trends in our markets are undebatable. Aging population, more testing. Many diseases becoming chronic, HIV, for example, but also some cancers, more testing. Infectious diseases issues all over the world. Constant innovation, pushing for more innovations in life science and clinical. Who was talking six years ago about liquid biopsy?... about microbiome, soil testing, and some others.
It's a very solid market. Two, on this solid market, we operate as a very unique company, and this is fundamental to always keep in mind. You know, guys, when the name of your company start to be used as a verb, you understand that you really have a solid brand. And when I hear laboratories saying that they are QIAGEN-izing their sample, it helps me, again, understanding that thanks to that unique Number one position in Sample Tech, we can then leverage this position to take leadership positions downstream the molecular workflow.
This is why it's fair to say that as of today, we are probably the only company completely relevant from sample collection to data interpretation, from life science to clinical diagnostic, from laboratory to companion diagnostic with pharma company, and this across the three key technologies in molecular solution: PCR, leadership position; digital PCR, leadership position; next generation sequencing, leadership position as well. So this unique profile, for me, does explain the performance of QIAGEN over the last years, and especially in 2023, where it's fair to say that we are in a top, top peer tier of the growth among our competitors.
We then normally at JP Morgan, do not disclose results of the previous year, but it's fair to say that what we have in hand now, here you see the numbers of the first nine months of 2023, that we are in a good position to deliver in 2023 on our guidance, both on the top line and also on the EPS. It will be another year of achieving, achieving results for our company. This good performance, does it mean that we suddenly became a perfect company, and we achieved perfectly everywhere? No, obviously not. In a challenging environment, we can also be proud of thinking that we have systematically delivered across all our portfolios. A couple of examples. In Sample Tech, it's now more than 28,000 systems of QIAGEN all over the world, waiting and calling for more consumables everywhere.
In QuantiFERON, it's beyond latent TB, the launch of new application. If you saw our press release in Q3, the launch of Epstein-Barr virus after the launch of Lyme. In QIAstat, geographic expansion, menu expansions. In QIAcuity, its evolutions towards QC testing for pharma companies, cell and gene therapy, and as we will see a bit later, move towards clinical diagnostic. So after a good 2023, we really believe that, for 2024 and beyond, we are moving as a much stronger and solid company. But let's not forget that this came after five years of really hard work by the 6,000 QIAGENs all over the world. Let me take some of you back to the key milestone of the last five years.
It's fair to remember that, back in 2019, this company had literally its back against the wall. We were coming from significant changes in leadership, being approached by some strategic competitors, and we immediately reacted by, proposing to change two key fundamentals of the company, the what and the how. The what, it's again, that very focused strategy. The how is decentralizing QIAGEN and investing into empowers new managers. It's interesting to highlight that over the last five years, out of the 150 top manager of this company, between 40% and 50% are completely new. Then came COVID. Are we going to brag because this company stepped up to the challenges of COVID? No, we did the job.
But what was very important with COVID for us is that COVID allowed QIAGEN to, one, significantly increased across, across all instrumentation, our install base. And now this install base is ready to take more consumables in the years to come, first. Second, to innovate and develop 10 new products, all of them with application way before COVID. A concrete example is wastewater testing, where QIAGEN imposed to the market digital PCR for wastewater testing. And obviously, wastewater testing is not just useful for COVID, but for many other pathogens. This evolution allowed us, post-COVID, to systematically deliver above-market growth, our core business growing by more than double digits in many quarters. And now we are going into 2024 and beyond with a renewed focus on continuing that focus investment, keeping a strong eye on R&D.
I believe that a fair R&D level investment for a company like QIAGEN will be always between 9%-10% of our sales. Continuing efficiency program, we still have bucket of efficiency and obviously building value for our investors. How we are going to do this? First, because the portfolio that we have built proactively over the years is answering fundamental demands and needs from the market. Just a couple of example, liquid biopsy, minimal residual diseases, all this is pushing for more Sample Tech innovation. We are there. Tuberculosis is still killing more than 1.6 million people all over the world every year. We are there. Digital PCR, more and more pharma company are looking at this technology for companion diagnostic, beyond PCR or next-generation sequencing, for QC testing, for cell and gene therapy, we are there, and so on, and so on.
We are relevant for every key trend of the market. Not only are we relevant, but we continue to invest still with that focused mindset to strengthen those leadership position. In Sample Tech, once again, further automation, especially towards liquid biopsy. In interferon-gamma and QuantiFERON, beyond TB, with Lyme, or again, cytomegalovirus, or Epstein-Barr virus. In QIAstat, with a significant increase of submission for 2024. And in digital PCR, that we are bringing now from life science to clinical diagnostic. QIAcuity, next year, will be FDA and IVD approved, and we will launch our first assay in oncology with BCR-ABL. Another key investment that you might have seen recently in our press releases. I told you at the beginning of this presentation that QIAGEN was crucial and fundamental at the very first step of any molecular workflow with Sample Tech. Guess what?
We are also extremely dominant and relevant in the last step and fundamental step, which is data interpretation, and this is our bioinformatics business. Where QIAGEN is not only number one on the market, $100 million revenue, growing at double-digit per year, but unlike our competition, not only number one, but also a profitable number one. Some of you might be confused because last year we disclosed to the market that we were open to a financial partnership with a private equity or financial partners to enhance the development of that business. There is no confusion here. We ran that process. We discussed with many private equity. It allowed us, by the way, to understand even better the power of the knowledge base that we had been building over the last 15 years.
But we never reached a satisfactory deal, something that we found of value for our shareholders, so we decided to invest organically into bioinformatics. Because for me, the question is how to accelerate? We could be complacent, $100 million, number one position, 10% per year at least. This is not enough. I'm very convinced that the biopharma informatics business, especially towards pharma company, has a very substantial untapped potential growth. And this is why it's key to invest in sales and marketing, in geographic presence, and in R&D firepower. This performance is also driven by a significant and disciplined capital allocation policy. We have an obsession with creating and returning value to our shareholders.
In organic development, I said that before, between 9%-10% of our revenues to R&D, focused once again, obviously, but also in smart bolt-on acquisition, as we have done for many years, and we will continue. And also in showing the market our trust in the future of our company by, as we communicated yesterday, doing a $300 million share buyback program. So as a conclusion, and before the Q&A, if we continue to focus on our R&D investment across the continuum from life science to clinical diagnostic, where we can take leadership position between number one and number three on the market, without hesitating to constantly streamline our portfolio, because the main danger for a company like QIAGEN would be to spread the company too thin. Once again, we are a mid-cap.
If we continue to do this, growing above market growth, with a constant eye on innovation and differentiation, especially around digital and with disciplined capital allocation, there is no reason why the more than 200 PhDs that I was referring to at the beginning of this presentation would not continue to consider QIAGEN as their preferred partner for molecular solution, as well as the more than 500,000 customers that we have all over the world. Thank you.
Great. Thank you, Thierry. Now we'll move to the Q&A session. If anybody has a question, we have a mic runner in the room, and if anybody's watching the webcast and has a question, please feel free to ask it on the webcast site. But Thierry, maybe first, so you talked about some of the positive trends you've seen in some of the markets you play in into 2024, and also mentioned that you expect to grow above the market this year. But how should we interpret that, you know, just given some of the headwinds the market's seen over the last few quarters? What are you expecting from an end market growth rate in total this year, and maybe parse that out between your pharma, academic, and government, and then clinical customers? Yep, maybe we'll start there.
It's a large question. I will continue to say what I said in 2023. I invite you to keep a cool head and look at trends. In other words, I heard many bullish comments on the market back in Q1 of 2023, a year ago. Sometime after, in Q3 of 2023, I heard very pessimistic comment on the market. We need to keep a cool head, once again. The trends that I tried to describe are there. The market is solid. Obviously, no industry is immune to international environment or to the economic, financial, geopolitical environment. So overall, I believe that this market is still there to have a mid-single-digit growth.
We will see what the other players will say in their disclosure in the coming weeks, but mid-single digit is fair. I believe for the coming month that sequentially, the market will normalize. I don't see an acceleration of capital sales quickly, but I believe that labs will probably reinvest in capital sales starting second half of 2024 or quarter four. But that's not an issue. First of all, because in clinical diagnostic, if you cannot say you can place a system, and we have been used to do that for many years, and we can do it in a profitable way. And in life science, where you don't place, if you have differentiated instruments like our Sample Tech or digital PCR, you can still grow your install base.
I do not believe that public funding and public research funding will significantly increase in 2024. Let's not forget that it's probably one of the first time in many years that at least 10-15 major countries will go through elections in 2024, so it's always creating a bit of... But I don't see those investments in research, whether it's NIH, or China, or Europe, going down. Let's assume flattish. Flattish is already okay, especially when you are so fundamentally well-positioned like QIAGEN. Geographically, I don't see any alert for the growth of the American market. I haven't seen major changes of reimbursement, either in the U.S. or in Europe. China is a specific question. I have a-- I've always been quite moderate on China, but it's a large market. I don't see bounces back before the end of 2024.
The market is going through significant adjustment, price, and organization, but it's a large market. It's a big market. It's already the number two market in the world for life science and clinical. We cannot ignore it. We need to adjust to it and its specificities. But overall, that's what I would say.
That's helpful. Then maybe taking a longer-term lens or a longer-term view, what do you think the normalized QIAGEN top-line growth rate looks like? You know, you're coming off of a year where you grew non-COVID revenue at a high single-digit rate in 2023. You know, historically, QIAGEN had been a mid-singles to high singles grower pre-COVID. You mentioned the market's around mid-singles, so just given some of the tailwinds with new product launches and some of the longer-term market dynamics you've talked about here, where do you see the long-term growth rate for QIAGEN moving forward?
So first of all, let's not forget that, especially when I'm coming back to 2019, where, as I said, this company had its back against the wall. Who could have imagined at that time that this company would grow its core business above double-digit growth for so many quarters, or that we would be growing at above 8% in 2023, compared especially to other competitors first? I strongly believe that we have now the team and the product portfolio to grow systematically above market growth, regardless of where that market growth is. And if I go into details, we continue to tick the boxes of what we said in our last QIAGEN Virtual Day back in 2020. Sample Tech is a mature market.
It's a low to single-digit growth market, but it's a large market, it's a long-tail customer market, and it's a high margin, a high-margin market. There's a lot of stickiness here. QuantiFERON, I still see it with at least low double-digit growth potential. Syndromic testing, there is no reason, especially now that we are cleaning the impact of past COVID, to see QIAstat growing at less than double digit. Digital PCR in our portfolio should continue to grow at double digit, especially now that we are moving it also to clinical while adding new solution for life science. So, overall, a company growing above market growth with increased profitability. We said, some years ago, and we tick that box again, that, for example, from an EBIT margin standpoint, we would deliver better result than pre-COVID. This is what we have done.
So this is what we want to do, and I also always try to make sure that this company will be able to grow its EPS at the same level as the top line growth. So those are the KPIs that we have in mind for the coming months and years.
That's helpful. You know, I wanted to touch on one of the new announcements you made ahead of the presentation, and, and you talked about it a little here today on the QDI investment disclosure. You know, a step up in, in investment here over the next five years. Any way to quantify that? What do you expect to spend, on this business over that five-year time horizon? And then, you know, stepping back, why does QDI merit this investment versus some of the other growth pillars you highlighted today? What about this market and QIAGEN's positioning, within that, you know, make it an attractive one to add some scale to?
Already for a company which is roughly $2 billion revenues, a bucket of activities of EUR 100 million starts to be significant. I like to create in QIAGEN different buckets of activities, QDI, but also our HID forensic activities, around $100 million. This is visible, and then obviously, with potential of going double-digit. This is exactly the profile of QDI. In addition to that, there is no doubt that the development of next-generation sequencing, the development of innovation around oncology, once again, for example, minimal residual disease and others, will favor the need for more and more accurate data interpretation. What is important is not to generate a lot of data through next-generation sequencing. What is fundamental is what QIAGEN is doing, which is the ability to transform those data into clinically actionable results for clinicians.
That's the beauty of that knowledge base. And again, I say, and I really believe, that we should be growing that market much more. If you take at the number one, QIAGEN, the number two, the European company, is around, $50 million revenues, $50 million-$60 million revenues. The number three company on the market of bioinformatics is an American company, is between $15 million-$20 million, which means that the three leaders are invoicing all together, less than $200 million. We could monetize this activity and that know-how much more, and this is why it is justified to invest. In addition to that, it is fully accretive to QIAGEN P&L. Once again, unlike our competitors. So, you have a lot of criteria justifying the investment.
Got it.
Does that-
Yep, no, that's helpful. You know, maybe just shifting gears a little bit. You mentioned China. You know, I know it's a smaller portion of revenue versus some of your peers, but can you just talk about the state of the market right now? How is QIAGEN performing in the region, and maybe touch on some of the factors that could impact the model next year, like VBP, anti-corruption, and, you know, touch on maybe whether QIAGEN's insulated from some of these dynamics, given your localization in the region?
So it's another topic where I would invite you all to keep a cool head and look at trends. I mean, what is always surprising me, with all due respect, is, let's say six, seven years ago, if a company was not in China, it was a stupid company. Now, if you are too much in China, you are equally stupid. So, so, we need to pick our poison sometime. I mean, none of what is happening in China, which is preference to local players, imposition of localization policy on international players, VBP, none of this is new. It was officially documented in many Chinese official document back in 2010. It's not new. It's not new. What is a bit new now is the anti-corruption campaign, but when I was myself living and working in China, we had three anti-corruption campaign.
It happens, it comes and goes. But fundamentally, I said before, it's a big market. It's an important market, second market in the world in life science and clinical diagnosis, but it's a specific market. Our exposure there as QIAGEN is limited, 6% of our revenues. Like many of our competitors, we are obviously localizing activities in China, not every kind of activity. We are obviously cautious with IP, but we have a manufacturing and R&D site in Shenzhen, where we are localizing. Perhaps more differentiated than competition, we have something rather unique in China. We have a second brand as well in China, that belong 100% to QIAGEN, fully consolidated in our result, but managed completely separately. Different management, different sales and marketing. QIAGEN is headquartered in Shanghai. They are headquartered in Beijing. That helps as well.
So this is what we are going to continue to do for the coming years, localize in a cautious way and invest wherever it makes sense. Now, the market itself, the Chinese market, will continue to give preference to local players. It will be naive to think that just by localizing activities, we will basically solve that issue. There is a political vision in China to make the Chinese healthcare market more Chinese. VBP will continue. VBP was designed first and foremost for the pharma activities, but it was clear that it will go into diagnostic. It started into easier technologies in diagnostic, clinical chemistry, immunoassays. It's coming to molecular.... But at the same time, there is still a significant segment of customer in China, called the Grade three hospitals, that are continuing to invest into foreign products. So once again, the market will continue to adjust post-COVID.
As I said last year, if pre-COVID, I would have expected this market to bring a 10% growth to QIAGEN. For the coming years, I will expect it to give a mid- to slightly higher than mid-single-digit growth, 5%-6% every year.
I'll open it up now in case anybody has any questions. All right. Wanted to hit on QuantiFERON. Can you just walk through the competitive landscape in Latent TB? You know, is there room for other entrants? Do you feel like your franchise is protected enough, with some of these partnerships you have in place and the automation that QuantiFERON offers? Yeah, maybe just touch on the competitive dynamics here.
I hope that nobody will consider this as arrogant, but I think QuantiFERON at QIAGEN is a kind of case study for business schools. Because the market is very rich of leaders who have been leaders, and then because they were leaders, became complacent and arrogant with their number one position, stopped investing, and then at a point, were surprised by the arrival of competition. This is exactly what we didn't do at QIAGEN. Since 2015, way before people were talking about the potential entrance of new players, we have systematically reasoned the barriers to entry on that market. First, partnership with DiaSorin for the back-end automation of the test, extremely successful. Second, automation of the front end with partnership with Tecan and Hamilton.
There will never be an as automated potential workflow, universal automated, than what we are currently offering. Second, we continue to invest into the quality of the product, the fourth generation of QuantiFERON, adding CD8 to the product, increase sensitivity. Third, we are talking about hundreds and thousands of publications, showing the strength of latent TB by QuantiFERON QIAGEN. So I'm not saying that no competitor is ever going to enter. We have seen some. Oxford Immunotec has been acquired by a very significant player. Some others are saying that, they will come to that market. But I see it also potentially in a positive way, because who is, in the last 20 years, raising awareness about the need to test for latent TB in the fight against tuberculosis? It's QIAGEN alone.
So if more companies are coming, it might help as well to grow the pie, and we will obviously be extremely well-positioned to take part of it. Second, regardless of new competitors, let's not forget that the main competitor of QuantiFERON is not another company. It's an antiquated technology called skin test. If you take the U.S., you still have at least 15 million tests in the U.S., 15 million. If you take worldwide, it's at least 50 million skin tests. This is where the competition here. So no complacency here. We will continue to invest to make that product more specific, easier to use. We still have a significant untapped market with many emerging countries.
So I still believe that saying that we can still grow that franchise, which is around $400 million for us, at low double-digit, it's very possible. We have done every investment to achieve that. And last but not least, I know that some of you sometimes might think $400 million franchise, is this going to be, the new, HPV of QIAGEN? I think I just tried to show you that, we did everything never to repeat that mistake, where in our time, we became complacent when we were number one on the market. This is not happening with QuantiFERON.
On QIAcuity, you know, this is a product that's seen a lot of demand recently. You know, kind of curious on, you know, where you're seeing demand. Are placements displacing qPCR or NGS even at this point, or is it mostly kind of greenfield users? And, you know, what are customers telling you about the advantages of dPCR versus, you know, the legacy technology there?
I think that even beyond life science, more and more publications are going to prove the relevance of digital PCR between PCR and next-generation sequencing. On one hand, to simplify, because it's slightly more complex, it allows a laboratory to give more precise answers than PCR without the complexity and the cost of next-generation sequencing. Now, clearly, you will never hear me saying that digital PCR is going to kill PCR or NGS. No. The market for the last 40 years have always proven that each technology is not cannibalizing the others. It's just happening, it's just offering laboratories with other choices and other capabilities. This is exactly what digital PCR is bringing. For us, because we have such a differentiated offer, it's a significant success so far. I mean, how many launches, if you follow diagnostics, if you follow life science, how many launches-...
I've brought more than 2,000 systems on the market in less than two years and a half. In those two years and a half, at least one year was completely taken by COVID. So many people have basically their mind elsewhere. More than 2,000 placements of QIAGEN QIAcuity in less than two years and a half. This is, as far as I'm concerned, and it's been more than 20 years that I'm in this business, a fundamental and phenomenal launch. In addition to that, we continue to bring new applications in life science. I spoke about cell and gene, cell and gene therapy, beyond our biopharma solution. I'm talking about QC control, for example, pharma company, and next year we bring it, as I said, to clinical.
As a result, first thing, I still believe that this product has a 20% minimum potential of growth in our portfolio, first. Second, and I don't want to sound arrogant, I respect competition, I think that we are geared to take the number one position on this market. In a five-year projection, this is where we should be, because this product deserves it, and we have specialized product, specialized R&D effort, and specialized menu to achieve that.
Gotcha. We probably have time for one more. Just, you know, on the buyback you recently announced, how did you guys come to the synthetic share repurchase decision? And then maybe, can you just walk through your capital allocation priorities in 2024? Would more repos be in the cards? How would you think about tuck-in M&A? You know, anything else around that. Thank you.
So as we disclose, and we started to discuss that last year, for us, the share buyback, first of all, we have a rich history of successful share buybacks. Second, as we said last year, we had a definitive agreement from our AGM back in June 2023. So the problem was not if a share buyback, it was when a share buyback. What was the right time to have the best impact, especially from an acquisition standpoint on our EPS? And so you quickly understand that it's much better to do it at the beginning of the year to allow that maximum impact. Second, the level of the buyback is very reasonable. It still leave a significant firepower cash-wise at QIAGEN for M&A, clearly, and we still have a very reasonable leverage level. So it brings us to why?
First, because it's a good sign of trust in what we are doing and in the company. And second, especially in an environment when the market is a bit weaker, obviously, it might strengthen the share price, and once again, it is accretive to our EPS. But let's be very clear, share buyback are good. It's a nice way of doing capital allocation, but it doesn't create growth over the long run. So therefore, to create growth over the long run, I prefer two priorities: Organic R&D, but smart one, focused one, again, the pillars of growth. And second, it's smart M&A. M&A, not for the sake of M&A, M&A that is strategically not spreading QIAGEN thin again, but still continuing that basically focus where we can take profitable leadership. I insist on profitable leadership. And so we have a long history of bolt-on.
This will remain the strategy for M&A, bolt-on. But at the same time, it's clear that we have the balance sheet that could allow us to look at bigger acquisition as well. There is no dogma here.
Great. Well, it looks like we're out of time, so we'll leave it at that. Thank you, Thierry.
Thank you so much.
Thank you, everybody at QIAGEN, for joining us, everybody at the conference. Have a great rest of your conference. Thanks.
Thank you.
Thank you. Yeah.