Did you get some comments after the dinner yesterday, or?
I think we're live. Not yet. Greetings. Day three of the TD Cowen Global Healthcare Conference afternoon session. I'm Dan Brennan, covering tools and diagnostics. Really pleased to be joined with me on stage here. Thierry Bernard, CEO of QIAGEN. So Thierry, thank you very much for being here.
Thank you for having us.
Terrific. Yeah, I thought I'd start out with some higher level questions, you know, if you don't mind. Yeah, maybe you can just kind of level set us, you know, as you exited 4Q in 2024 and we enter 2025. Maybe just talk about some of your priorities and kind of how you think about the outlook for 2025.
As usual, I would say the first priority is to execute on the guidance. And we gave a guidance at 5% growth for 2025, excluding NeuMoDx, which is one of the top growth guidance in the market for this year. It's made, as usual, of different components that are our priorities around QuantiFERON, QIAstat, digital PCR, sample technologies, and also bioinformatics. That's first priority here. Second is accelerating on M&A. We have had an active allocation of capital over the last two years in share buybacks. Share buybacks had good proof that we are confident in our company, but we want to double down this year on M&A. We have the balance sheets to do that. I mean, we are looking primarily at interesting bolt-on opportunities. I would like to close at least one or two opportunities in this regard during the year.
And obviously, last but not least, because we do live in a volatile environment, is to continue in our program of extremely tight operational efficiency, what we call QIA efficiency, to make sure that we constantly adjust the P&L to the reality of our environment. So, as you have seen, we are basically targeting to be over 30% operating margin. If we can beat that, we will not hesitate to do that. So, long story short, we finished 2024, as you said, strong. We are strong in the beginning of Q1. And my ambition would be not only to execute on the guidance, but if we can, obviously, update the numbers both on the EPS side or on the top line as soon as we can and as soon as we have, obviously, the numbers behind us.
Terrific. That's a great start. Just level setting on some of the more macro things happening with all of the policy initiatives. We'd love to get your latest thinking here on NIH. I'm sure you've gotten the question, you know, five times today or 10, but it's a small part of your business, right? 3%-4% government exposure. I mean, you can correct me on that if we're off, but just maybe reflect upon kind of how you thought about that smaller end market in 2025 and in the first quarter, given the uncertainty that's been introduced by the administration and any comment on kind of how things are going.
So, first of all, entering 2025, we never had any illusion on NIH budget because in our assumption, we put it at 0% for this year, 0% growth. And we did that last year as well, and we proved to be true. Second, there are still a lot of rumors. We try to keep a cool head and look at facts. And so there are different ways to take your question. And first of all, if I look at year to date, our numbers are not showing any impact on the NIH and affiliated account directly. Where we see still is a kind of volatility in the academia field. Not surprising. It's normal. There are uncertainties. It's not specific to QIAGEN. I think it's market-wide. Now, your numbers of 3%-5%, 3%-4% is a correct one, but we need to go into a bit more detail.
Inside those numbers, if I look at what is direct sales to NIH and what we call affiliate accounts, it's much lower than that, much lower than that by a significant magnitude. Then you've got the sales to academia, as I said before. True, we need to think part of those sales to academia are generated by a grant from the NIH, but where do you put the threshold? Do you put at 20% of those sales, 50%, 60%? It depends. In addition to that, some of those research on the academia side are pre-commercial development. They are already started. They are not going to be stopped. Last but not least, most of our sales to these sectors are consumables. I mean, it reflects the traditional split of activities of QIAGEN, which is 90% consumables, 10% instruments.
And in addition, we sell there mainly sample tech, which is a fundamental step if you want to do your research. So cutting there, it's not that easy. What do I mean here? Are we completely immune to that? No. Do we see some volatility on the academia? Yes. Do we see overall NIH and academia year to date impacted at QIAGEN? No. Do I believe that the 4% or 5% that I read sometimes in some analysis as grossly exaggerated? Yes.
Okay. That sounds good. How about tariffs in terms of, you know, Mexico, Canada, China? I mean, most of the companies have quantified. Most of them seem reasonably okay. And then we don't know what's going to happen in Europe. So that's a moving target. But net-net, just how would you characterize it? And I know you spoke about this, but it's always good just to level set these two questions upfront, and then we'll move forward on the good stuff for QIAGEN.
We obviously monitor this very closely. Mexico, Canada, no impact for QIAGEN. China, no impact for QIAGEN or quite no impact. Why? Because first of all, China is rather a small percentage of our revenues, but also because we have no product manufactured in China for the rest of the world. It's all China for China. So where we focus the most is obviously the bilateral relation between Europe and the US. And so far, we believe it's under control. We don't know if there will be exemptions or not. It seems that the administration this time says no exemption. But as you probably know, I'm also chairing the AdvaMed Diagnostics, which is the industry association in the US.
We are very active to convince the administration and also members of Congress that really we are such a small part of the U.S. deficit that probably there are rationales for exemptions. So let's see. We are prepared. It could be also a fantastic incentive for us to constantly challenge the way we are organized, you see, tax-wise, and try to optimize it even better.
Okay. Maybe jumping into M&A, I was going to go through the businesses, but I'd like to start there since you brought it up as a second kind of guideline or priority this year. You know, you haven't been active in M&A recently since you've gotten there. You've really focused on driving the core business, driving margin, driving cash flow, which you'll continue to do. But M&A will be a new kind of additive feature. Not that you haven't done stuff, I'm sure, but it seems like it's more of a priority. So just speak a little bit towards what is a bolt-on, like what's the size parameter around that, and what are the kind of features of a deal that you would like to underwrite, maybe gross margin, operating margin, profitable, not growth, just kind of walk through some of the metrics that would make for an attractive deal.
First of all, I don't want to sound defensive, but it's not that I focus more on organic. It's just that I'm looking at M&A, and I did a lot since I joined QIAGEN and even under this tenure of a CEO. But I'm not obsessed more by M&A. It's just we do M&A when it makes sense for the company and when it makes sense for you guys when it creates value for the company in finance. So what I can tell you is that, first of all, we have significant firepower. Clearly, you look at our balance sheet, you look at our leverage. Basically, we can act very quickly and significantly. Second, we have an extremely rich pipeline. And this is covering life science, bioinformatics, clinical diagnostics of many different sizes.
It can start at only $2 million revenues to, let's say, on average, $40 million-$50 million revenues. Obviously, naturally, I'm pushing our business team, business team, I'm sorry, to focus a bit more on the latter side, you see, on the $25 million, $30 million, $35 million. Why? Because at the end in M&A, regardless of the size of your target, it's the same kind of work from a due diligence standpoint. It's the same kind of work from a post-merger integration, but you need to try to move the needle a bit. And so I would prefer to focus where we could get an interesting growing $20 million, $30 million revenue. So that's the target. Now, in addition to that, I have also some key criteria which shouldn't be new for you. First, it has to be synergistic with what we are doing.
There's no way we are going to spread QIAGEN thin now that for the last five years we tried to streamline our portfolio of activities with M&A. Why do I say that? It's not just for the sake of synergies. It's that the objective of M&A for me is to take more share of wallets in a given customer that we know already with our QIAGEN portfolio. And second, is to be able to add to our natural core growth 100, 200 basis points of added growth. And so that means that we need to prove that we can accelerate the growth of the target. Number one. Number two is that it has to be accretive in a reasonable timeframe. We have the strength to accept a kind of dilution, let's say two years. But beyond that, we need to see accretion.
And last but not least, valuation should be reasonable. I note that valuation seems to be more reasonable over the last six to eight months than two years ago, which is a positive point. But it has to make sense from a value creation standpoint. We are not here to just create value for the current shareholders of the target. You see, we want to create value for our shareholders. So those are the mechanisms.
Maybe just one more question there, and then we can move on to it, so do you think to be more public or private type company? Do you lean more towards clinical or the tool side, and I guess would you buy a business that's unprofitable today?
We are looking at everything. And again, it can be non-profitable at the point if it's in a ramping phase. And if the product is growing 15%-20% per year, that's fine. But by QIAGEN after two years, say two years and a half, we need to see that profitability coming. So then it's across all the spectrum. It can be life science. And obviously, as you know, opportunities in bioinformatics, normally you are talking about smaller sizes than what you could find clinical or life science. Private, public, not an issue. Again, it's the feasibility and the value creation.
Okay. Great. So let's dig into some of the businesses then. We'll start on diagnostics. We'll start with QuantiFERON. So maybe just QuantiFERON had another good year in 2024. The long-term guide reflects just a natural rate of slowing, which I think is prudent given the strength that you've had. Still a really big market ahead, but maybe you're just being prudent there. So just speak about the guide in 2025 and just competitively, not necessarily what's driving that guidance in 2025 when you look at maybe some new tenders, when you look at just the existing business. Just kind of walk us through how you thought about the guide for 2025.
There is one major factor that I think sometimes the market doesn't see as we see it, or perhaps I'm not good enough at showing it, is that more than 50% of the market is not converted and it's still skin test, which is, as you all know now, I hope, an antiquated, not patient-friendly, not even clinician-friendly methodology. 50% of the market. So that means that in the world, as we speak today, there are probably 50, five, zero, at least million tests of skin test that we can convert. In the U.S., closer to us, 16 million, 1/6 significant. I like to focus on the U.S. because the price of a normal skin test in the U.S. is rather high and very comparable to the price of a QuantiFERON. So conversion. And this is what is driving our guidance.
Second, is that in full humility, we are going to go soon to the World Tuberculosis Day. We keep discovering new buckets of growth for QIAGEN and tuberculosis. Honestly, five years ago, we would not imagine that latent tuberculosis could be such an issue for diabetic patients. You go to Mexico, most of the diabetic population is under clear threat of tuberculosis infection. It's the same in the U.S. Patients under dialysis. So every year we continue to discover new applications. So as you said, we gave a market CAGR for the coming four years at 7%. We are coming from higher than that. We grew 10% last year. We will grow again 10% this year. We believe that from $450 million last year to $600 million in 2028. So perfectly achievable guidance. And we are on our way to execute on that.
Okay. Well, we'll dig back in a little later maybe on QuantiFERON for a minute. So I mean, QIAGEN has had the FX rate, I think growing 25%, right, grew 25%, I believe in 2025 is the outlook you have. Really large install base. You have some really nice momentum. Excuse me, you have mid-teens growth this year after 25%. So just walk through why the mid-teens growth rate this year after such strong growth rate last year. Just give us a flavor for what underpins that.
I mean, because in every guidance we give, I mean, we take into account our environment. So we were growing at more than 20% last year. I mean, still growing when we are already at around $100 million revenues, above a double digit. It's interesting. So let's execute first on the guidance. If we can beat it, obviously we will. The second thing is that, as you said, for us, the main potential in 2025 is to become really successful in the U.S. because now our salespeople on QIAstat in the U.S., they have a full menu. You just saw recently that we had another kit approved by the FDA. We have also our large throughput, high throughput QIAstat-Dx Rise under submission. We'll see when the FDA is going to approve it. So we are fairly confident in the system.
But for me, the priority in the U.S. is basically transforming the success of regulatory approval of 2024 into sound commercial result in 2025. That's the priority.
How big is the sales force selling QIAstat-Dx in the U.S.?
So we are going to, first of all, continue to invest in it and extra specialize that. What I mean by this is because we are always managing our P&L. I believe I said that many times in sales specialization. So starting 2025, the people selling QuantiFERON will only sell QuantiFERON. And the people selling QIAstat will only sell QIAstat. So that's an investment, obviously, but it's driven by our numbers. Second, we want to strengthen those people selling by what we call medical liaison because you need to visit also the clinicians. So if you could have, let's say, three, four medical liaison over the territory of the U.S., basically between eight to 10 sales rep focusing on QIAstat, you're well equipped.
I mean, is it possible this year like you could replicate last year? I mean, I guess it's feasible. Is there any real reason if the new menu traction was right there or is there something with that 25% last year that's just not repeatable?
I mean, once again, I mean, it's a good question, but let's execute on what we have to execute before thinking about something higher. I mean, give us the time to execute already on what is a good growth on an already important franchise. So this is another way to say it. In our priorities, if there is one I think positively about and I feel comfortable about, it's QIAstat.
Okay. So maybe on digital PCR, it's like the biggest growth driver in your long-term guidance that you guys laid out. Talk about, I think there's been some instrument headwinds there, but just talk about the progress in 2024. Maybe it was masked a little bit by some of the instrument headwinds and kind of how you're thinking about 2025.
So first of all, where are we coming from? On digital PCR, we have created, I'm sorry, the fastest growing install base on the market. And I don't like superlatives, but probably in history of life science and diagnostic because beyond 3,000 systems in such a record time is fantastic. Knowing that the first year we launched digital PCR, there was still COVID and digital PCR was absolutely not a solution launched for COVID. So that proves the quality of the system. In addition to that, you know that we don't have one instrument only. We have three instruments for low throughput, mid throughput, high throughput. So it's very fair to say that QIAGEN is the only company at this stage democratizing access to digital PCRs to many labs in the world. It's with the one plate.
They wouldn't have the opportunity to invest in such a technology with other competitors. With QIAGEN, it's a small box, one box, sample-to-results. Second, we executed on the menu. When we launched the solution three years ago, it was really academia, kind of research. Then we developed the biopharma. Why is biopharma important? Because biopharma are customers that are more 80 plates, so higher throughput, higher pull-through, obviously, per system. Then we developed cell and gene therapy. And by the way, at the moment, the two main growth drivers consumable-wise in life science are biopharma and cell and gene therapy. Last year, we put on the market another 100 assays, life science, to our customers. This year, we are going to give them another 100 assays. Then we told you we are going to launch that solution in clinical diagnostic. We did it. The platform is now FDA approved.
We want to really focus on LDTs and to second level in hemato-oncology here. Last but not least, yes, of course, last year we were impacted by a slower environment on capital sales. Let's keep a cool head here as well. When we say we were not on target on capital sales, completely right. In Q4, we put more than 200 systems on the market. In Q3, we put also more than 200 systems on the market. This is just cumulative instruments that are just waiting for consumables because I remind you, it's a closed system. This is where I focused. Was I disappointed a bit by the level of capital sales? Yes, of course. What is important is to continue to put more and more systems. We are roughly at $90 million revenues.
We are now penetrating also the companion diagnostic with QIAcuity, which is also good. We have the target to be at $250 million. With the momentum in life science, with the progresses in biopharma and cell and gene therapy, with what we are trying to do in minimal residual disease in oncology, plus diagnostics, I think $250 million by 2028 is realistic.
So maybe just one more. I know at the Investor Day, you guys had a lot of slides a little while ago. But just when you think about sizing this, just I think investors can get excited about like, well, wow, this could really be X in five years versus even where you guided to. So how do we think about maybe you can use installed base of PCR, I don't know, clinically? I'm sure you guys have done your math about how you're thinking about the opportunity ahead. What is the precedent example about the addressable market for digital PCR, do you think?
So our numbers, and I believe it's supported by many data, and in addition, they are more conservative than some of our competitor numbers. As of today, I really believe that the digital PCR market is at least at $500 million, at least $500 million. It's growing double digit and it's high double digit. So we are not talking 10%. We are talking higher than that, which means that in a visible, let's say, planned period, you see it at $1 billion, clearly. And then we always said at QIAGEN, since we started in this field, that the total potential addressable market over time is probably around $2.5 billion-$3 billion. For QIAGEN, I mean, beyond 2028, obviously. So I'm not here in a midterm plan discussion. But should it be a $500 million revenues? Yes, for sure.
I mean, there is no reason why digital PCR, an activity where we control the instrument, the reagents, and the bioinformatics that we are also in companion diagnostic, shouldn't be at least the size of QuantiFERON at a given time in our portfolio, clearly.
Great. All right. So let's maybe we'll kind of shift off that a moment, if you don't mind. Let's maybe talk about sample prep and extraction. You have a next generation sample tech coming and more automation coming in 2026. Just talk about sample tech and kind of how do you think 2025 and 2026 plays out?
We believe first that in 2025, we continue to see the shift from manual sample prep to automated sample prep. And if you look at our numbers, manual is flattish to negative, automated is positive. That proves that our strategy to constantly upgrade our instrumentation for the last three years and a half is the right one. I remind you, QIAcube became QIAcube Connect. EZ1 became EZ2. Now the next one is the flagship system, QIAsymphony, becoming QIAsymphony Connect at the end of the year. End of 2025 is going to be a pilot launch because we really want to make it right. The full launch will be 2026. At the same time, in 2026, we will have a very smart system in sample technologies, which is a one-shot, fully benchtop, the size of your laptop.
Imagine a researcher having this in her or his bench and ready to be used shot by shot whenever they want. Cheap price for the instrument so that they don't have to go to a budget process of approval and obviously related consumables. This is launched in 2026. We call it QIAmini. At more or less the same time, probably one or two months difference, we want to go into the very high throughput market of sample tech, the only market where we are not at the moment, with what we call QIAsprint Connect. And there is only one competitor there. And basically, that had not been upgraded for many years. So we believe that. So what do I see for us? First of all, this year, probably flattish to very small growth.
Starting next year because of the impact of this instrument coming back to a 2% and the numbers that we gave on our CMD, which was 3% growth, we can achieve that. So some people are telling me, yes, 3%; it's a bit a mature market, but it's 3% at a significant profitability. And so it's fueling the P&L. Second, it gives you position in the labs that are very nice because once they take your sample tech, they can obviously move to other products in your portfolio. Once again, the importance of share of wallet. And something that the market, I think, needs to understand: when we are going to launch the QIAsymphony Connect, the QIAmini, just the accessible installed base that we just have to replace or to complete, it's around 30,000 systems.
Even without focusing on landing new customers, we have 30,000 people using QIAGEN, convinced about the quality and saying, "you're bringing something new." The renewal of this base is already phenomenal. Those are the trends that I see for us.
So when you roll out those two new products, I mean, what's the impact? Is there an instrument upgrade cycle? Is there a pull-through opportunity?
It's always you need to give time to time. Customers, they might be very interested. They need to validate it. So you have a trial period. I mean, for me, if you really launch QIAsymphony, QIAmini, I'm sorry, and QIAsprint Connect by mid-2026, you should be in full speed of sales mid-2027. Clearly, you will have sales before, but full speed, you see, and QIAsymphony Connect, I mean, I remind you, at the moment, the normal QIAsymphony, it's an old instrument. We still put more than 100 systems per year on the market. There is no reason we should be doing less than that starting at the end of 2026.
Right, right. But 3% is where that growth goes. I mean, it can't get to four or five given the size of your installed base.
If we can beat it, you'll be the first to know, as usual. And at the same time, you see there are promising applications where we are. I don't want to use customers' name, but I mean, a very good name in liquid biopsy, go to Natera. It's impressive. We are talking about more than 100 QIAsymphony side by side there. And we continue to put more QIAsymphony. So choosing to invest in automation, I'm sorry, plus added value applications such as liquid biopsy, MRD, and so on, if we can beat that, we will, obviously.
So talk about the long-term margin guide versus where you exited 2024. And wouldn't there be a lot of upside to that long-term margin guide? Just walk us through kind of how you guided 2025 versus where you exited. And when would you contemplate raising the long-term margin guide?
There is upside. We always said that. I think it's fair to say that in the volatile environment in which we are, one, we strongly believe in our 7% CAGR on the top line, but obviously, you need to sweat because the environment is volatile. Where I believe we have more margin of quick upside is on the operating margin. So we will not hesitate to review that number quickly if we see that we have solid rationale behind that, and so what should be the next target? I don't know. It's premature, but it would be higher than 31%, but I like also to insist that if I may, and again, I absolutely do not want to sound defensive, but eliminating the ups and downs of COVID, this company in the last five years has increased its level of activity top line by 30%, three, zero.
In an incredibly moving environment, improving profitability, we will be this year about 30% operating margin. Still now raising EPS faster than the top line. This year guidance for EPS is 9%. Obviously, you need to take into account and discount the forex. You take at least 200 basis points of forex, but 9% versus 5% top line growth. In a, let me insist on that, also very volatile tax environment. You know that Pillar 2 in Europe, obviously, is increasing the level of tax rates we are subject to. We are subject and generating a cash flow that is unprecedented. So the last five years are proving that the company is really stronger than ever. It's not translated into the current share price. That's why I invite you to be more active on it.
But at the same time, definitely, we prove to be on top of our peers with solid P&L, improving profitability, and very solid cash flow to do and deploy on M&A.
Let me just ask you one final question.
I think there was a. Sure.
Just in terms of the acquisition, it's going to get more aggressive in the acquisition. I'm just curious if you're going to share any targets in terms of ROIC versus the cost of capital. Because it seems like the market doesn't seem to give you a multiple. Maybe it's because the ROIC is so depressed. How do you think about that?
So the question was on M&A and the push to be more acquisitive, how you would contemplate M&A in terms of ROIC. Would you underwrite a certain ROIC level for this new M&A?
No, because I mean, it depends. I mean, the time frame that you are considering, obviously, so for me, the answer is clearly no. What I'm looking at clearly at the moment is really accretive from a growth standpoint because I believe that QIAGEN should focus on continuing to be a growth case to you. And we have proven with past acquisition that we were very good at making them extremely profitable and then improving our return on capital invested. We have proven you as well that despite giving it some time when it doesn't work, we do not hesitate to basically divest. Next example is obviously NeuMoDx, so the mindset will not change here.
Maybe final one in a minute past. But just with the stock where it is, and you've kind of outlined the growth, the margins, the cash flow, the focus. Do you think investors are do you think people are hung up on QuantiFERON? Do you think people just kind of what do you hear back as we wrap it up? You're doing what you can, delivering, executing against your plan. But what do you hear back about maybe what might be misunderstood about QIAGEN?
So first of all, I would say that management should always be extremely humble here and never hesitate to question itself. Because it's always easy to say, oh, it's QuantiFERON or it's China or it's NIH. We need to look at our own belly button, perhaps the way to translate our performance, the way to communicate, the way to we need to improve there, first of all. Second, I believe that obviously the rumors on QuantiFERON for me are largely unfounded when you look at what we deliver, even since those rumors have started, given the potential of market that we still have to convert from skin test. But that's the way it is. So what are our actions? Continue to develop the product, continue to raise also commercially the barriers to entry and to execute.
Last Q4, it was the seventh quarter of more than $100 million revenues for QuantiFERON. But clearly, I mean, rumors, especially when they come with absolutely no details on product performance, product specification dates, and so on, they are just rumors. The current environment is not specific to QIAGEN, but clearly, it creates a bit of volatility. It's not specific to QIAGEN. Once again, I think for us, the story is stay humble and continue to execute quarter after quarter. At the end, it needs to pay off. If not, I mean, I don't know. There might be some other decisions to be taken. That's all.
Terrific. Thank you very much again, Terry, for being with us. Thanks everyone in the audience. Let's finish strong on day three.
Thank you. Thanks a lot for the time, guys. Thank you.