Hi, good morning, everyone. I'm Matt Sykes, Life Science Tools and Diagnostics Analyst at Goldman Sachs. I have the pleasure of being joined by Roland Sackers, CFO, and Jon Gilardi, Head of IR. Roland, Jon, thanks for being here.
Thank you.
Thank you.
Maybe we could start out, just given the current environment, which continues to be challenging, maybe just talk through sort of the durability of your end markets and recurring revenue, and how does this help you manage the uncertainty we have seen in the tool space so far this year, and how does it differentiate you maybe potentially from your competitors?
Yeah, I do think you described already the environment quite well. Nevertheless, clearly what is helping QIAGEN quite a lot is that we have 85% of our revenues coming from our consumable portfolio, and consumables in general are very resilient to QIAGEN. I think we have seen a very good start into the year. You have seen an overall 7% growth rate. We also guided for a 5% growth rate in the second quarter. I would say overall that is being quite stable for us. I do think it's also important to go one step back because, first of all, I think it's important to remind everybody that 50% of our revenue is coming from the clinical side and 50% of our revenue is coming from the academic side in general. Within that 50%, we have on about 4%-5% being related to U.S. NIH budgets.
Got it. Maybe just talking about, at a high level, your 2025 guide, in terms of the largest headwinds in the tool space here, you've got tariffs, academic funding, willingness to spend on R&D from biopharma, and the current macro and policy uncertainty. How are you baking that into your 2025 guide? Where are the guardrails in that? I mean, I would think that my view is it's fairly conservative, but there's a lot of different factors to put into this guide. How did you think about it?
Yeah, I do think when we moved into the year, and as you know, we have given guidance, I think, end of January, early February, we clearly took quite, I call it, conservative, realistic view. And so far, it's also the reason why we were able to beat our guidance in the first quarter. We were always, and we still are, quite careful in terms if it comes to instrumentation revenues. Instrumentation is somewhere between 10% and 15% of our total revenues. I think it was quite obvious that this year it is probably a more muted environment there, and I don't think that the view has changed for us in any way dramatically. Nevertheless, it is also important to understand that our instrumentation business is somewhat different than for many other companies. A typical QIAGEN instrument is somewhere between $20,000 and $40,000.
Typically, it has a payback period somewhere between 12 and 18 months. You can make the case, particularly also if you believe the headcount environment might get a bit more difficult, and you want to keep the volume up. I do think in terms of the consumable environment, it is important to understand that all our consumables are literally an integrated part of the daily work routine. As long as people come into the lab, they have to use it. That has protected us quite well. We have not seen any larger changes in general trends. There is clearly more volatility in now, but nevertheless, on an overall quite stable environment.
Other than that, just even certain areas, like for example, China, which is 4%-5% of our business, where we clearly had a more difficult start into the year, where we see now the first stimulus money literally reaching the street. I'm not going to tell you that China now returns to growth rate, but the significant double-digit reduction probably looks like that that is more muted over the next couple of quarters.
Yeah, just on China, and I know it's a small part of your business, which has helped you on a relative basis, but how do you view this region longer term? Have your expectations for growth in the region come down? If so, like where in your portfolio you're able to offset that potential step down? In terms of commitment long term to China, it's not going away. It's obviously going through some challenges, but how do you feel about that region for QIAGEN in the long term?
First of all, just to frame it again, 4% or 5% of total for us. I do think it's second also too important to understand that China, especially for QIAGEN, what I mean with that is it's the only country where we have a dual brand strategy. On the one hand side, we have the very global QIAGEN brand, but we have on about 40% of our business with our second brand. It's actually our largest copycat, which we acquired in 2005. We kept and separate local management, local R&D, local production. Here we clearly see that China has multiple layers of topics, if you like. One is this very general GDP issue and where all companies have to deal with.
You clearly also can see that a Chinese company and our second brand is clearly seen as a Chinese company has a certain advantage in a local setting. Therefore, it is an opportunity for us to, again, to make up some of the revenue shortfalls we see in the global brand. Nevertheless, we are very much committed to China. We do think that China right now is number two in healthcare globally. Over time, it will become the most important market just by the population side. It's quite obvious also as a European company, we are probably in a slightly different setting than some of our U.S. peers. We would like to stay in China, and therefore we're looking into different options, how we even can drive that going forward.
Okay. And then shifting more towards the business, sample tech represents about a third of revenue. What do you think will spark growth in this segment, and how should we think about normalized growth in the medium term for sample tech?
Sample tech involves our business. That's the core, the bread and butter of QIAGEN. This is where you're using our kits and instruments to be able to get DNA, RNA out of any biological sample. What's important for this business to get back to this growth rate of 3%-4%, what we have given as a midterm guide, is we're going to be launching three new instruments starting at the end of 2025 into 2026. We're going to go through a product upgrade cycle from our flagship system. The QIAs ymphony will become the QIAs ymphony Connect. We have over 3,300 QIAs ymphony placements out there over the last decade. That's going to be ripe for replacement and also for expansion, especially when you hear terms like liquid biopsy and MRD.
What we're doing in sample prep is we're moving into two new market segments. We're moving into what we call the ultra high throughput market. This will be with the QIAs print. This is where we're going to be competing, where you're running like 200 samples at a time and doing very fast, rapid turnaround to get the samples processed. Again, this is an area where we haven't competed before, so it's going to be very interesting for us. On what I would call the ultra low throughput, this would be with a machine that we call the QIA Mini, which will cost a few thousand dollars, under $5,000. You're targeting academic labs, places that were doing a couple of samples in terms of processing, and this can now be automated and free somebody up to do that.
It's a product refresh cycle, and it's a market expansion that we see being able to help drive that. We've seen that before with our instrument launches, that when we get into an instrument launch phase, that helps to rejuvenate the top line. Right now, the last two years, the instrument environment has been tough.
Yeah. With the upcoming launch of QIAs ymphony Connect that you mentioned, have you received any early access customer feedback? If so, kind of how has that been? Have you seen any delay in customers willing to buy a system now as they wait for potentially the upgrade? Should we expect maybe some level of, I do not know, pent-up demand or acceleration post-launch? How are you thinking about the cadence of that as that instrument gets launched and any feedback you have already received?
Yeah, I said starting with the later one, no, we clearly have systems out with some larger customers testing it, giving us feedback. I would say feedback is so good that some customers even do not want to get the testing machines back to us, which I think is always a good sign. Again, the machine clearly has advantages in terms of workflow integration, in terms of throughput. I do think there are also nice step-up opportunities for customers by utilizing these machines. What we see also in our industry is probably something that you also know quite well from the kindness in a second, the company launches or announces a new machine, there is clearly a certain softness in the existing offering because everybody can wait for another 6+ months for a new machine that is hitting the street.
That's clearly something what you have to factor in, what we have factored into our guidance this year as well.
On the QIAs print, the ultra high-throughput, you haven't been in that market before. Is there some level of commercial build-out you have to do, or can you use existing commercial resources to support that? Is there anything unique about that market, given it's relatively new to you, that you'll have to kind of get some learnings on as you launch that?
The only reason why we are not in that market at all is that we always believed if you move into this high-throughput market, you want to have literally a machine which offers a generational shift. As you know, QIAGEN is not developing its own machines. We do all the software development. We do the adaption on the consumables of that machine. We needed the right partner for that. I think we identified now two years ago as the right partner. We are now in the final stage and finalizing these instruments. We do believe we have all the ingredients needed to have also an important step, making an important step into the market because quite sure QIAGEN is well known for its sample prep portfolio in general. The customer setting there is no different.
It's just probably a slightly different kind of a lab with a higher throughput. We believe quite nicely in that market opportunity, and that makes a larger difference to QIAGEN and also our sample prep numbers going forward.
Got it. And then how do you view QIAGEN's position in high-growth areas like liquid biopsy, specifically MRD? How does your sample prep automation help you compete in these applications? And where does automation fall in the rank of importance for customers in this space?
Liquid biopsy is where you're using a blood sample to be able to fish out the cancer cells to be able to do the analysis. The first application of liquid biopsy was actually prenatal testing. Now we saw the expansion now into cancer. We'll see the expansion in other diseases as well. MRD is where you're looking for minimal residual disease. Okay, the patient's been treated for cancer. How many of the cancer cells are still in the patient floating around? And QIAGEN makes the key kits that are used for liquid biopsy. We actually started this in the 1990s with a professor in Hong Kong to be able to start this technology. It shows you that these technologies start out in academia and move into the clinic.
If you think about the Natera's, the Guardant's, all these big labs that are doing liquid biopsy, they're relying on us on the front end to be able to do that work. That is where the QIA Symphony plays into that workflow to be able to help them get the high-quality DNA they need to be able to go downstream with their applications. The more you hear about it, the better it is for our business.
Got it. Where does sort of automation fall in the rank of?
Automation is very important, right next to the quality of the kits that they're getting. So what we give them is on the front end, we give them PAXgene, which is our joint venture with BD in terms of the blood collection tubes, and then moving into the sample prep kits to be able to get high-quality material. They're looking for three things: circulating tumor cells, free circulating DNA, and then they're looking for what are called exosomes. These are important to be able to analyze because these are kind of like spaceships that are shed by the primary tumor and go into the body and start the metastases. And so we're able to, we have the gold standard for this. But automation is absolutely critical when you think about the violent explosion of volumes that are going through these labs.
Got it. Shifting over to QuantiFERON, which has been a great story for you guys, and you have a $600 million target by 2028. If sort of if you assume the market share kind of reaches that, how are you able to offset any potential pressure from new entrants in the space, given that you've been in that market for some time?
First of all, I think just to remind you, our midterm target on CAGR was 7% from 2024 to 2028, and right now we are clearly tracking nicely ahead of that. I think that speaks for itself. Second, I do think what is most important to understand, it is a market where 60% of the overall market volume is literally a 120-year-old skin test. That 60% market is still growing 4% just by population growth, by more mandatory testing globally, and so on. Even for us growing, let's say, 7%-10% over time, we barely eat into being able to penetrate that market in general. It is always a market, it was always a market which is competitive. We had Revvity, Oxford, now part of Revvity in the market since 2012 when we came into the market.
We had bioMérieux in the market, out of the market, back into the market, not really making a difference. There's always more than a handful of Asian companies in the markets not making a difference. We are gaining market share literally as we speak day by day. I don't think that it's going to change going forward. There are clearly rumors about one extra company moving into the market. As we heard on the capital market day, it is more or less in the environment as we assumed before that they might come into the European market by 2026. We haven't heard anything about the U.S. market entry in general. We feel quite comfortable. What is most important for us again is that we were able, with the majority of our customers over the last 12, 18 months, to renew multi-year contracts.
Again, I think that also speaks for the quality of the offering we're delivering to our customers.
How do you really drive that conversion of physicians away from skin towards your test? I mean, it's a better test. It's probably almost easier to do at scale. How do you, like what is the commercial strategy to continue to unlock that 60%? Because it's seemingly a huge opportunity. At the same time, you pointed out it's still growing 4%. Obviously, that's population, but still, it's something that would seem almost obvious from the outside observer. Doctor protocols, as you know from looking at this industry for a while, just take a long time to ship.
Change.
How do you affect that change?
Yeah. So what we're doing with QuantiFERON is we're testing for the latent form of tuberculosis. There's two forms. There's the active form of this bacterial infection in your lungs, and it causes, there's around 11,000, 12,000 cases a year in the United States. What you're looking for are the people who have latent TB. This affects one in four people worldwide who have the infection in their lungs, but the immune system has it kind of in a headlock, and it's not able to go active. Of those one in four people, about 10% will develop active disease. As part of the efforts around the world to eradicate tuberculosis, you have to test people for latent TB to find these people, treat them with antibiotics, or put them under observations to stop this replenishment cycle.
Because people forget with the pandemic over, it's back, that TB is the leading cause of infectious disease death in the world. More people will die of TB than malaria and HIV. Every 25 to 30 seconds, somebody dies of TB around the world. We're talking about a market opportunity of more than 75 million latent TB tests in developed countries: the United States, Europe, Australia, Japan, these types of markets, Middle East. This is a developed world test. If you think about migration trends, legal immigration, congregated living, healthcare workers, there are very specific types of people that have to be tested for TB. To your point about what's driving conversion, it's just still, after having this test since 2012, it's awareness. You still run into people who are not aware of it. Also, the price of the skin test has gone up in recent years.
The cost resistance has gotten a lot less. The third part is that we offer a much better automation solution with our partner, DiaSorin. It makes it easier for labs to process this. The fourth driver right now is more about better targeting of the clinical patients who have to have this test. These would be people who are going on to biological therapies. If you listen to the commercials on a Sunday here in America, the DTC ads, you hear a lot of them talk about the need for TB testing. We're getting a lot more sophisticated at finding high-level prescribers of anti-rheumatoid arthritis medicines. All these drugs for Crohn's disease, cancer drugs, all these types of products often need a TB test in advance. We've gotten much better at targeting those prescribers to order the QuantiFERON test to drive conversion.
Got it. I want to move to QIAstat-Dx, which has been a really good story for you guys. You've had a nice cadence of approvals recently, including the GI panel, which was recently approved. Specifically on the GI panel, and then you can talk about QIAstat in general as well, how could this impact the back half of the year? What do you expect initial demand cadence to look like for that?
I think what you're referring to is the GI approval for the U.S. We always had it on a global base, but in the U.S., we're just one of the four FDA approvals we got literally end of last year. It was a good timing. What is important to know is that GI is typically the number two assay of this kind of environment, but probably more important that respiratory and GI, and sometimes also meningitis, you have to offer in the tender process. Therefore, it's important that you have all available to offer. That was clearly something we were lacking in the U.S. Now we can clearly play a critical role here in the U.S. as well, participating in these tenders. We're seeing that we are clearly also gaining traction here.
We have a significant number of instruments already placed and sold here in the U.S. over the last couple of years. There is an opportunity for us to roll that in. It will not go overnight, but it is clearly a continuous improvement in terms of revenue stream in the U.S.. I think globally, it is important to say that, again, it was clearly a 37% growth rate in Q1. We are good enough. If it stays high, double-digit, not sure it will be always 37%. I think what we said in the past is critical. We always said we want to grow that business, more or less double that business until 2028. As long as we have 150 placements each quarter, we are totally fine. It is fair to say right now we are clearly nicely above this placement ratio, and I do not think that it is changing anytime soon.
Now, even having a larger menu, more to come over time, is clearly an incremental benefit. Not only on the revenue growth, but clearly also on the profitability growth, because the one thing that we were lacking, I would say, in the last probably two, three years was the utilization in terms of production environment for our QIAstat cartridges. Now, this is quite significant growth also in revenues and therefore in volume that gives an extra push on the profitability.
Got it. Just shifting over to companion diagnostics, which is something you guys have had a long history with. How do you view the competitive landscape in that space, and how has QIAGEN able to differentiate themselves in companion diagnostics?
Companion diagnostics have been around for probably since around 2009 or 2010. These are diagnostic tests that you're going to run on a patient. Obviously, it was really in oncology to be able to understand what's the molecular fingerprint of the patient's cancer mutations. Based on that information, what drugs would be good or what drugs would be bad. You think back to IRESSA, Erbitux, these were the first ones that used a test to be able to stratify patients, either you're eligible or not eligible for the drug. QIAGEN is active in this area since then, bringing back these, helping to get these drugs. It's been now 15 years that we've been active in this space.
We're at the point now where we're starting to see more and more adoption of companion diagnostics in that it's really become the exception rather than the old rule that, to put it the other way, you need a companion diagnostic to get FDA approval for a cancer therapy these days. Also, the pharma companies want these because they get better efficacy rates and they have better side effect profiles so they can get better reimbursement. Where we are now is that we're at the point where we're starting to offer these types of companion diagnostics outside of oncology. In oncology, we have 30 partnerships with the big pharma companies. We have 16 FDA-approved kits in this area.
Now we're moving into Alzheimer's with Lilly to be able to do an APOE test to be able to stratify patients in terms of whether they're eligible for the Lilly drug or not. That'll come hopefully in the next two years. We're also working with AstraZeneca on chronic diseases, and we can't get more into details on that. What our approach is, is to be technology neutral to the customer. We'll offer you qPCR, where you look at one gene at a time, yes or no, like KRAS or EGFR test. We're moving into QIAstat-Dx, where we can do a constellation of tests of markers together on the same panel. We do the respiratory and the GI panel test. We're offering them there. That's what we're using for Eli Lilly. We're also able to offer digital PCR as an option to people.
That's why we're working with QIAcuity. And then we work with Illumina, which is our next-gen sequencing partner. And then you'll start to see some news flow coming in that area where we're going to start to have new partnerships coming where we can offer all these different modalities to customers.
Got it. Shifting to QIAcuity, you mentioned that your digital PCR offering, you upgraded your multiplexing capabilities recently. How has this helped drive utilization on the platform and any updates on win rates since that upgrade? Or is this more of a slow-moving kind of event that we'll see over time?
It's going to be a grind to see what customers want. What you're doing with digital PCR, it fits into this gap between, again, qPCR, where you're looking essentially at one or two genes at a time on a test, and next-generation sequencing, where you need, you're going to look at 50, 500, 2,000, or all 24,000 genes in the human genome. Digital PCR fits in the middle. What digital PCR does is it offers far better precision with speed than qPCR. Against NGS, it's much more cost-efficient when you're looking at a handful of markers and you get the results in hours instead of having to wait days or weeks for a next-generation sequencing run. At the beginning with QIAcuity, we said you could look at five markers. Think of five different genetic markers at a time that you want to analyze.
Now we're up to 12, and then we're going to expand that capability more and more with time that we can start to offer more opportunities to look at more. Not every customer needs to look at 12. It's going to take time to see how much applications, how much sales can we generate from the high-throughput version of that kit to be able to look at 12 versus looking at 5. It'll take time. Right now, the push is more, how do you move this? The start was in academia. Now we're getting a lot of traction in pharma, especially around biological drug development, QAQC, manufacturing, drug development. Now we're moving into the clinical area, and that's where we see the next big opportunity. We'll see how that we focus more that way.
There is obviously a large incumbent in the digital PCR space, but given the growth rate we have seen in QIAcuity, there has to be some assumption that there have been some share gains as well as the market probably expanding as you talk about moving into different areas. Maybe talk about the evolution of QIAcuity in terms of market share and where you feel like you are best positioned and where you feel like your right to win is in the future?
I think what we see right now is clearly the area of biopharma is probably a significant opportunity for us. It has to do that we have, first of all, generally three different sizes of instruments. So depending on which kind of volume you want to run, you can more or less pick exactly the size you want, which is a nice opportunity for our customers. Second is we expanded our menu quite dramatically. We added 100 panels this last year. We're adding 100 assays this year as well. I would say in terms of offering, we also have here a quite significant reach into the market.
Last but not least, I think it is also quite clear that the conversion, not only on the biopharma side, but also, as Jon just said, on the sequencing side is ongoing because while sequencing is an outstanding opportunity and technical solution, if you are looking for the unknown information on the biopharma side, I do think it is important to understand that they typically know exactly these are the six, eight markers why they should change or should not change. If you can do that more or less in one day instead of weeks with a digital PCR solution with a couple of hundred dollars compared to $1,000, you clearly can also see that even if you assume that the pharma environment gets more challenging in terms of environment, there are opportunities to increase speeds, but also save costs.
Got it. Maybe just going back to a little bit more high level, and I think QIAcuity kind of is a good segue into this, but just talk through sort of the willingness of your customers to spend on CapEx this year. If you've seen any kind of significant impacts from the broader macro environment from instruments versus consumables. Now, you're in a fortunate position that a large portion of your revenues are recurring in consumables, but there still is some instrument exposure. Where do you see sort of still, do you still see these CapEx constraints in place? Do you see it alleviating soon? What kind of impact and what have you done to kind of try to spur?
I think there's even a second reason why we're in a good situation because, or there's even two more reasons. One is that half of our revenue is clinical, half of our only life science. The second is probably that most of our instruments have a very different price point than instruments typically in our environment because with a price point between $20,000 and $40,000, you clearly reach break even much faster than if you have to invest, whatever, $500,000 or even more in some cases. Again, Q1 was okay. Again, - 1% growth rate for instruments, I would say not as good for us, but compared to the overall environment, quite sure most companies would die for that. Nevertheless, we believe that the environment stays quite difficult for probably quite some time. We need better visibility on particular U.S. funding situation.
Not sure how, at least in our guides, we have not reflected any larger improvements here. While we believe that hopefully with end of this year going closer to the new budget season, that you have some clarity, we are not so sure, at least when it comes to our guides, just giving us some flexibility. I do think where we nevertheless see some momentum is particularly in Europe. There is clearly some extra funds coming down the area there as well. China we talked about already. I think overall it is okay. Jon was alluding to the large events in instrumentation, which are more or less 26 events for us, which is his new instruments in sample prep.
That is quite big for us because these are all machines where we believe they make a significant difference, not only for QIAGEN, but actually for our customers going forward on the low throughput side and the mid throughput side, but also on the high throughput side. It's a big year for QIAGEN.
Before we move on to some of the financial questions I have, I do want to address QIAGEN Digital Insights. I think it's a business now that has gained some level of critical mass. It's growing very fast. The margins are attractive. You guys have started to talk more and more about this business. Maybe just kind of talk a little bit about your strategy with that business and what competitive advantage do you have within the bioinformatics space and how easy is it to get customers of your other products to utilize this type of software analytics?
QDI is QIAGEN Digital Insights, and this is our bioinformatics business. We started building this probably around 2012, 2013. What you're doing is you're using industrial scalable professional software to be able to analyze and interpret the data that comes out of any next-gen sequencer. The data that comes out of these sequencers is just a glorified text file, a collection of Cs, Ts, As, and Gs. You have to be able to use very specific software to be able to first align all the DNA up and then mark through what's right and what's wrong. Wrong is what they call a variant. They get upset if I call it wrong. It's just a variant.
This is just like one of those tests that you did as a kid with a number two pencil, and it's just do, do, do, do, do, and it's marking what's wrong, but that doesn't tell you anything. You need to use different software products for the interpretation. That's going to tell you what's a variant or what's wrong and why is that important or is that just noise? This is where QIAGEN has built a $100 million business, like you said. It's getting critical mass, just like QIAcuity and QIAstat-Dx have also both broke through the $100 million threshold of sales. That's where we're trying to create products for drug discovery and for research work and then also for clinical applications. What we're trying to do here is move this into much more of a SaaS model from license agreements.
That's like Roland was saying, this is a bit of the drag that we're seeing on the sales performance right now. This is a transition that's going to probably take another 12 to 18 months. If you think about labs that want to be able to do next-gen sequencing panel analysis work for their customers, we're providing them the tools, the picks and shovels to be able to do that. Where we can cross-sell to these customers, to these labs, if you think about the NeoGenomics, the Quest, LabCorp, the big medical centers, these types of places that are offering these things, we can offer them sample prep. We can offer them the automation to do that. We can offer them then digital PCR to help do the QC work on their next-gen sequencing runs.
We can try to pick them up with the panels that they need to be able to pull out and extract the genes because these guys are thinking about 500, 500, 700 genes that they want to extract out of the sample to be able to sequence. We will give them the informatics to make sense. All of our kits that we are creating and our software are agnostic to any sequencer platform. We do not care what sequencer you are using. We will be able to pick you up on the front end and we will pick you up on the back end.
Got it. Roland, you laid out a target of achieving 31% adjusted operating income margin by 2028. It's been the worst kept secret that I think that we can probably, you could probably do better than that, but wisely you've sort of gated some of those expectations. How should we think about areas of potential upside to that target as we move closer to 2028?
First of all, I think it's important to realize, of course, we made, of course, significant progress where we improved the EBIT margin by 330 basis points over the last two years. I think it is already quite meaningful. I do think you're right with this. Clearly, more opportunities for us going forward. Yes, we also said on the last call that at some point, I would say between now and probably latest call it when we give next year guidance, we're going to update our midterm guidance as well because it's quite obvious that there is opportunity for us to do better. I think if you look into the details, I would argue that probably for this year and next year, the larger part comes from operational leverage. There's opportunity for us to gain here some more visibility.
R&D probably quite comfortable with 9%-10% of revenues going into R&D and funding our pipeline. There's opportunities around digitalization and other efforts on the SG&A side. Over time, we will see an incremental driver helping us to expand our EBIT margin, which is cost margin. I talked before that we have certain areas where we are underutilized. I think it's also quite obvious to see that instrumentation is part of our strategy, but clearly better utilization of the instruments at the customer side clearly is also helping us to sell higher consumables per machine, which again helps us to drive overall margin for QIAGEN. I think there's a number out which I always find quite interesting.
If you take all the instruments which we launched over the last few years, plus the related consumables running on these machines, the cost margin for the rest of the business is north of 70%. You can see how important a healthy consumable business is for QIAGEN, and there's some way for us to grow into that as well.
Got it. In the few seconds we have left, I do want to touch on capital allocation, M&A being a component that you've talked about in the past, but also now with the buybacks you've been doing where they're consistently dividend. How are you thinking about your priorities here? Specifically on M&A, what areas of the portfolio do you feel like you need to fill in?
I think our overall capital allocation policy has not really changed. We always said it has one part is investing into our business. As I said, 9%-10% of revenues going into R&D. Second is we always said that we are looking on any kind of value-enhancing deals. We just closed a smaller acquisition on the bioinformatics side, as we said before. There are clearly opportunities out there as well. Last but not least, we started in 2012 with $100 million share buybacks per year. Just in the last two years, we stepped it up to $300 million per year. Next week, we are going to ask our shareholders for a $500 million synthetic share buyback approval. I would say the combination of all three is still what we want to drive going forward as well.
Great. Go ahead, Jon.
Don't forget the dividend.
Yeah, that was.
Last but not least, we're going to start with a small dividend payout this year because we all know once you start a dividend, my successor's successor still has to pay a dividend and grow it every year. For us, it was important to show the confidence in our cash flow ability, plus also being attractive to a new set of shareholders.
Perfect. Roland, Jon, thank you very much. Appreciate it.
Thank you.