Great. Thanks, everyone, for joining us this morning. A pleasure to have with us Qiagen's John Gilardi. We have the CFO, Roland Sackers, from Investor Relations. We have Daniel Wendorf. We have Jonathan Sheldon, VP of Communications. I guess, Roland, for me, when I looked at the numbers, your organic has been the best in the last year in life science tools. It's been a challenging year. I know, historically, Qiagen, when I think of Qiagen, NIH, and government academia comes to mind. I mean, despite those challenges, you guys have done phenomenally well this year, well above your life science tools peers. So when you just do a review of the year, what has surprised you? And what do you attribute this above-peer performance to?
Yeah. First of all, thanks for having us. And again, it's a pleasure to be here. And finally, we also have a good microphone. So I think you can congratulate yourself on that. I've seen that differently in other conferences. But again, what is important is, and I think it's fair to say that we had a really good year this year, where the 7% growth rate in the first quarter, and also the second and third quarter was a 6% overall growth rate, was actually, I think, well received by the market as well. I think this is testament also to our strategy on the one hand side being very focused on around five different growth drivers, which we are for sure going to review in detail.
But I think it is also a testament that 85% of our business is consumables and consumable-related business, which is clearly much more resilient than an instrumentation business. So I think overall the portfolio strengths played out. I think it's important that we probably do not see ourselves, but I think the market sees us as innovation driver. Our customers like to work with our consumables also long term. And even in days where you have funding concerns or even funding issues, clearly our customers want to continue their operations. And as long as they come to work daily, they have to burn our consumables. And I think that is clearly the strength of Qiagen.
Great. Since you brought up macro rate, what was the total impact from NIH sort of funding constraints? And what do you think growth could have looked like without those issues?
Yeah. I think NIH was probably like 4% or 5% of total overall academia. It's probably somewhere, let's say, between 6% and 8% in the U.S. of total, which includes that. So I would say there is clearly, I would say, an impact of the NIH. And there's also a reason why we were a bit more careful when we have given for the fourth quarter guidance. Because while I think the overall consumables business is doing on and going on quite well, you clearly see that people are a bit more careful on the instrumentation side, which I do think is a natural behavior.
If you're not sure that you have funding for the next 12 months or even more visibility beyond that, you rather wait for a couple of whatever weeks or months and say, OK, before I make that material decision, which also then, of course, triggers maybe a new operational guy in front of the machine, for sure, incremental pull through on consumables. I want to have clarity.
Gotcha. I do want to come back to that fourth quarter guide. But before that, you also announced the CEO transition. Look, it's never an ideal time for CEO transitions. But this came in along with some M&A. Seemed a little bit abrupt for us, but maybe this was planned from an internal standpoint. So maybe some context on transition.
Yeah, the context is, as you know, it's German law. At the end, as you know, we in Germany, we have this ad hoc law that means once you have a discussion, which contains material news, you have to release it publicly. I would say in the U.S., you probably would have waited till you have identified a successor. But Thierry and the board had a discussion on succession planning. I think both agreed that the timing after, again, 10 years being with Qiagen and six years of that CEO, and that includes clearly the significant COVID days, it would be a good time for transition, but under German law, you have to then release it immediately, and yeah, we have to deal with that now.
Gotcha. And from a new CEO standpoint.
search is continuing. We are looking, as you know, for internal and external candidates. I would say the European time frame is typically somewhere between three and six months. As you know, Thierry will stay on board and work on a very professional handover. There's no question about that.
Gotcha. And then we'll touch on the M&A, but maybe a couple of macro items. China comes up a lot. From your, when you look at the macro in markets, you serve right pharma, diagnostics. How would you say characterize the current environment versus six months ago? Do you feel like the environment has improved?
I'm not so sure. I'm a bit more optimistic for 2026 because you see, I would think, moving in the right direction, but I'm not sure that we made significant steps. A good example is China. I think we all hope that China in the second part of the year would be improved somewhat. I would say it probably improved, but micro steps. Again, China for us is also only 4%-5% of total. So I would say it shouldn't concern us too much. Nevertheless, we were, of course, we as many others would have wished that more macro impact would happen, that more funding would hit the street. And again, we see little signs, but not like big step forwards. I would say there's clearly good news that the shutdown is stopped.
But I think you know better than I do here, all of Europe, that you still don't have a budget. You might or might not end up in the same situation in January again. And while nobody is hoping for that, that might happen. And so again, overall, no concerns for our consumables business because as people go to work, they have to burn our consumables because otherwise there's not much to work. But would I buy a new machine? Of course, I would. But would a scientist who is a bit more concerned? He would probably say, OK, wait another four weeks and let's see what happens end of January.
Since you brought up shutdown, has shutdown had an impact so far?
Sure. And you clearly had, again, you have seen it even in the third quarter, which I would say we all would agree was a good quarter for Qiagen. So again, compared to the market, we're doing well. So it's probably also a reason why we can speak a bit more freely on that topic than others. But of course, again, if you get threatened at some point in time, 20% of funding cuts, everybody knows that's not different in your environment. A CEO, CFO can do certain things. If somebody tells you you have to cut down your cost by whatever, 5%, 10%, you can do that. OK, let's do less travel, less training, skip the Christmas party. Fine. But if somebody goes around, it's 20%, 30%, you know, it probably means headcount. And that concerns people.
And so why should I increase fixed costs if my job is under scrutiny? So I would say it has an impact. Again, not too much on the consumer business because people are still working. But on CapEx, yes.
That's helpful. And I think China, did you say China is 4%-5% of revenues?
Of total, yeah, that's correct.
Can you just maybe high level remind us, what did China do in 2024 year to date?
Again, for us, it was last two quarters actually double-digit negative, like I think 12%, 14% or so. The interesting situation for Qiagen is, again, I think therefore we are probably a good observation of what's going on in the market. You might recall, Vijay, that we have this dual brand strategy in China, which is unique for us to China. That means more or less half of the business is with our global Qiagen brand. And actually in 2005, we acquired at the point in time our single largest copycat in China, produced locally, developed locally, local management, seen very much as a Chinese company. And here we clearly see that the local brand in brackets is doing better than the global brand. So this whole theme of buying local, buying Chinese is a topic we can't ignore that.
The benefit for us is, of course, we are right now looking, OK, can we enhance that? Because we believe that might be a longer-term trend.
I see. That's helpful. And when you roll up all of these, there is China, there is shutdown rate. But still, I have a hard time when I look at the 3Q and the 4Q. 3Q, you guys did 6% core. And we're guiding to 2% core in Q4 at 400 basis points of deceleration. Comps don't necessarily get harder. How much of this is like shutdown versus China?
I would just slightly rephrase it or rearrange it. Comps get a bit more difficult in the fourth quarter, particularly if you look on QuantiFERON. Actually had a very strong Q4 last year. Again, I'm not concerned in general, as you know, on QuantiFERON in general. But I think it's worthwhile to point it out that it is a bit more difficult in the fourth quarter, gets easier again next year. In general, we were clearly, when we have given guidance, we were in the middle of shutdown, and I would say nobody at that point in time expected that the shutdown would be over two weeks later, so I would say there is an impact. Nevertheless, I still also believe that the instrumentation impact, as I laid out before, will continue. I also go back to what we did earlier this year.
We sometimes give guidances where we believe it's realistic and the market might believe it's conservative. And we tend to come out then better than you thought. Again, I wouldn't mind if we do better as well. But at the same time, keep it balanced, I think, is the right thing right now.
Gotcha. Sorry, and just the point that you made on shutdown, the guide had contemplated a full quarter shutdown impact.
Correct.
I see. And that shutdown, Roland, is that limited to the U.S. academic environment? That's your 6% of revenues?
Yeah, it's more or less what we're seeing in the academic environment, particularly U.S., of course, is of importance.
OK. That's helpful. Diagnostic solutions.
This is a healthy business for us. Again, if you go through it, I'm quite sure we can't complain about TB testing. I think we can't complain about QIAstat. Both are very solid double-digit growth drivers, as we said publicly on the call as well as again, we typically say it's a good quarter if we have more than 150 placements per quarter. We said publicly Q1 was a very strong quarter. We said Q2 was a very strong quarter in terms of placement. We clearly have seen Q3, we've been very strong. I'm quite sure in January, I tell you the same thing about Q4. So this whole symptomatic testing is a strong business for us. The enhancement of the portfolio for us plays quite well. As you know, we got four approvals end of last year in a tender-based market.
So it will take some time to roll in. But we're seeing being quite successful in rolling this additional test into the U.S. market. But it's also a global product for us. So again, in all markets, we're growing double-digit and we do have strong placements.
Gotcha. And I know, is there a first half versus second half dynamics in core diagnostics?
Not much. Again, sometimes we have impacts, again, not as big for us than for other companies. Like, of course, if you have a stronger respiratory season, it is not hurting us by definition. Again, I would say the larger impact for us right now comes from the launch of new activities. As you know, we have more launches coming up. We will probably submit in December still something to the FDA in the U.S. and there's more to come. So we are continued expanding menu, not only on QIAstat, but also on digital PCR. So I would say overall, we feel good on the diagnostic franchise. Again, if you like the focus points, I'm not even saying it's a concerning point because again, if you grow in the area you're growing, most people would probably die for that in our business, is clearly on the budget situation.
Gotcha. Gotcha. And sticking to diagnostics and then QuantiFERON, that's been a phenomenal growth driver for you guys. If I go back like 12, 18 months ago, there was a lot of concerns around competition. I know the stock, it did reflect on the share prices. Just talk about the competitive landscape within that latent TB testing.
Yeah, let me kick it off and then Daniel might enhance on that. First of all, just to remind everybody, TB testing was always competitive. Only because we have a significant market share means that there is no competition is not correct. There was always other companies from Oxford and others in the market. Yes, we are probably doing since 10 plus years much better than everybody else, but it is competitive. But the biggest competition for us is still actually the 60%, literally 120-year-old skin test. But the good news for us is even this 120-year-old skin test is growing 4%. So the opportunity for us to penetrate that market is not getting short at all. So while we're growing, let's say, 10 plus %, we barely penetrate into the underlying market, which is good news.
It's driven by population growth, but it's also driven by more and more mandatory testing. More and more governments want to have mandatory testing as a work-related, legal, immigration-related, healthcare worker-related. So I think there's a nice opportunity. Second, of course, we're not standing still. As you know, we are now working on the fifth generation of the test. We are improving workflow. We have, I would say, an outstanding instrumentation partner with DiaSorin. So I would say also the way over the last 10 years, the product developed is quite nicely. I still go back, as you know, till 2012 when we acquired the product, and literally, some of your colleagues at the time hammered me, how can you pay $300 million for a product with $20 million in revenues? In hindsight, we all look smart.
But of course, in the meantime, we have now $2.5 billion in revenues with a very healthy gross margin. So I think the deal worked out quite nicely. And again, the competitive situation really hasn't changed. bioMérieux, now for the five, I think, five years, is in the market, sometimes had to pull, coming back, really didn't make a difference. Roche since 10 years tries to enter the market. I think they clearly got more vocal over the last couple of probably two years. Nevertheless, on the last CMD, they didn't talk about any U.S. launch anymore. We still assume that they will come to the European market at some point next year. But I do think we are well prepared. We work with our customers. We develop our products. Again, I think the product we're having is well recognized.
Gotcha. You mentioned the fifth generation of QIAstat. Is there a timeline on when it might launch and what is different on the fifth gen versus the current version?
Every couple of years, we're continually improving the QuantiFERON test. We're now on the fourth generation. That's been on the market for a number of years. In the fifth generation, we're looking for workflow improvements. You think about the sheer volume of test tubes that our customers have to handle. Remember that there's four tubes in every QuantiFERON test. In terms of the complexity of the test, that's a key barrier to entry to make this test work. People are looking for ability to be able to process faster and more tubes. That's what you saw from our partner, DiaSorin. They recently announced that they had come up with a way to increase the high throughput capacity for certain customers up to 75%. We're looking at additional ways to help them with the workflow and in terms of the processing.
We'll tell you more about that in 2026.
Gotcha. Is that launching in 2026, John, or?
Some of the products will start to launch in 2026 and 2027.
OK. OK. That's helpful. And Roland, since you brought up skin testing, which is still 60%, we know QuantiFERON, it's a superior test, right. And it's been demonstrated well enough. Why are we still at 40%? Why shouldn't this be at 80% penetration?
Because you have to change behavior. You know that healthcare in general, but I think diagnostic is specific, is a sticky environment. You still have doctors saying, I'm doing it since 20 years. My patients are happy. What is helpful is that therefore you see this acceleration. We're still growing double-digit. There's, of course, more and more papers coming out supporting the superiority about products. You see that more or less all the large labs are offering it. There is clearly an acceleration in terms of volume in general going on. But you still have to educate people's behavior.
Gotcha. Gotcha. Is QuantiFERON, should this be a double-digit growth asset for the foreseeable future?
Again, as you know, we have a midterm guidance out, which calls for a 7% CAGR. So technically, I should say no, because right now we're growing quite well. At the same time, we feel quite good about the product. It's clearly ahead of our plans right now. And while I said probably Q4 might be facing a tough comparison, I'm quite confident looking into next year as well.
That's super helpful, and then you called it strong instrument placements, QIAstat placement rate in 3Q. I guess that for me stands out as unique because some of your peers are still talking about capital challenges in the market. What drove 3Q and how are you thinking of sustainability of those trends?
Yeah. So first of all, we have really seen three quarters of strong placements of QIAstat-Dx. In fact, in the U.S., in the first half, we placed already more than we placed in the full year of 2024. And this was really driven by menu expansion. We have now three of our core panels on QIAstat-Dx in the U.S. We have three mini panels. And we are not standing still. So we are on track to submit another panel both in the European Union and in the U.S. in blood culture identification still this year. And next year, we're looking for submitting another panel, both jurisdictions again, with complicated urinary tract infections. So we are expanding our menu. And this is certainly helping also our instrument placements for QIAstat-Dx. And what we are also now moving more into is the area of companion diagnostics.
Our platform has two very important advantages for the clinical field there. And this is CT value calculation amplification curve. So you can basically track disease progression. You can track pathogen load. And this is particularly important in the clinical setting. So we feel really comfortable for the further development of our QIAstat-Dx platform. And we actually almost forgot to mention it. We got the FDA approval for the QIAstat-Dx Rise platform, which can do 160 samples a day with limited need for lab space, which is also a very important feature. And this already had a good start.
Have you disclosed an installed base for QIAstat-Dx?
Not for this year. We took it to a year end.
Gotcha.
But you can do the math.
Gotcha. Sorry, the assay that you're launching in 2026, is that a major one or any way to quantify what that assay is?
It is unique. So I do think it will help us again driving penetration into the market. I think it's fair to say that, again, it will be no different in the fourth quarter. Respiratory has the majority of the panels. But again, if you go back pre-COVID, and I'm not indicating that we will at some point go back to pre-COVID, pre-COVID, the mix around on respiratory was one third. And the rest was then probably gastro and the others. I do think with everything what is going on on respiratory and also that people want to know post-COVID much more, OK, is it COVID? Is it flu? Is it RSV or whatever? That respiratory probably will always stay half of the business.
Gotcha. That's helpful. And then moving to sample tech, I think that grew low singles in third quarter, but it certainly improved from first half rate. And that's why, again, going back to my earlier question, is the macro improving or sentiment changing? Can you just talk about the puts and takes and what drove 3Q?
Sample workflow by definition is an important product for us. And I would say it's clearly also a market where if you have the market share we have, it is not easy to outperform the overall market growth. Therefore, it is important that you work on innovation and new product launches. And I do think that is clearly something that Qiagen is driving right now. We did quite some launches on the consumable side over the first half of the year. And as you know, it is even more important for us now at a time where we add three new platforms to our sample prep franchise. And we just more or less introduced the QIAsymphony Connect to the market a couple of weeks ago, as you know.
So there will be a revenue impact more or less kicking in, I would say, over the course of the first half of next year. And mid of next year, we're going to launch probably even more important machines of QIAsprint, which is a high throughput version of a sample prep machine, and the QIAmini, which is on the other hand, which is rather a low throughput machine. Why do I believe particularly the Sprint is important? While QIAsymphony, as you know, is a well-established Qiagen platform since actually, I think, 2008. And now the successor is a significant advancement of some machines in terms of workflow integration, throughput, connectivity, all the features a lab wants to have. It is clearly also hitting a mid-sized and mid-throughput environment where a lot of QIAsymphonies, again, have a huge and good utilization. It's a high throughput machine.
It's brand new to Qiagen because we never played in that market. And again, while we have, I would say, significant market share overall, the high throughput market Qiagen doesn't have any footprint in yet. So every machine we're selling there is incremental to our business. Every machine we sell there comes with an incremental consumable business. And as we're talking high throughput, it is even material. And so I would say, therefore, we are quite confident that over time, our sample prep number probably goes even up and further. Clearly, also the acquisition of Pars on top of that is being very helpful for us.
Definitely. We'll get into Pars. But this QIAsprint, I mean, this feels like it's one of the more significant launches in 2026. Would you agree with that?
Absolutely. And again, as I said, it is addressing a market where we believe there is need for innovation. The question you could ask is, OK, why haven't you entered that market much earlier? Because we always were looking for an automation platform which really makes a generational shift to the automation solution that in terms of continuous loading, turnaround times, again, automation figures. I don't think anybody will be surprised that Qiagen will be able to come with a significant portfolio from day one because, again, we are the sample prep company. But we clearly always have to look for an automation partner which helps us on the automation to be state of the art as well. Took us some time. But now over the last three years, I think we developed a nice machine. People will be very pleased with the features.
How large is that? When you look at the sample tech market, Roland, what percentage is high throughput, which is now greenfield for Qiagen?
We haven't really sized the market in that way. But we think there's probably at least 10,000 of these systems out there that are eligible for replacement.
Gotcha.
So like Roland was saying, this is not a recycling story or a rejuvenation story. This is a fully incremental market for us.
Are there any economics for NGS you can share, John? What do each of these instruments cost? Is there like a rough range?
It's hard to imagine. That goes above six figures.
We give you a discount if you want to have one.
I will let my director of research know if I want to start a lab. I will let him know.
Investment banking team pays more.
I guess that kind of segues nicely into my next question. A liquid biopsy, MRD, those have been the buzzwords, right? Is this the system that would cater to those kind of markets? Or how should we think of those markets being a driver of sample tech?
When you think of the liquid biopsy market, the instrument we have developed actually with one of our customers to suffice the needs of that market is the QIAsymphony Connect. The two important new features for the QIAsymphony Connect is faster time to result. So it can process more samples within a given time period. The other feature is lower elution volumes. So we embedded a new magnetic technology which allows to concentrate the magnetic beads even further. So you have the already precious DNA then eluted in a smaller sample size. This is really the instrument we have developed for the liquid biopsy market. It's actually a very attractive market for us. It showed growth over 35% over the last year, really. We are not, also for competitive reasons, disclosing how much we generate in that field.
But it's a very attractive market for us.
I guess when can it become significant enough that you need to start disclosing? I know you do a good job on the diagnostic side, right? What is QuantiFERON versus different drivers? Could this end up being meaningful enough where you might have to break it out within sample tech?
Says a guy who always tells us we are disclosing too many details. But no, again, I do think, as Daniel pointed out correctly, the QIAsymphony is a new one. Clearly makes a difference. We believe once we see that hitting the street, we for sure are going to be updating you on more details. And that probably will include also liquid biopsy.
Gotcha. And then when I think of everything that you've said between QIAsymphony Connect and QIAsprint and QIAmini, it just feels like sample tech could be inflecting in 2026. Would that be a reason?
Over the course of 2026, we are quite positive. As I said, the two big other machine launches are coming mid of this year. But we are clearly seeing that, as you said it and framed it correctly at the beginning, these are important inflection points for Qiagen. That's the reason why we are so focused on these three launches. One is now on its way. Customer feedback is good. Again, we had a couple of customers testing the Symphony now for months. They even didn't want to give the machines back, which is fine because they are life science customers. But so I would say the feedback there is good. We expect similar feedback from the other machines. Again, it's an important inflection point for Qiagen.
Gotcha.
It will not go overnight by definition. At the end of the day, it's a consumable business. We like to sell the machines. But as you know, at the end of the day, we like to sell machines to sell more consumables.
Makes sense. Then maybe switching to genomic side of things, let's start with the acquisition that you did on Pars Biosciences. You highlighted single-cell RNA products, right? I mean, it's an interesting time to be doing deals in that space just given NIH constraints. So maybe talk about the rationale and timing.
Yeah. Let me kick it over. Daniel for sure can enhance on that. I think what we liked really on PARS is their unique setting. I think one of their very strong features is that you don't have to have an instrument, an automated solution to get to results. It is clearly also an opportunity that you have a consumables-based only solution. Particularly what we described before, that CapEx is a more difficult environment. We see that clearly as a strong differentiation factor from PARS. We're also following that company, I think actually since 2017, 2018, quite detailed and probably on a quarterly basis over the last two years, and they delivered literally every quarter on what they promised. That's not always true on the small companies, as we all know, and they have a strong performance.
Again, as we said publicly, they delivered around about $20 million revenues last year. We expect at least $40 million for next year. So, strong performance, and that doesn't even include, I would say, a larger revenue impact by, again, having Qiagen getting involved. Our involvement at the beginning is clearly focusing a lot on R&D activities. We're doubling up on the R&D framework. Of course, we're bringing them in our global network. But they had a good footprint. They were very strong around the top 10 pharma customers. We, of course, know more than the top 10 pharma customers. The same is true for the overall global network. So, there will be opportunities to really drive that business quite nicely. It's also a reason why we believe they're not only will be accretive in 2028, but also over time will be margin accretive for Qiagen.
Yeah. And actually, the single cell market is currently also in a very interesting point of its development, also driven by PARS because its Evercode technology allows now to generate millions of billions of individual single cell data sets. And this now allows basically to create, with the help of AI, with bioinformatics software like we also can offer with our QDI, IPA, and Omicsoft platforms to start creating virtual cell modeling. And this is now also becoming very interesting for the pharmaceutical industry. So we think the single cell market is a sort of at the brink of a new interesting development with that possibility to generate millions to billions of data sets. And actually, PARS, together with a company called Tahoe Therapeutics, they generated a data set of 100 million single cell data sets. And the development doesn't stop there.
Very interesting. I thought single cell, it's about maybe a $600 million market. But obviously, capital environment has been constrained. When you look at that $40 million estimate for 2026, Roland, what gives you the confidence in that $40 million? I don't know if this market has a backlog, right, to give you visibility?
By definition, we of course talk to many customers they're working with, and we clearly see the pipeline for next year, so I would say, as I said before, we see this $40 million already more or less by extrapolating what they're doing right now. Again, the Qiagen benefit we haven't expected. It starts as of January 1 because, again, they did a good job, but we for sure can enhance that, so it will not stop at that $40 million. It will continue to be a significant double-digit growth driver for us, but I think it's also, and I think as Daniel was alluding to that, the market is shifting. I think the market overall is shifting in the direction literally they are by far the leader.
Again, if you compare their $40 million next year to what, for example, Scale is doing, there is a significant difference. Again, that's the reason why we double up in terms of R&D because we clearly want to expand the difference there. We have a strong feeling that that will work out quite nicely for us.
That makes total sense. I mean, just given your leadership position within sample tech, right? In my understanding, Roland, Pars uses barcoding tech and that's how you eliminate the need of instruments, correct?
Absolutely.
So you can barcode these cells.
It is easy to integrate in our overall offerings from the sample prep side all the way to the bioinformatics side, and for us, it's a perfect fit.
Let's say I use the Qiagen solution, right? I use Qiagen PARS solution to barcode these cells and separate them. What do I do after them? Am I doing sequencing or PCR?
Sequencing. It's going to go into a sequencer and then off the back end with bioinformatics.
Gotcha. And then since.
It's upstream of the library prep step, or if you want to do a whole genome, and then you can mix and match what you want, but it's clearly, like Roland was saying, it fits right into the wheelhouse of Qiagen's sample prep kits.
Gotcha.
Then we can cross-sell it with library prep as needed. Or we can start to bundle it with bioinformatics.
I think we also got in the meantime, it's also fair to say, a couple of calls from pharma customers saying, guys, we're glad that you bought that because, again, knowing that it is in a larger scale, it gives us also, by definition, increased confidence that it will take from where it is today to the future.
I mean, this space, we've been doing some work, and it makes total sense for us eliminating instruments and barcoding, right? Just do it in a test. It makes total sense. John, you brought up sequencing, right? Downstream, you do sequencing. Genomics NGS did high singles for you guys in the third quarter versus flattish in first half. Talk about the first half versus second half dynamics. What's driving this strength? And is it sustainable?
We see improvements in the genomics portfolio. Remember, this includes what we're selling for the wet lab work in terms of library prep for universal NGS panels. We're agnostic to the sequencer. So we will work with any partner that's out there in terms of working with their systems. And then we're picking it up on the back end of the sequencer with our Qiagen Digital Insights bioinformatics business. That enjoyed very good growth at a double-digit rate in the third quarter. It had good underlying solid high single digit growth. And then combine that with the Genoox acquisition that we did earlier in the year where we picked up an Israeli bioinformatics business on the clinical side that's known for a lot of very good work for hereditary disease. We like the platform.
We can expand that to somatic cancer analysis as well and other types of clinical decision-making tools.
How big is QDI for you guys at this point in time, Qiagen Digital Insights and?
It's actually doing quite well. As you know, it's north of $100 million business for us. While we're going through a transition from a licensing-based deal to a SaaS kind of business, which clearly is hurting the revenue recognition, the order income is actually quite good. You have seen also last quarter being double-digit. I would assume for next year, high single, low double-digit growth rate to continue. So I would say we're quite happy with that business. Particularly, it also has a very healthy gross margin. While we're investing into R&D, it is clearly a business also helping us in terms of profitability quite nicely.
Where are we on the SaaS transition, Roland?
Typically, I would say the contracts have been three years in the past. So I would say technically, we are probably just a bit more than halfway through. I'm not sure that you feel that too much from the outside because, as I said, we are now more or less, again, back to the high single digit, low double-digit environment. So yeah, it could be better. But I would say overall, compared to the market, we're OK.
And the customer mix out there, is that more clinical versus research or pharma?
It's a fair mix. I think there's a lot of pharma companies in that. There's a lot of life science research. Of course, there's also a couple of clinicals. So it's a mix. Right now, I think the companies who I would say are most engaged is around the pharma side.
Gotcha. Gotcha. And then switching the last segment for you guys on PCR, that was slowed down in 3Q versus first half, right? I thought NIH was mostly a first half impact, right? So maybe just talk about first half versus second half.
Again, digital PCR is an outstanding technology. And even in that environment, us growing like last quarter, double-digit, I think is good performance. Would we love that it would be more? Absolutely. And we have seen very solid consumables growth rates. But instruments are difficult to sell in an academic environment. Again, even if the instrument is in brackets only 30%. And yes, we are growing. But again, people are concerned. They want to see funding flow. So I probably also believe once you have an approved budget in the U.S, that might be the area where people say, you know what, I always wanted to have that machine. Now I finally can buy it. I'm not a big fan in general from call it budget flush situation or whatever because I'm not typically believing that. Here, I would say yes because the technology is so unique.
The demand on people wanting to learn about that is still high that I can see that. Now what is driving the growth is the machines we sold more or less over the last two and a half years. People are utilizing and increasing the utilization. The consumables run rate is good. As you know, we're also adding more or less 100 panels per year. We did that over the last two years each year. We're going to do the same thing as well. The portfolio for our clients gets much bigger as well, which is being helpful.
Gotcha. U.S. academic income, when you said it's 6% of revenue, right? What is it?
Academia is around 8% of total.
8%.
Yeah.
OK. And what has it done year to date? Has it grown? Has it declined?
On the consumer side, it's OK. On the instrument side, it's declining.
OK. And when I look at street numbers for next year, I think it's modeling mid-singles, organic. Is that something that you're comfortable with or?
Yeah. Again, I think overall the consensus I think is reasonable for next year. I think they have U.S. revenue growth rates drawn around 5 percentage points. I think EPS are like $2.50 or whatever. So I think that is probably a reasonable starting point.
What macro should, when I look at the levers, right? You guys have done the guidance is that mid-single CER this year. Next year, maybe China's bottomed out.
We all hope so. I'm not sure it's happening. We'll see.
Possibly U.S. academic and government environment improves. And you have new products, right? So can you just frame the pluses and minuses when you think of 2026?
I would say in general, we are clearly, if I could add now the volatility around macro, by definition, more positive for 2026 than for 2025 for the things we discussed before. I'm quite positive that our five growth pillars are continuing to deliver from Qiagen start-up or Qiagen about sample prep with the new launches, and QuantiFERON, again, will have a good run. I do believe there's opportunities, what we just said, on normalization, on digital PCR, and I think the overall volume might increase once people have more certainty, so I would say yes. The one thing which, again, might lead to a situation similar to this year, you and many others thought, OK, we have given a careful guidance in Q1. The good news is we were then beating Q1. We were beating Q2. We were beating Q3.
And so I can't guarantee that that should happen every time. But while I have it that way, then being too ambitious and then falling short. So I think in a volatile environment where you are to a certain degree depending also on outside factors, playing a bit more cautious is not necessarily a wrong thing.
Gotcha. And maybe my last question on EPS.
Easier for me to answer.
Go ahead. Go ahead for 2026. I'm assuming it's modeling 6%.
Yeah. As I said, the 250 I think is a consensus. I think that's fair. We clearly have quite a, again, interest income is, of course, by definition, much lower than it was this year. So we have to offset with margin performance. Nevertheless, I would say it's very clearly obvious that we have a midterm margin target out from 31% for 2028. We were quite outspoken in the past that we are going to update that, meaning increase that at some point early next year. We will continue to, we are planning to do so. If you be more specific on margin improvement for next year, we will end this year, give or take, let's say at 29.5%. But of course, with the acquisition of PARS, we will have probably a headwind around 100 basis points for next year.
Probably currency as it is right now might change a bit still. It's probably another 50 points headwind, and of course, tariffs being 12 months a headwind instead of six months a headwind is probably another 50 points headwind, so if you add that up, you probably have around 200 basis points of margin headwind for next year. Despite all of that, what I just said, I believe I'm not giving official guidance today, but margins should stay flattish for next year because we have still a lot of opportunities to improve margins not only for next year but also for the years beyond. Let me give you a couple of examples. One is clearly QIAGEN. We're still running underutilization. Production capacity was built during COVID. We are ramping up. Standard costs will come down. Significant impact. Overall, the mix is positive.
We are growing there faster where we have higher profitability. You know historically sample prep is an important product, which has higher margin for that. With all what we discussed on sample prep coming up, I do think that has a gross margin impact as well. R&D, we feel comfortable with 9% of revenues as input and output. We have a lot of opportunities around SG&A to get leverage. We have around about 40 initiatives going on from smaller footprint initiatives to put even more resources into shared service centers and so on. So I think there's a lot of things that give us good confidence that we're also able to improve margins beyond end of next year.
That's fantastic. I think with that, we're out of time. Roland, John, and Daniel, thank you so much for the time this morning with us.
Thanks for having us. And again, thanks for taking the time. Thank you.
Thank you.