Okay, everybody, welcome back to the 2023 Stifel Healthcare Conference. We are on the life sciences and diagnostics track here, and I'm happy to have CEO Thierry Bernard from QIAGEN with us. Thierry, thanks for joining us.
Thank you.
Our pleasure. Maybe a place to start, which I've been doing with some of our companies here, is just sort of recap the last quarter: 5% CER growth for the non-businesses quarter was, outside of one or two players, the highest in the core tools group, I think is worth noting. Can you just maybe talk about where the relative strength in the business is today on the non-COVID side?
Thank you, and thanks for the comment. I'd rather focus, by the way, on the year-to-date growth, non-COVID, which is even better than 5%. So I think it positions really year-to-date QIAGEN in the top tier of the organic growth or the core business. I think it's coming from solid performance in what are the fundamentals of the company, and especially around the Five Pillars of Growth. SampleTech is still doing very good in our company. We, I think, took market shares post-COVID as well as during COVID because we have that unique positioning between automated and manual SampleTech, and at the same time, for the last four years, we have systematically upgraded our instrumentation, launching new instruments every year so far, or an extended version of an instrument, and we are going to continue to do so.
Second, on another key reference of QIAGEN, QuantiFERON, I think the partnership with DiaSorin proves to be successful. The efforts that we have put in, that we have been putting on medical education, clinical education, and conversion of the skin test are paying off. So this is very solid. In the, let's say, more recent part of the portfolio, the dynamic solution on growing market that we are pushing now for a bit more than three years, namely syndromic testing with QIAstat-Dx and QIAcuity and NeuMoDx, we see QIAstat-Dx doing extremely well on the non-COVID business, where we have a menu, especially in Europe. We are still, obviously, discussing with the FDA to get the GI panel approved in North America as well. QIAcuity, number of placements are still going very well sequentially, quarter after quarter. I think it's the fastest growth rate of an install base in digital PCR.
You know that we have a very differentiated positioning. But in addition to that, over the last three years, we have constantly added applications, lately on biopharma, cell and gene therapy. So this obviously helped boosting the growth. And if you go outside of our strictly Five Pillars of Growth, other activities are still solid. UNGS, Universal NGS, our strategy that we took when I took over in 2019 proved to be quite the right one at the moment to become completely platform agnostic. There are many more players now than four years ago in NGS platform and instrumentation. I think that was the right thing to do. On bioinformatics, solid double-digit growth as well, leadership on the market.
So once again, I would never say that QIAGEN is immune to the current more difficult environment, either geopolitical or financial, but it's a solid execution, and we believe that we have the portfolio and we have the people to grow above market growth, whatever is that market growth.
Yeah. Maybe just taking apart some of the growth drivers, QIAstat, obviously, very much one of them, 16% growth year-to-date per my notes ex-COVID. What are the assays that are driving usage there? And to your point on the U.S., the menu has lagged a little bit. How important is menu addition there? Can the whole be greater than some of the parts, so to speak, in the U.S. when it comes to adoption by those customers? What has been the sticking point for U.S. customers there?
Extending the menu is key for QIAstat. There is no magic. I confirm and I continue to think that that platform will become number two on the market. If I would tell you number one, it would be purely aspirational. The number one is far above us in terms of revenues. But what is interesting first is if you look at the progression of the installed base quarter after quarter for QIAstat, where we are on an average quarterly placement, I'm sorry, of between 160 to 200 systems with a menu which is far less developed at the moment than the number one, but a number of placements which is quite comparable to the number one, it's a fantastic performance, and it proves that the platform instrument is really good.
And it's clear that if you are now fueling that platform with menu everywhere, you're going to clearly continue to grow at double digit. It's the case in Europe because in Europe, we have respiratory, we have GI, we have meningitis, and we continue to launch new applications, BCID, for example. In the U.S., yes, we had a surprise. We are still in discussion with the FDA to get the GI approval. Never forget that when you are talking approval of a syndromic panel, it's not one analytes that you are trying to approve. You have to screen the statistical data and analysis around more than 20 pathogens, so it takes time. I still expect it to be approved now, if possible, at the end of 2023 or early 2024.
And then we will submit meningitis, and then the ideal position for QIAstat in the U.S. would be to have respiratory as we have it now, GI and meningitis by the end of 2024. And then it's changed again the perspective of growth. It will boost the growth. Something in a now more mid-term perspective that is going also to be decisive, in my view, for QIAstat is that we are the only company currently developing an asset that can be extremely successful given the demand because there is an untapped demand market around complicated urinary tract infection. So if we continue and we are on track on the development of that assays, this is a typical assay that justifies a syndromic approach with a potential significant demand, with a clear clinical case.
If we are able to launch it as the only one with that solution, then we are going to be able to get some new customers that are going to be hooked to QIAstat, and then they will obviously take the rest more traditional menu. That's the strategy. If we execute that, I confirm that we will be number two on this one.
Okay. Obviously, there was a lot of QIAstat usage during COVID. Do you see the utilization or the pull-through comparison between mid-COVID and the end of this year or next year as a headwind for you?
I mean, we still have a slight headwind in our numbers for 2023 on COVID comparison compared to last year, obviously. Q4 last year on COVID was rather strong testing. We have put zero number in our guidance for 2023 on COVID. We don't know if it's going to surge. We don't even know if it surges, that it will trigger new testing. And we don't want to have our P&L depending on that. So yeah, so obviously on the pull-through, you have this impact still. In 2024, it's over. There will be no base anymore.
Yeah. Sorry. I guess I should have been more specific. On the non-COVID side, is the usage of the box this year and next year lower than what it was during COVID? I mean.
No.
Okay.
No, no. Absolutely not. Because during COVID, it was really dedicated to COVID mostly. We were always clear, a syndromic test during COVID like QIAstat, but it's also the same for competition. 75%-80% or sometimes 90% at the peak of the usage was for COVID, clearly. Clearly.
Okay. And then what about NeuMoDx? You made a comment on the call. Someone asked you a question about whether you were the right owner of that system, and the answer implied that maybe you are not. And I would love to just sort of explore what it is that you mean by that. Is that an asset that you think might not be a QIAGEN asset at the end of it at some point in the future?
Oh, I still believe that we are the right owner, and I also still believe that it's a fantastic platform. By far, if you look at the last 10 years, it's the real only innovation in the PCR multiplex testing for infectious diseases, and we have proven it and demonstrated many times, but it's the duty of management. Anytime we do an investment, whether it's Five Pillars of Growth or not, to systematically, consistently review the performance of that investment. What's the growth of our market shares? What's the improvement of the pull-through per system? What's the return on the capital invested? And if at the point one of our solutions doesn't fulfill the promises that we had in that platform, we need to take decision. We need to take decision. We are a mid-cap, once again. We need to focus. We have different, very interesting investment cases.
As I said before, SampleTech is still one of it. QuantiFERON, as you have seen, we released a new assay in Q3, digital PCR. So if NeuMoDx doesn't fulfill the promises that we put in our acquisition of NeuMoDx, we obviously need to look at every option on the table, keeping it, and continue to invest on our P&L, partnering, or other solution. It's fully open, but I think it's healthy to do that, and it's management duty to do it.
But as it stands today, it's still an investment priority for you on.
At the moment, it's still in our P&L. It's still an investment, and every option is open.
Okay. Maybe just on QuantiFERON, three quarters of that market is still skin testing, which is a pretty big untapped opportunity for you. What is the secret or what is the key to penetrating that other 75%? Is it marketing? Is it economics in some way?
It's continuing the efforts that we have been putting on that market for many years. Medical education, proving the case, proving also the financial value. Skin test, no offense, it's an antiquated test which is not convenient for the patient. You have to come twice to your GP, and the reading of a skin test is rather, let's say, subjective. None of this exists with QuantiFERON. Yet, you see, there is a certain conservatism sometimes in our market as well. Healthcare is very prone to innovation, but many times you hear people saying, "Yeah, okay, but I need to change the training of my technician," or, "I need to change that." So we believe that, yes, indeed, the market for skin test is only 30% or 40% penetrated.
But if we continue like this, because we have seen an acceleration over the last six years, the partnership with DiaSorin is one of the conditions, continuing to improve the QuantiFERON as we have done with our fourth generation. The ability also to segment the market to know where are the skin test users. Never forget that skin test is not just in laboratory. Your GP is also doing skin tests or prescribing, so it's much more difficult to trace where they are. We have done fantastic marketing efforts. We have a very good visibility in a country or in a continent like North America. We are becoming better in Europe. In many emerging countries, it's far too challenging. It's difficult to know even where they are. But that explains how we are going to continue to convert.
It's basically the power of automation, improving the test, and knowing more and more what to target and to convert.
Has there been any change in the competitive landscape post the PerkinElmer Revvity ownership of Oxford Immunotec? Anything notable there?
I don't know of. We, like everybody, hear some rumors that, by the way, have never been precise. I've never heard any competitor saying, "I will be on that market by then with that product on this platform." So as long as it is rumors, what can I say? But I would like to insist on something. For me, QuantiFERON, and I hope it's not going to be perceived as arrogant or complacent, but it's a very good business school case studies. Because there are always challenges with being number one, as we are in QuantiFERON. You become arrogant, you become complacent. You don't pay attention to what might happen. This is exactly what we never did with QuantiFERON.
When I joined QIAGEN, this is the first thing I did when joining QIAGEN because I saw that this was a jewel that we had to protect, and I went immediately to visit DiaSorin and strike a deal for automation. So what we did systematically over the last five years on QuantiFERON, improve the product. It's already very good. We increase its efficiency with the fourth generation Adix CD8. We built the most automated workflow with DiaSorin for the backend reading, but people forget also that we have two other deals with Tecan and Hamilton so that the full workflow is automated. And in addition to that, we develop new application. So we have CMV, cytomegalovirus. We launched Epstein-Barr virus on researchers only, and we have a new partnership, as you know, with Lyme, with DiaSorin. So we did everything to protect that franchise.
It's close to $400 million for QIAGEN, so it's significant, and to grow it. And so you have seen two quarters in a row with $100 million of revenues, 25% growth over the last two quarters. We continue to believe that in the visible, foreseeable future, that franchise, it's a low double-digit growth for sure.
Yeah. Yeah. You've been in that range, if not higher, more often than not. And so would it be fair to say that of the growth drivers that you have, that is where confidence is higher in terms of the sustainability of the profile?
Not exactly. I have a lot from a double-digit growth. I have a lot of good data and moment coming to say that QIAstat will be double-digit outside of COVID, obviously. QuantiFERON, we said that. Digital PCR, for sure. And I don't think that maintaining 25%-26% of growth of QuantiFERON will be possible forever. So QuantiFERON, you will be seeing coming down rather to lower side of double-digit, still double-digit, which is quite a performance for more than $400 million. But my expectation on digital PCR, it's above 20% growth. I mean, we are going to become we are in digital PCR in life science. We will become clinical in 2024. QIAcuity will be FDA approved and IVDR approved in 2024. In addition to that, we will launch our first clinical assays on digital PCR for oncology in 2024 as well, BCR-ABL, so for liquid-based cancer.
So, this I expect from this range, 20% minimum of growth per year. If we don't do that, it's a matter of execution. Take it on management. It's our fault. Because the product is good, we have the menu, we have the people, it should be growing, and the market is growing, so.
Yeah. So given these things that you're saying, I mean, there was a point where the messaging very much was, "We can be a double-digit growing business outside of COVID sustainably." The markets in 2023 have taken a step downward, and so that is not the case. But given what you're saying and the enthusiasm that you have about your growth drivers, is a resumption of that 10-plus rate something that we can think about in the future?
I think we need to come back to history. Since I was asked to take this position, I always spoke about realistic ambitions. Ambition because we believe that this company still is a growth case, clearly. Realistic because I don't want to come to you with basically aspirational numbers for the sake of numbers. So on the double-digit, what we said and we executed on that. Mid-2021, we were the first company to decouple our P&L in July from COVID completely, saying we are going now to clearly distinguish COVID, non-COVID. We were the first one to do that, and doing this, we said, "We will grow our non-COVID by 10% for 2021, and we will do the same in 2022," which we perfectly executed, and now we said, "Okay, the COVID impact is behind us.
The non-COVID market is going to normalize a bit more." There has been some more impact from COVID. Obviously, many labs have acquired a lot of platforms during COVID. They will acquire probably less platform post-COVID, at least for a short period of time. We said, based on that, we believe that our core business will be above market growth. If you consider that the market growth is at 6%, we will be above that. If you consider that it's at 5%, we will be above that.
Okay. So that's the statement for 2024 is, "We shall see what the.
No, it's not a statement on numbers because I'm focusing on achieving Q4 of 2023, which would be a good base to also. I never took a guidance on 2024, and I don't want to because we need to be fair. I'm just saying that in 2024, whatever the market growth will be, we will be above it.
Yeah. That's what I was referring to. You think you will outgrow the market in 2024 or whatever that number tends to be or ends up being?
Yeah. I disagree with some of the most recent comments from peers as well, and I'm not criticizing everybody. This is a solid market. I'm not talking QIAGEN. I'm talking the diagnostic market. We need to keep a cool head sometime, and the people that were overly bullish during COVID or post-COVID were equally wrong than the people that are overly negative at this moment. COVID has proven something which is crucial. It's that everybody realized the critical value of diagnostic in the healthcare value chain. That's a lesson from COVID. Second, hospitals, on average, on diagnostic, any kind of diagnostic, they are spending less than 5% of the budget. The population is still aging. When you have an aging population, what is key is prevention. What is prevention is diagnostic. Many diseases are becoming chronic. HIV is chronic. Hepatitis is chronic.
Some cancers, it's just following your mutation, but you have to test the patient multiple times a year. Even transplant, sometimes post-transplant is becoming chronic testing. So the market is solid. The fundamental, whatever the small hiccups, because no market is immune to the external environment, it's a solid market. It's a solid market. I'm very positive. Whether it's mid-single digit, whether it's a bit above, it's still solid.
What about China? Can you just talk to China in the diagnostics market? You mentioned the anti-corruption efforts on the call. Do you see that as a true headwind to growth in the current quarter or last quarter? And do you think that that's something that's meaningful next year, or can we be past that?
That's another topic where I would ask people to keep a cool head as well. I mean, six years ago or five years ago, you were not in China, you were stupid. Now, if you are too much in China, you're equally stupid. So we need to pick our poison at a point. I still believe that China is a significant market size-wise. In a very short time frame, it became the second market in the world, both life science and clinical diagnostic. But we also always insisted, probably also because I've lived and worked there, that it's a very specific market. The Chinese authorities have decided to localize and nationalize that market as much as they can, which is at the expense, let's be clear, of foreign markets. There are ways to try to mitigate that localization of your products.
In the case of QIAGEN, we do that, but we have also a second brand. Will that protect us completely? No, it will be naive, but likewise, at the beginning of the year, I heard many people saying China is going to improve sequentially. I mean, the Chinese economy was going to hit issues and challenges. It's years that we know that. The market for healthcare and for diagnostic has not recovered. I don't think it's going to recover in the coming six months. The anti-corruption campaign is an element, but it's not going to last forever. When I was living in China, I've been twice through an anti-corruption campaign. Okay, it has an impact, and then after.
So cool head, important market, specific approach, a bit of localization, not always too much because there are some IP issues, a bit of other creative initiatives such as the second brand that you have. Where I did change is that pre-COVID, I was always saying this market should give us 10% growth per year. And now I say this market, because of price erosion, because of the new context, because of acceleration of localization, should bring us a mid-single-digit growth. But it's not bad. It's not bad.
Yeah. No, all things considered. Okay, Thierry. Shortened conversation, but I feel like we covered some good ground here, so thank you very much.
Thanks so much for the time. Thank you.