Good. All right. Welcome. Welcome and good morning. I'm Puneet Souda. I cover, life science tools and diagnostics here at Leerink . My pleasure to be hosting, QIAGEN team today. Joining us on the stage is, CFO Roland Sackers; and also, Head of Investor Relations, Danielle Wendorff. Great to have you guys. Thanks for coming to our conference.
Oh, thanks for having us.
Yeah. Maybe Roland, the first one, something that's on a lot of investors' mind, and there's a quite a bit of discussion around it. Maybe just if you could talk about, obviously you've stated that you're open to discussions regarding strategic options? You know, Thierry has really emphasized shareholder value. It's always understandably look, it's hard to comment on these ongoing discussions and level of interest, but wondering if you're willing to share a bit more about this process on how things are progressing, any updates on the strategic front?
Sure. Again, thanks for having us. I do think today was pretty much clear, and as I've seen, of course, Bloomberg picked it up last week as well, that on the one hand side, QIAGEN feels quite strong about its position in the market. Clearly, we executed quite well over the last couple of years. Same time, we also believe we have a strong pipeline. At the same time, it's also very clear that more or less, since a couple of months we're in a CEO transition, and that is a typical time where not only the CEO, but clearly also the board can ask itself, okay, what other alternatives are accessible for us or might even create further view or future value or incremental future value, if you like.
That's exactly what Thierry stated, that that is probably the time we're in while the CEO search is progressing. Just to be very clear, that's progressing quite well. We are more or less from a long list to a short list, and we would expect that there is a new CEO at least announced in the second quarter of this year. There's clearly opportunities on M&A fronts as well. That also goes into different directions. On the one hand side, I do think we, in the meantime, build a very nice track record of doing board on acquisitions like Genoox or Parse as well. At the same time, there might be opportunities in any kind of combination with the different or even larger companies to create more value for the shareholders as well.
The board, as well as management, demonstrated and wanted to be very clear that is where we are open to and let's see, where we end up.
Got it. Okay. You addressed both of those, you know, key questions. I'm sure you're gonna have more of those in one-on-one meetings. Maybe, just given the ongoing conflict right now, you know, and there are some inflationary concerns. Just wondering if there are any considerations in terms of shipping cost, other things that you have started to think about if this was to stretch longer.
Yeah, as you said, it's a question of how long it might take, right? Is it more or less a few more weeks? I think we all should be fine. There's clearly already some hiccups in terms of logistics left and right. I don't think that's too material right now. There's a lot of things you probably have to eat, but I don't think there is any larger material change of business. That might change in a second, of course, when your logistic supplier, for example, starts to increase fuel surcharges. As you know, they are typically good at that. If a larger time frame fuel price odds for them change, they might add that to the pricing. Might be a couple of millions.
Nothing what I'm too worried about right now, because I would say, let's see where we are in three, four weeks down the road. We right now do visual calculations. I think it's also important to know that the majority of our freight costs we pass on to our customers, so I think the net impact might be smaller than that. Again, right now it's probably more the logistic change in general, while we don't have too many things coming via ship. A lot of planes are stuck somewhere, while it probably will take some time before there's a normalization also with the logistic providers. Something where we have to plan through right now and not to avoid, but at the same time, you cannot ignore it.
Got it. Okay. That's helpful. The other question on the macro side is just overall the state of funding, both in academics versus pharma, that's been relatively stable. There is also the question of the smaller biotechs. Maybe just try and, you know, I believe you were expecting 50 basis points of improvement from funding. Any changes that you're seeing here in the first half so far?
Just to put things in perspective, 50 basis points and a half in number one from H1, H2 is $5 million. Again, if that is our maximum risk for the year, happy to take that. I do think we have to slice and dice it a bit. What I do mean is that the consumable business is a very resilient business, as you know. It's 85% of our revenues. Even in the governmental shutdown in the U.S., we still sold consumable on a quite regular basis. The more or the larger impact typically comes on the automation, on the instrumentation side. Of course, he is not only good enough to have the funding available.
As you know, the good news is we do have an NIH budget is growing 1%, much better than most people who are expecting/feeling while at the same time last year when the world was thinking about, "Oh, is it down 20%? Is it down 30%?" Solid + 1%, I think, is a very solid and good number. I'm not too worried on the consumable side. On the instrumentation side, I think you need more than money available. You need also confidence in the system because an instrument is not an investment for a 12-month period. It's a midterm investment. You typically enter into a new consumable screen. You might have to hire a new operator for the machine or at least you contract a service contract for the machine as well.
It's not necessarily only about the budget for this year. It's also, "Do you believe what is my funding situation down the road?" Building confidence, as we all know, doesn't happen in four weeks. That's also what we factored in when we have given guidance a year, so it might take some time. That's a confidence into the system probably will take some time. Again, that's more specific to the U.S. academic situation. We do not see these trends in Europe right now. We also don't see that in the clinical environment, just to frame it. We are careful on the instrumentation side. Of course, as I said, we would expect building confidence back will take some time.
Yeah. Okay. Switching gears to, you know, 2026 revenue, your guide, you are expecting at least 1% organic growth in Q1, for the full year, I believe you're expecting 5%, that implies a significant second half ramp. Maybe just walk us through your comfort level on that ramp. Still somewhat number of things that you pointed out, obviously, in the marketplace is still we're in that somewhat of an improvement phase. There's some conflict ongoing and macro questions that are in the marketplace. Just given the CapEx environment still, you know, what gives you sort of confidence on that second half?
I think if looking backwards to last year, similar to Edward, we gave a quite low guidance for the first quarter of the year, and I would say we improved in the guidance over the course of the year, twice, in particular on profitability, and came in quite strong. I think it's also fair to say this year is somewhat different given some of the macro trends, particularly in the U.S. The bridge from H1 to H2 is actually the following. As you said, from 1% and then more or less a 500 basis points increase H1 to H2. 200 basis points is just mechanics because it is until mid of this year, we do have the headwind from the discontinuation of two of our business, NeuMoDx and Dialunox. This will automatically fall apart, 200 basis points out of the 500 basis points.
Another 200 basis points is from what you just were referring to, is from the new product launches. 150 of that is from the new sample prep machines. We are going to launch three new machines this year. QIAstat-Dx and QIAsprint are already on the market, so there's no launch risk or whatever. Having $15 million more revenues in a six months period coming from two new significant launches, I don't think it's too aggressive. While I would say it's fair to say, you still refer to this instrumentation topics before, I still believe that is reflected in the numbers as well because, again, only half of our business is life science, half of our business is in the clinical market, which is doing quite well. Of course, this instrumentation business also comes with pipeline and so on.
You have a reasoned visibility. Another $50 out of the $200 comes from launches we do around QIAstat.
Mm.
As well as QIAcuity, our digital PCR platform. We delivered so far quite nicely on both of them. I wouldn't say there's any larger risk. Another grow or acceleration we do expect from QuantiFERON. It is fair to say that Q1 is clearly a bit more challenging for us, quite unusual. That has to do with the large tender business we had last year. You might go back to Q1 last year when we had a 16% growth rate QuantiFERON was which also for us is a strong growth rate. That has to do with the tenders we won in Brazil and in Oman. These tenders typically come with a full package, not only the consumables, but also the instruments, the software.
That will normalize what is starting in the second quarter and then even sequentially in the third and fourth quarter. I think there's an impact. The last impact is the Parse acquisition, which again, they did $20 million in 2024. We said we'd do $40 million, at least $40 million in 2026. Quite sure right now that they do more than the $40 million. There's an acceleration of probably $5 million from H1 to H2 as well. I think there's a lot of reasonable factors for us to believe that it's going to happen. I want to be fair as well. It's not a home environment. The environment is not the easiest one right now. You have just other things you just mentioned, U.S. academic, you have China here. Now you have the Middle East.
A lot of things to juggle at the same time. I think there's a lot of reasons to believe that we will on that way as well. Again, if what that is happening, what a lot of other companies are saying right now that they believe the academic environment in U.S. will even improve sooner than later. That is upside to our guidance as well. I think we haven't factored in here too much as well.
Got it. I wanna come back to QuantiFERON in a second. Maybe just briefly on Parse. Just wondering, you know, in terms of the product, you're expecting 20 going to 40. The competitors, as you know, some established competitors in the marketplace, they have launched also new products that are lower-priced products. There is another sequencing company that also has, you know, via their acquisition, they have products in the marketplace. I guess if pricing was to, you know, pricing pressures were to emerge in that market, obviously how should we think about that?
Yeah. First of all, the technology of Parse has a big advantage that it's scalable and it's instrument free. Our competitors, they rely on instrumentation solutions. The one you're referring to, I guess is one of them is 10x. They're moving currently customers from one platform to a new platform, which is indeed cheaper. However, if you buy the kits with higher single-cell runs-
Mm-hmm
Per kit from Parse, we are very well price competitive, so it's not that we are seeing price pressure for our products at Parse. That's not the case, right? Our pricing has been stable for the last two years. If you do a really apples to apples comparison, and if you do a really big dataset generation of single-cell analysis, you will see that our pricing is actually very competitive still also to the new platform of 10x. That's not really what we are seeing here.
Just to add to that, I think I would argue that Parse plays in a different league. If you want to compare to certain offerings, you probably have to compare to the scale part. The scale part is most likely, as they said, $4 million revenues. We are saying at least $40 million this year, and I have said before already we're going to beat that number. Second, we have a healthy gross margin. It's a profitable product. The only reason why we have dilutions this year from that acquisition is we are doubling down on R&D. 'Cause we believe now is the time to set the standard for the future, given the advantage we see in the technology, as Daniel said, automation free, hundreds of millions of copies possible.
There's a significant opportunity for us to, again, to get here to a leading franchise for significant time going forward. It's the reason why we're doubling down.
Great.
Maybe an add-on, you might have seen that we launched a new chemistry, the V4 chemistry.
Yeah.
Parse, t wo of the main advantages is that one is that the data quality is even higher than for the old chemistry, which is one of the key competitive advantages of the platform. The other advantage is that the cell retention rate is meaningfully higher, 75% higher, due to the introduction of a magnetic bead technology, which is able to increase the cell retention rate with the new chemistry.
Got it. Do you have customers using QDI in any of the downstream analysis and maybe, the other piece that I had was on the, on the margin side, you talked about investments into this, you know, sort of how should we think about the overall margin drag in sort of Q1, Q2 here?
Just Q1, as we said to public as well, it's just coming from an acquisition at $0.02 dilution.
Yeah.
It will improve quarter-over-quarter. As I said before, we also believe that probably sometime next year it becomes even margin accretive, given the growth we're expecting and a healthy gross margin. So I'm not concerned on the profitability profile here at all. It's more the question of how much we really want to double down on R&D, and I do think there's a nice opportunity, as I said before. One of the benefits is exactly what you, what you were referring to, a nice combination with our QDI business, right? And we see that already happening as we speak. There's not only internally at QIAGEN, but also on the customer side, I would say a strong linkage happening.
People are thinking more and more end-to-end, and that getting that out of one hand is a significant benefit.
Got it. maybe just coming back to QuantiFERON, you talked about, you know, tenders and tougher comps, from last year. one question that remains in the marketplace is really, the emergence of competition, you know, from a major, latent TB, testing provider. You know, again, that's been question that's come up quite a bit, but maybe just tell us how should we think about that, where your strength would be, where the channel is strong, where the defensive modes are?
Yeah, first and foremost, I think the company you mentioned tries now since 2012 to come to the market. To be honest, in the meantime, we are begging that they come to the market, 'cause right now we're fighting a ghost and let's see what they are going to say us now in May. Again, I would say let them come to the market, and we talk in six months again. Nevertheless, we're not standing still, right? First and foremost, as you know, last year, they were clearly referring that the U.S. launch got pushed out, so, and we're still working under the assumption that they come to the market in Europe sometime middle of this year. Let's see if that gets confirmed. What is surprising to us that there's not much news around that.
Last one, which you might have seen that, was a poster launch a couple of weeks ago on a conference. Interesting enough, that poster didn't have any clinical data, just biomarker data, which is very unusual, because if you are close to your launch date in our industry, you typically provide clinical data because that's the way you sell. You typically goes, I don't have to tell you that, you go to one of the top KOLs in our industry and say, "You know what? You know the QIAGEN instrument and solution. Here's our worth." You compare, and whatever's comes good out of that, you put into a marketing poster and tell the world. Hasn't happened yet. Again, don't want to read too much into that. It's just an interesting news. Second is we clearly haven't sit still in the last two years.
We signed on with more than 60% of our customers multiple-year agreements. Interesting fact here as well is most customers were even signing this contract, which also volume-based, with no larger impact to prices. Actually, we actually were typically now having inflation-based protection into that, which in these days is not a bad thing to have as well. Last but not least, I think with the question particular investors have to ask themselves, where are these machines placed from the competition? Are they there where TB testing is happening? Second, how much capacity do they have? Because what people always forget is the TB test is either a three or four column test. That means you have to have quite significant excess capacity, probably 40%, 50%.
I'm not sure which labs four years post-COVID has a machine hanging around which 50% capacity. I think you can play around with it, fair enough, but at some point in time when you want to play it serious, you might have to buy a new machine. If you have to buy a new machine, you look up, okay, what is the best machine available? Is it a 10-year machine in the market, or is it one of the newer, for example, DiaSorin solution? We are preparing for a lot of different things. Right now, that's also one of the reasons why we said the CAGR is probably not the 10% anymore. It's probably somewhere around the 7%. Let's take it from there.
Right now, we are just hoping that we don't have to fight a ghost for another 12 months.
That's a good perspective. On the instrumentation side, maybe just, you know, you have QIAsymphony. There's a potential for replacement cycle there. You know, maybe just tell us how are you thinking about with the new product launches already in, how should we think about the, you know, both growth of those products, you know, QIAsprint, other boxes, automation boxes, and then more importantly, QIAsymphony.
As Roland already mentioned at the beginning, we are in the process of launching three new instrumentation platforms. The QIAsymphony Connect, which is basically a follow-on to the, a new development for the QIAsymphony, a QIAsprint Connect, and the QIAmini. The QIAs ymphony Connect will be fully IVDR launched mid this year. It's already on the market in a pre-commercial launch phase since end of last year. The QIAsprint Connect was just launched at a conference in Boston a few weeks ago. The QIAmini will come in fall 2026. What is important to note, the QIAsymphony Connect is in particular developed for the needs of high-value applications, meaning for the needs of liquid biopsy customers, and if you want to do microbiome testing, for example.
It has full sample traceability, and it has superior extraction performance, and we expect that mainly our clinical customers will want to buy this machine. Consumables, which are currently run on the QIAsymphony can also be run on the QIAsymphony Connect. That's different to the QIAsprint Connect. The QIAsprint Connect is really our entry. It's a completely revolutionary entry into high throughput sample preparation. That market hasn't seen innovative products for quite some time. We launched the QIAsprint Connect with a new menu, 30 new sample types. That should really be incremental, not just to instrumentation, but also to consumables or consumables revenue. The QIAmini, and it's mainly research for research applications being used. This is also the case for the QIAmini.
The QIAmini is really designed to provide smaller labs, mainly being on manual tests, to provide a first entry into automation. It can process up to eight samples. If you want to do, if you want to enter, more automation processes, the QIAmini would be the right platform to buy. Mainly research customers. When you think of the QIAsprint, the QIAmini, it's basically a bit of a market expansion. The QIAsymphony, we really double down on our high-value customers, in particular liquid biopsy.
Got it. Okay. Maybe just given the time, let me switch gears. China, I mean, you have historically said China would, you know, bounce back before 2026, given the high teens declines in 2025. Are you seeing any sort of stabilization? What's the latest there, and what are you hearing from the teams?
Yeah. Just to phrase it first.
Yeah.
China for us is around 4% of revenue, so sizable, but I would say not too meaningful.
Yeah.
We still believe that China still start the year with a negative growth rate, probably high single-digit growth rate, but negative growth rate. I would say there's also reasons to believe that it shows sequential improvement and hopefully ends the last quarter kind of a flourish on that. What is probably the difference between QIAGEN and many other companies serving that market as well is that we have two kind of different brands in China. We have some very typical global brands, a QIAGEN brand, but we also have since 2005, a very local brand. An acquisition what we did in 2005, actually at that point in time, our single largest copycat. We always kept it separate. Chinese R&D, Chinese production, Chinese management.
Here we clearly can see the difference between being perceived as a local company and being perceived to being a global company, because a local business is doing better. Our topic is not like VBP or so. It's not really affecting QIAGEN at all. It's more like this buying Chinese topic, buying local, if you like, and of course overall GDP situation. We have seen some improvement, we hope that it moves in the right direction. At the same time, what we're of course reviewing right now as we speak is there more products which we can integrate into our local brand by Chinese production, again, China for China, and see if we get their benefit out of it.
Do you expect China for China, broadly speaking, growing simply because there's preference even in life science tools beyond the IVD market for local products?
Absolutely. Again, we shouldn't forget China right now is already the second-biggest healthcare market in the world. By definition, population growth, at some point it will be the second-biggest healthcare market. We made on purpose a decision to stay in the market. Sometimes it might be beneficial to be European company, who knows? Again, there is clearly still a need for cutting-edge products. We still particularly see that some of the top educated and recognized labs in China are very loyal customers. I think there's also reasons to believe that things at some point might. To analyze that they are not negative anymore. Let's start somewhere.
Maybe switching gears to just wanted to get your thoughts on capital deployment. I mean, you obviously completed the $500 million share buyback in January. Maybe just give us a view into the valuation gap that sort of exists out there. How do you think about M&A buyback, especially at a time when, you know, you have looking at strategic option, CEO, search ongoing at the same time.
Sure. First and foremost, let's see what comes out of the review, right? I do think that is clearly probably the next milestone. Second, since 2012, I think QIAGEN built a nice track record of capital allocation. Again, first and foremost, investing into our organic growth rate, meaning R&D. Second, to doing bold on acquisitions. To us, we typically generated excess cash flow, and I think that cash flow over the years even become stronger, and I don't think it's any way different for 2026 or 2027.
Therefore, we stepped up our share buyback programs from $100 million, which was initially the more or less a yearly share buyback, then into more or less earlier, or a few years ago into $300 million buckets. This year, as you said, to a $500 million share buyback. If nothing changes, put it that way, I'm quite sure that we will have on the annual general meeting this year another proposal for two topics. As you know, we also started last year to pay a dividend. We started quite low, so I think there is an opportunity for us to step that up.
We are not becoming the huge yield payer, but given the cash flow generations, there's for sure an opportunity to nicely increase in that dividend payment as well. Second, of course, ask for approval for another share buyback. Of course, we do believe it's rather a regular tool for us going forward. If there's a bolt-on acquisition opportunity, happy to do that as well. I don't think, given the likelihoods in our industry, there's only a reason to believe that on average there should be excess cash.
Okay. That's, that covers it. That's helpful. Maybe, in just one last question around, obviously AI as a topic comes up. QIAGEN always had, you know, had developed a strong position bioinformatics, and a number of tools, not just any. In early days it was open source, now more and more things were incorporated into QIAGEN products as well. Maybe just give us a sense of with AI now, are you seeing any upside, in terms of the customer demand? How are folks employing these tools and, you know, what's your expectations for overall the bioinformatics side of the business?
AI is a huge opportunity for the industry, but passing particular also for QIAGEN. As you said correctly, it is already embedded in our particular QDI information, because at the end of the day, with tech sequencing, there's so many information coming out of a sequencer one, it's beyond human comprehension. You have tools to help you to get to the right conclusion in a faster way and a better quality, that's a perfect outcome. At the same time, we all have to recognize there's a long way to go to train these machines, right? There's a lot of data required that all this information get even better over time. There's also, I would say, a huge opportunity for the underlying QIAGEN business because this information do not come from nowhere, right?
Particularly, if you think now clinical, 99.9% is not good enough, right? I still can only remind people on automation, right? I started more or less 20 years ago at QIAGEN when we just entered the automation of sample prep. Still, the majority of sample prep this world done is still done in a manual way. Automated, of course, is growing much faster. While AI is changing the world, particularly on the clinical part, it will take quite some time before we see that as making a dramatic difference. Until then, it will drive a lot of pull through.
Yeah. There's always inertia that you have to fight back, but, no, thanks for the thoughts here, Roland. Really appreciate the time, and thanks for joining us.
Thanks for having us, and thanks for letting us in your penthouse. Thank you.
Yeah, absolutely.