We're going to kick it off from Tycho Peterson from the life science team. It's my pleasure to introduce QIAGEN. We've got Roland with us today. Let's jump into it and maybe, setting the stage here, just talking a little bit about trends coming out of Q1. You had the guidance reset. Just start at a high level. How should we be thinking about what was kind of idiosyncratic in the quarter and broader demand trends as you feel about the rest of the year?
Well, we do it on Holland, you also have U.S. It is probably one point. I think you're absolutely right. I think, overall, the Q1 start of the year was, I would say, a quarter with mixed results. On the one side, four or five growth drivers actually performed quite well. Same time, QuantiFERON clearly had a difficult start that was due to the immigration-based testing, particularly in the U.S. Just to remind you, QuantiFERON for us is around about a $500 million business for us. 10% of that is immigration-based testing. By far, the majority is legal immigration. One thing what we clearly had to experience is that there were changes coming up in the legislation in the U.S. It took some time that they got effective. We really haven't seen any larger changes, more or less, all the way to February of this year.
Digging into that, it became quite obvious that some of our larger clients have seen that impact. Have in mind, that kind of testing is not done in any kind of dedicated lab environment. It is done with very regular centralized labs, and that probably also took them some time to figure that out and to rebalancing. Nevertheless, what we did is we took literally 100% of the exposure in the U.S. out, which is around $30 million. At the same time, of course, we see similar trends for very different reasons in the Middle East. We might go back a couple of years when we clearly talked about that we want the TB testing in areas like Qatar, Dubai, Abu Dhabi, and so on. Given for the war, we also took out $5 million for that.
We haven't seen any change in Europe for immigration-based testing, nor have we seen any change in 90% of the TB business. Therefore, I think that is quite stable. Being in Q2, I would say what we did was the right thing. I think trends got confirmed. If you go back to the call, what we said, we said QuantiFERON around -5% in Q1. Probably Q2 is flattish, slightly negative, Q3 slightly positive, and Q4 more or less a normalized growth rate. I do think that is what we also see today, and therefore no change. As we had to, going also to your second part, given the changes we have seen then and realized on QuantiFERON, of course, we turned a lot of other stones within the company.
That's also the reason why we took a couple of larger OEM deals out of the guides. One thing is very clear, we delivered until Q1, 26 quarters in a row in terms of revenues and in terms of EPS. Once you realize you have to reset guidance for a specific reason, you turn every other stone.
We'll jump into the businesses in a minute. I guess before I do, just want to hit on the CEO search. You kicked it off in November. Originally, we're targeting June, now it's kind of back half of the year. Just walk us through where we are in the process, how you're thinking about the candidates, how the board is thinking about what the business needs at this stage?
Yeah. No, I think it's fair to say, in the last call we updated it, but it is probably now more an H2 event. I don't think it will be all the way down to December, but it's clearly an H2 event. Couple of reasons for that. First of all, the board is looking for what you probably would call in the U.S. like somebody who has seen the movie. A very senior, experienced leader, clearly with a strong footprint, in the life science and in the clinical side. Clearly, given also QIAGEN's international setting, somebody who has either lived and worked in Europe and/or the U.S. Also here, somebody who's rather very experienced. I don't think that you should, because of the, in brackets, delay, read into that we are short of candidates. I think it's probably actually the opposite.
At the same time, as a lot of investors were waiting for clarity from some of the CMDs, one of our competitors had on the QuantiFERON product on the QIAGEN side. There's also other parties who were waiting for that kind of feedback. That probably led to the situation and discussion. Let's wait a couple of more weeks.
Anything you can say about what the board is looking for?
Again, senior person, C-level experience. Again, somebody who has did the job in a different company before.
Let's jump in on QuantiFERON, I guess, the biggest wind factor to the reset guidance. You've taken down the expectations on immigration. Are we at a clean base from here, or are there still moving pieces for the next couple quarters?
It's about immigration to U.S. It's very straightforward. I haven't really changed. We were careful in taking out 100% of the exposure in the U.S. I'm not sure that's 100% realistic. We do not expect any legislation change in the U.S. as well. I think it's the right thing to do. In the Middle East, I would call it that at some point, either the war is going to end or we will see these countries going back to a more normalized environment, like we see there in Israel and others. Back to work, if you like. Reason for that is, and therefore, I think there we should see, again, some normalization. It's hard to say when, but for sure, will not take as long.
Just how about underlying growth ex immigration, what did that look like in the first quarter? How do you think about that for the remainder of 2026?
As you know, overall, we said it's a kind of a 6% growth rate for the full year. Now, of course, we took $35 million out of that number. At end of the year, we will grow again that business nicely, single digits, and let's see exactly where we are.
You mentioned the competitive dynamic. I guess what we saw there was limited markers, limited head-to-head data on sensitivity, specificity, lingering questions on workflow. You've obviously laid out your roadmap on automation with the Inpeco partnership. Just talk a little bit about how you're thinking about competitive dynamics evolving and with the market obviously getting ahead of itself relatively to the headwinds.
Yeah, I think it's probably a fair summary. I do think there was clearly a couple of remarkable outcomes. First and foremost, as you were alluding to it looks like that our competitor is missing one very important critical marker, which is CD4, CD8. Why is CD4, CD8 so important? That is for the subsegment, which is actually the fastest-growing subsegment. If it comes to latent TB testing in immunocompromised patients, the critical marker. If you don't have that, it's hard to test. I do think that is important, again, and clearly a factor also for the labs, because depending a bit on where you are in the world, it is a population group between 10% and 20% of the total population and the testing population. Of course, as I said, the fastest-growing population as well.
I'm not sure that you will see customers going for two different work streams to address that topic. Second, it became very clear that the automation solution, I think, as they said, is beyond 28. A bit surprised by the wording. Typically, if I mean beyond 28, I would say 29. I'm not sure what beyond 28 means. Very clear also that there's nothing short-term in the U.S. We like the fact that they finally come up to the market in Europe because it's helpful for us to prove what we said before in terms of, again, our success in the market. I think overall, I think it was incremental good news for QIAGEN, I would say.
Just on your pipeline, can you talk to the partnership changes with Inpeco and whether this should be viewed as shared defense, new lab adoption, potentially both?
I think Inpeco is a great addition to our overall workflow. As you know, we have a great partnership with DiaSorin on the back end, that is not going to change. On the front end, of course, there's a couple of steps which still require certain manual steps, which we, of course, going to automate with the Inpeco solution going forward or we fully automate that. That is clearly unique then to QIAGEN. Nobody else can do that. Inpeco is clearly a well-known, proven provider for this kind of workflow automations. As we do believe that TB testing is still a significant volume grower, have in mind 60% of the global market is still literally 120-year-old skin test. Even that skin test market is growing 4%.
We do believe there is an increasing need for automation, and therefore the Inpeco solution which [the partnership] provides you with a walk-away solution is a step in the right direction.
Maybe just shifting over to life science, the other piece of the guidance cut there was this reset expectations partially on the weaker A&G outlook here and then the OEM headwind. Between the two, you said $ 35 million, $40 million headwind for the year.
Can you unpack each piece relative to what the expectations were when you first laid out guidance in February?
To be honest, it's not too much. It's a general environment for academic life science in the U.S. Here, I think it's also fair to say that historically, also last year, QIAGEN had a reasonable consumable performance. Clearly, implementation business was for us, as for many other, a bit more volatile. What we did, as I said before, we looked particular in the larger OEM contracts, which are also part of the life science business. We have here a couple of contracts with large governmental organizations in the U.S., but also in South America, where given the political environment, we are not 100% sure that it will come out. They were very reliable customers for the last few years, always high single digit million-dollars of revenues.
If you do, for example, something like pandemic preparedness, you might have even orders in hand, but you're not 100% sure that it comes in. In a situation where you have to make sure that the new guidance set out is more than reasonable, you adjust it.
I guess, was the reset more a forecasting issue or demand deterioration?
I think it's probably also just to make sure that the forecast is realistic and therefore I think, well, doable. Again, that's probably the base behind it. I would say overall, the automation business was actually quite strong for us. We talked about that in the call, Heiko. As you know, sample prep, for example, instrumentation, was growing double digits. Hard to complain about that, right? As I said, consumable in general is moving in the right direction. There's a couple of pockets who can do better. PCR, in general, is something that we clearly probably will draw a bit more attention to. In general, we clearly see an increased activity, particular on demos, in terms of requests for proposals on the academic side, on instruments. Will all of that lead to more revenues instantly? Probably not.
Do we see, I would say, a certain kind of refreshment of interest? Yes.
Just honing in on U.S. A&G. Obviously, you've got a slight increase in the budget, up 1%. You've got this multi-year budget dynamic that's impacting labs. I guess, how would you describe the backdrop now, and do you think there's a chance we'll get a pickup as we go through the summer?
Just to frame it out with some numbers. Our more or less work from H1 to H2 only requires $ 5 million more incremental revenues coming from a better life science environment. If that is our issue, I'm fine. We do assume it will improve, as I said, on the instrumentation side. The bigger step forward for us clearly comes also with some of the new launches, particularly on sample prep. There we do expect around about $20 million of incremental revenues, given the size of instruments we are launching with QIAsprint and QIAsymphony, and also, I would say the visibility on pipeline and so on. I think I would say so far we feel quite good about that. I would say in environment in Europe, Horizon budget is distributed.
We're seeing more and more budgets in the U.S. finally reaching the benches. Is everything perfect right now? Absolutely not. Do we see that people are clearly getting more interested, particularly on the instrumentation side? Yes.
Maybe just shifting over to pharma. Seems to be better for most in the industry. Just from a high level, how did it do in Q1 relative to expectations for you guys?
Sure. pharma for QIAGEN has a couple of very specific driver, which make it quite successful for us. One is QIAcuity. Clearly pharma is a big partner here on biopharma research, double-digit growth I think consumable and instrument in Q1. Same is actually Parse acquisition. I think what we Parse clearly an outstanding product offering by itself. Now with the [QIAGEN's acquisition of Parse Biosciences] , partnering with our global pharma teams helps in order to gain access to some of this larger accounts. These are sizable deals. That's also the reason why we said, we feel quite comfortable on the $40 million guide we have given for Parse. I would say, in general, pharma is for us probably more on the positive side.
As we think about biotech, funding's been good, sentiment strongest since 2022. Where in the portfolio will you see it, when that funding starts to convert to spending for mid-cap biotech?
Several reasons, of course, daily procedures. We see also the biotechs clearly, again, doing more lab work, I'm not sure if they all want to regenerate now AI-based data also. There's clearly more fundamental lab work done, and therefore again, areas like sample prep are important. Biotech is not the largest customer group for QIAGEN, but still incremental will be helpful. Other area is actually around bioinformatics. Here, I think we see increasingly requests. I would say, it's always good. Finally, I think the funding is on the highest level since 2020. Let's keep on going.
You mentioned Sample tech a couple of times and the expectations for 200 basis point uplift in the back half of the year. I guess, what's happening now? Is it funnel conversion? Is it replacement detailing, competitive wins? Just talk a little bit about what you're actually seeing on the ground to give you confidence in that pickup.
As you know the uplift is actually somewhere between 400 and 500 basis points, some of them it's quite easy because 200 basis points is just the headwind from the deconsolidation of non-COVID and diagnostics. Those disappear as of June 30. It's just a technical impact. That's the 200 basis points. 200 basis points, as you said correctly, is coming from the new product launches, particular QIAsprint Connect and QIAsymphony Connect. The good news is these instruments are launched. They're in the market. The pipeline is building. There was not so much in Q1. There's clearly only a few in Q2, but again, pipeline for Q3 and Q4 looks good. I think that is going to happen. Have in mind also that QIAsprint Connect clearly is a brand new instrument.
Every instrument we sell is not only an instrumentation sale, it's clearly also generating incremental consumable pull through, so therefore important. On the QIAsymphony side, you know that there's new launches coming up. Blood culture is a big topic here as well. I would say on the new product launch, that's good. We have another 50 basis points on what we discussed before. We clearly do believe that quantitative PCR should get better in the second half compared to the first half. Last but not least, Parse as it is still growing and kicking off, we'll have $ 5 million more revenues in the second half compared to the first half. Another 50 basis points there.
I guess just thinking, midterm on the Sample tech, I think you've sized it at 115,000 placements or greater than for the three instruments combined as the opportunity. Couple points tailwind there. What would get you to do better than that?
I think one thing what we already discussed is clearly it's always good if you have a more stable environment and people have the beliefs that they can plan middle long-term. Consumable is something what you buy for your daily work at the end of the day. I think there's also a reason why we actually had a very reasonable consumable business last year, while the environment was not the easiest one for many companies, we were still growing. We shouldn't forget that QIAGEN still is again, historically outperformed the industry quite nicely. Instrumentation, again, is different. I think the benefit we're having is that most of our instruments are rather the price point between $ 35,000, $40,000. Even the QIAsprint Connect, depends a bit on the configuration, it's probably around $ 70,000, $75,000. I think it's reasonably priced.
We would believe if people believe that there's a midterm budget the year after and not everybody loses his job, are going to buy the instrument. More important is it is not only life science, right? We clearly see that the pharma guys are going for the efficient solutions. We see volume growth with some of our liquid biopsy customers who are significant customers for us. You have seen a couple of them just minutes ago. I do think there's opportunities for us to grow, also by other companies doing quite well.
What % of Sample tech systems do you think go into clinical placements of the new systems?
I would say the share of Sample prep instrument is not much different than the global split up. It's roughly half life science, half of the clinical side.
Parse, you touched on, I think you suggested potential upside to the $40 million target this year. What's changed since the initial deal in terms of where you're seeing upside?
Yeah, the interest of pharma and translational space, for single cell is going up. The biotherapeutics data set with 100 million cells is definitely a good proof point that you can scale with the Parse technology. On top also, key quality, that's an important factor. Also, in general, we see a shift from bulk analysis into single cell. The major driver here is the pharma part.
Competitively, how do you see that? Obviously, ScaleBio that acquired around the same time. How do you see the competitive dynamic playing out?
Yeah, the Parse technology is instrument-free. You named it perfectly right, that ScaleBio would be the head-to-head comparison, and here we're not seeing much. Just look at the revenues, right? $40 million for Parse that we expect or even more than that for 2026, and then to a handful of million from ScaleBio.
That's the reason why we doubled down on R&D, you might know. While the business is actually doing quite well, it actually has healthy gross margins, we clearly put quite some dollars into R&D because we want to build the menu even much faster than the original Parse plan was. It's the reason why it's dilutive for this year, particularly in Q1 and Q2. Again, we do believe also it pays off quite quickly.
Maybe we can hit on digital PCR. Strong growth there, over 20% in the quarter. One of the more compelling stories, I think, in the five-pillar plan. I think people are still trying to get comfortable with what the longer-term outlook looks like for that business. Can you just talk on how you think about that trajectory? I know you'd originally laid out a 25% CAGR at the Capital Markets Day, and it's been below that, but how do you think about that business improving from here?
First and foremost, we should remind ourselves that four of the five growth drivers, I think, are overall on track, and probably more important, nothing has changed. Our $2 billion target for 2028 under five pillar of growth hasn't changed. You are right that the composition of the mix might be different things then. I think the $2 billion are more than doable. I do think that hasn't changed, and I don't think there's any reason that it should change. Particular QIAcuity, I think it was fair to say that last year we had all this good coverage with co-promotional side, but the implementation environment, in general, was difficult, not only for us, but for many companies. Despite the fact, it was very encouraging that Q1 had a very good start.
W is to go for it, not only in the consumable as always, but also on the implementation side. I do think we will not expect anything different for the second quarter. Again, for the full year, we feel on track as well. I do think what makes the difference for us is clearly all the investments we made on the consumable side. I would say historically, what you would track and really reach is that most people would say that QIAGEN always had the better implementation solution. At the beginning, we were clearly a bit short on menu. With the investments we made over the last two years, and we continue to do this year in expanding menu and portfolio, for digital PCR, we are probably more than head-to-head, right? I think we have even a certain advantage here. I think that pays off.
We are not standing still here. Also here on that side, we're clearly pushing hard on the menu side because we do believe the transformation from qPCR into digital PCR is just the beginning. If sequencing is doing well, it's great news for digital PCR because you need validation, you need quality control is always most likely digital PCR step. There's a lot of good reasons to believe that business continues to do well.
You mentioned on the Q1 call a kind of a prioritization strategically of digital PCR over qPCR. Can you maybe just talk about what needs to be done to drive more of that transition? Is it workflow, cost per sample, further menu development that Roland mentioned?
Yeah. Just as a teaser here, we also have a deep dive coming up on June 15 on QIAcuity. There you will learn more about that. Just a few words on that. If you just look into the qPCR space, then you will see that a lot is coming from gene expression. This is something that we also mentioned earlier this year that this is something that we want to continue focusing on. Here, what is important for that multi-type capability is always a big topic. Here you saw that we're able to target 12 or to analyze 12 targets in just one reaction. Ease of use is important because as you know, qPCR is a very simple technology, and then how can you automate that? This is all what QIAcuity can do.
Cost per experiment is going down the more targets you can put into one reaction. That's an important factor. The menu, as Roland mentioned, to just catch as many applications as possible in the space.
Maybe we can hit on QDI and you've taken growth expectations down from double-digit to something closer to mid-single-digit this year. Just talk a little bit about how much of that is discovery, research, sluggishness and what specifically changed in the underlying demand environment versus prior expectations?
Obviously, it's very good about the business. We shouldn't forget that right now we're still going through a SaaS transition. Means, again, typically, historically, customers were buying rather upfront licensing deals for typically 3+ year periods. They're going for rather quarterly installments. I would say it's probably somewhat even more profitable for us, but clearly having a different revenue recognition event for us. It's quite obvious that the clinical part of that is an important one, which clearly see also now that, again, some of the AI components are being helpful with helping customers with getting more volume done. Not sure the long term is rather a high single digit or low double digit business. I wouldn't differentiate here too much, it's a nicely profitable business for us, which is scoring above average.
Okay. You previously talked about 15% CAGR for longer term, but now you think high single, low double?
Let's see where the weather slides.
I guess, QIAstat-Dx, you're pointing to a meaningful ramp there, right? Double digit in the back half of the year. Just walk us through what needs to go right on that.
Well, the performance guide I thought was also a good start in the year in terms of placements. We have had this, as you know, historically, always said if you have around 150 places in the quarter, it's a good quarter for us. We had that four times last year, and I would expect it's also the kind of a run rate we should expect for this year on average. Clearly, respiratory is in Q1, but also in Q2. We said that on the call as well. It's a tough comp. I think it's going to normalize in the second half, and we should also not forget that, again, as we said before, there's clearly an important launch coming for us. We'll see how quickly that involves and contributes.
The significant ramp still comes from the launches of QIAstat-Dx for Meningitis in the U.S., because, have in mind, while it got launched more or less end of 2024, that business in the U.S. is very much a tender-based business, and these tenders are typically 3+ years. That means only every year 1/3, 1/4 of this market is addressable for us. We're still rolling nicely into that business. That will drive growth for still quite some time.
You previously suggested there was a path to pull forward to 31% margin target. Now, we're thinking about flat to maybe slightly down this year. Obviously, some FX headwinds in there. How should we think about confidence in the 31% framework?
In fairness, there was a couple of headwinds. First of all, we did an acquisition where we clearly said it's dilutive, right, with 100 basis points, right? The United States decided to implement some tariffs which is also quite some headwinds. Currency wasn't helpful either. Despite that fact, we were growing, margins last year. Despite that fact, we are probably keeping it somewhat steady with what we said for this year, 29.5% on a constant exchange rate. This actual rate is probably 29+%, so north. I would say we're still continuing to expand margins. We still have 40 efficiency steps going forward to helping us to expand margin as well. On top of that, of course, overall, the menu direction has been very helpful.
It's no surprise to you, to anybody else, that sample prep at QIAGEN is probably a higher cost margin than most other products. If sample prep continues what it is doing right now, growing quite nicely, the mix will be helpful. We also have been quite open that QIAstat-Dx is an important product in terms of margin expansion, because utilization of production is an important topic in that environment. Again, as you said by yourself, we do believe that is a good product which is going to grow as well. I don't see any reason that margins shouldn't improve. Again, I hope that you're not increasing tariffs every second month. Despite that factors which we cannot control on the efficiency side, we are in the middle of stepping up on changing our ERP system, bringing two systems to one system.
There are a lot of detailed projects behind this. There's clearly updates on that coming up.
Got just under a minute left. Maybe the door is open to ask about the strategic process. We talked on the CEO timing. Maybe just talk about where the board's head's at. You announced to the world you hired bankers.
Yeah. As we said, a couple of, probably two weeks ago, we announced that we engaged two bankers to help us and help the board to review all the different options which we have. Also a reaction on all the rumors being around since the announcement of the CEO and QIAGEN taking part. I do think there's also an important event which we described before, which was important for shareholders, which was the Capital Markets Day. It's probably important for a lot of different parties. Let's see how that plays out, and then we take it from there.
Great. We'll leave it at that. Thanks.
Thank you, Tycho. Thanks for having us.