Qiagen N.V. (QGEN) Earnings Call Transcript & Summary

All right. We could look to get started here. Thanks, I'm Patrick Donnelly, the tools and diagnostics analyst here at Citi. Happy to have Roland Sackers and John Gilardi here from QIAGEN. And yes, Roland, I guess we can just dive in coming off the last quarter another, another quarter of good solid execution from you guys.

Maybe we can just work our way down some of the growth drivers. QIAcuity for one, nice consumable growth there. Maybe talk through what you're seeing in that market? That's the one we get asked a lot about just in terms of the competitive landscape, where you guys are playing. So maybe we can start there.

Yes. First of all thanks for having us. It's a pleasure to be here. It's a clearly a great location. So thanks for that. QIAcuity is clearly probably, if not the most exciting areas for us mid and long term. If you go back to our Capital Markets Day, it's clearly the area where we said it's an opportunity for us going all the way up to $250 million in revenues by 2028. And we feel that we're off to a good start, not only in terms of numbers, but also in terms of portfolio development. As you know, we have dedicated machines and different volume throughput and therefore, addressing the market quite nicely. But I would also argue that we made significant progress in menu expansion, and John can elaborate a bit more on that over the last 12 months, and we have a good plan also for the next 24 months and building out that menu. And we're seeing that gaining some traction. As you said, consumable growth rate is actually very strong double-digit. And clearly, every launch helps and also capabilities like we have on GeneGlobe where you can customize your panels are perceived, are received quite well. But also placement was actually quite solid. It's clear that in a given environment, instrumentation sales are probably a bit more difficult than 12, 18 months ago. At the same time, instruments as we sell them with a price point starting at [ $30,000, $35,000 ] are still well received in the market. So we are quite pleased with that. And menu expansion?

Menu expansion for QIAcuity is really around our ability to target different types of customers. So we started off by launching this to Academia and pharma customers. We offer through our GeneGlobe portal. That's a differentiator for us, where people can make their own customized panels as to what they're targeting. Then we start to look at applications in pharma deeper into that area, cell and gene therapy, biopharma processing and how can we help people in these areas. Then we moved over into applied testing. We announced an interesting partnership with the U.S. FBI to be able to bring this technology into forensics. So earlier, in the second half of the year, we got the first approval for our clinical version of the machine for those who want to have an FDA-cleared machine that's coming into the market now. We're seeing a lot of interest from oncology but also for infectious disease testing. So we're just going to keep widening the range of applications here.

Yes. And maybe on the competitive landscape, again, obviously a large player out there along with you guys. What do you see on that front? Is it win rates? Or is it just there's not too much overlap when you're going into accounts? What's the right way to frame that up?

So the best way to look at it is there's clearly a lot of greenfield opportunities. There's a lot of significant market qPCR, which I think is asking for conversion, there's significant opportunities also in particular on the biopharma side from the pharma companies because compared to sequencing of much more cost-effective ways to enable and to help them. So I think there's a lot of greenfield opportunities. At the same time, our setup on instruments, which, as you know, is having 3 different kind of sizes of machines, depending on your planned throughput, you can pick a small machine also to larger plex machines. I think there's an opportunity, which differentiates us quite nicely.

Yes. And I guess in terms of your guys' sales and marketing approach on that business, obviously, been a few years. How has that evolved? And what's the right way to think about just the future on the sales and marketing on this one?

So what we're trying to do is take much more of a unified product development approach and how we go into the -- how we steer the product, but to have much more specialization in how we're targeting customers. So that's where we want to be able to develop that expertise to look at the applications and then be able to target better how we're selling the machine. It's not necessarily a one size fits all because you're looking at different types of applications in Academia, pharma, forensics or also on the clinical side. So we want to equip our reps who are going in there to sell sample prep, other products to these types of applications, then to put QIAcuity in the bag for them as well.

And just to follow up on that, and you know that, but just to reemphasize that the Capital Market Day, we clearly also stated that is, for example, one area where we actually our sales force activities it's still ongoing. So I do think it's also an area where we should expect a certain acceleration moving on to '25.

Okay. And then QIAstat, another nice vertical for you guys, a few good approvals on the panel side. Maybe talk about the approvals. And then again, I think you guys put up 40% type growth in the last quarter. So maybe talk about both the growth and then again, just that expanding menu and what that could mean for that business.

And I think you're touching on 2 important topics. First and foremost, we clearly have feel quite good about 3 incremental approvals in the U.S. meningitis gastro, of course, another respiratory panel because it's quite obvious that while we had a complete menu ex U.S., in U.S., we were very much focused on respiratory and having now particular gastro and also meningitis available opens many new doors for us, which were not accessible for. And that only for gastro or meningitis also in the U.S. as a dedicated market where you have to more or less bid on tenders. And so it means you have to be able to offer either 2 or 3 of them. So these doors were close to us. So over time, the stores will not open for us all of it. And then I do think there is a nice opportunity. Nevertheless, I think it's also fair to say that the rest of the world is doing quite well for us, a 40% growth rate speaks -- I think speaks for it. We always said if we have more than 150 placements in a quarter, it's a good quarter. We have seen that now for many quarters in a row, and I'm quite sure the fourth quarter will not be different for us. Right now, for the first quarter also as many placements as #1 in that market so far. So I think we are catching up clearly now with the menu expansion in the U.S. for next year, that will be an incremental opportunity for us. So we feel good about the business. Again, there's clearly other factors, which we will see if that plays out. Right now, there's regular respiratory season, we will see how it moves into end of this year or next year. But I think the strength of the platform, which was always there is very well accepted by the market and helps us to differentiate right now.

Yes. And to your point there on the $150 million a quarter, I think you guys talked about 600 placements on the year, sounds like you're tracking well on the way there. Is that still the right way to think about it? And is that just kind of a good status quo number to think about going forward?

I think that's a good number. And again, it might be very a bit on a quarterly basis because the fourth quarter is always a bit higher, but I think that the number and average is a good number for us.

Yes. And then with this one, still early days or at least relative basis, how do you think about just the additional opportunities, both geographical and then similarly just on the menu?

I think geographically, the important point to remember here is that we're selling well over half of the revenues are coming outside the United States. So we've shown that we can grow the sales in, let's call them cost-efficient markets in Europe, Middle East, Asia, Latin America. And now that we have the full menu in the United States, we're expanding here and we want to get traction here in the U.S., especially as we get into a replacement cycle in the coming years from those systems that were placed at the beginning of the pandemic. In terms of menu, the key points here has to have respiratory, gastro panel and meningitis, let's call those the big three horses that you need to have. Now like Roland said, we have those approved in the United States. So we're in good shape here to be able to compete on equal ground, even though a lot of the market is for respiratory testing, but people want to have a minimum of those 3 tests to feel viable about the machines. You also have people who in the U.S. who are looking to do one of those tests more often with a different vendor because of the problems that the one of the vendor machines out there has to be cleaned after every run and that causes a lot of time and friction issues. They also have some quality issues with the test. We're able to resolve that issue for them that's given us an entry into the lab. The next test coming would be blood culture that's going to be submitted in '25. So this give you a rapid test for sepsis. '26, we're looking to create what we call the first hook. That would be a complicated urinary tract infection test. These happen in women, and you have a lot of complicating factors that you want to be able to scan for also to rule out if there's a need for antibiotic use because of the antibiotic resistance that's becoming a major issue for societies. But the second hook that's coming is our expansion into companion diagnostics, precision medicine with the system. We've already announced publicly partnerships with AstraZeneca and Eli Lilly. And that's where we are also moving companion diagnostics beyond oncology. So what used to be a necessary evil for pharma companies a decade ago has now become at the forefront that they want these tests to be able to stratify patients and get better results. On the Lilly Alzheimer's drug, this is our opportunity to create a test on [ APOE 1 to 4 ] in terms of looking at just markers and help identify which patients are most suitable for that treatment. And then on AstraZeneca, we're going to be working on different hereditary diseases like fatty liver, irritable bowel syndrome, these types of products that we're in development to.

Interesting. And how do you think about that kind of companion opportunity relative to kind of the core piece of that business as time unfolds here?

Let's see how the market develops here. But in cancer, you're talking about thousands of patients that get a one-and-done test. And think about the demand coming for Alzheimer's testing is tremendous. We're talking millions. And you're also talking about a test that the pharma companies want to do closer and closer to the patient and not have this centralized lab leakage. But we see -- let's see how that develops. But if you think about the number of people at risk for Alzheimer's, it's a tremendous amount of people.

The nice thing about this development agreements with pharma partners is clearly carry a lot of the incremental research cost to us so it's a little cost downside to us. But obviously, what comes out is 100% owned by QIAGEN. So I think there's a significant upside to us in the mid and long term.

Yes. Yes, that's interesting. And I guess, obviously, QIAstat has been this great story. One of the other newer kind of acquisitions was NeuMoDx, which it was good, but you guys obviously made a decision to kind of wind that down. Maybe talk about what went into that decision. Again, I thought it was encouraging. You guys are willing to kind of make those hard decisions, the profitability wasn't there. But maybe just talk through that decision process and then, again, maybe just the numbers impact as we look ahead into '25.

And as you said, it was not an easy decision because actually the platform by itself is and was still one of the best in the industry. But what really has changed and it was because of COVID the market dynamics, particularly in the U.S. have changed because I think it's fair to say that we, as many other companies in our industry did a very good job during COVID, placing a lot of new machines into the centralized labs and NeuMoDx dedicated customer environment is while the higher throughput environment, therefore, the centralized lab. And so the decision for us was rather okay, developing more menu on a machine going into the U.S. market, well knowing that probably over the next 3 to 5 years, there's limited opportunities to place these machines. You see that also with other companies that the number of machines, they're selling actually right now in this environment. We can count on one hand is limited while we have, at the same time, a lot of opportunities on the decentralized side, on the digital PCR side, things which just discussed. So then what we had to do is revalue the opportunity, okay, putting another, I don't know, $60-plus million into R&D to expense the menu for the U.S. While we had a full menu for Europe, with a limited opportunity to sell into the centralized lab. And that clearly led us to the conclusion there's better opportunities while it's a good machine, it's probably not the best timing because of COVID. We made a lot of money, business machine doing COVID, the visibility post-COVID the next 5 years was limited. Therefore, I think we came to decision. Let's stop it now. As you said, we were losing money. Let's -- part of it, we invest in other areas. Nevertheless, have a margin impact for this year of 50 basis points, probably by middle of next year of 100 basis points margin improvement. So being quite sizable also in improving our profitability while we're investing at the same time in other areas with better growth objectives was from our perspective a good decision.

Yes. And then the QDI piece, you guys announced a little more investment, accelerated investment into that piece. Maybe talk about, again, the scale of the investment what's -- what went into that decision and how to think about that piece here.

Let me kick it off, and John probably can go into more details. But I do think one thing that is important for us is that also QDI similar to our other pillars of growth is a business where we have a top 1 position in terms of market share, while we have more than, as you know, $100 million in revenues, good growth rates and also compared to many other companies, actually a very profitable bioinformatics business. Nevertheless, we clearly also understand that there is a need for more consolidation in that market. And as you know, you can do that in 2 different directions. You can develop it organically, but you also can acquire certain pieces. We are looking actually to do both. So we stepped up our investments into R&D activities. At the same time, we clearly intensified our search for bolt-on acquisitions where we believe we can even build a stronger platform for our customers, having certain bioinformatics solutions out of one hand. But it's also important that you have the wide sales activities and targeted activities. See what we identified is that while we had the #1 position within bioinformatics and our QDI solutions. It was somewhat detached from the rest of our sales organization. So we believe having here also a much more integrated approach is important, and it is also something that we're going to drive.

Yes. On the bioinformatics business, on December 16, where we're going to be having an online webinar for about an hour to give people a chance to do a deep dive into the business, get some more understanding context of the products that we're giving there because again, we see that making sense of this complex genomic data is really becoming more and more neck of sequencing. A sequencing file without analysis and interpretation is meaningless. And the cost per sequencing run is going down, but the cost to do the analysis continues to be important in a value-creating area. And that's where -- just like with the computer industry, we see the shift away from the hardware as that becomes more and more commoditized. I'm old enough to remember the days of the $5,000 laptop. And then you're going to see the shift more towards the -- what to do with the data, and that's where we want to play.

Okay. No, that -- it will be an interesting event to hear more about that. And then, yes, just keeping it going, maybe we can talk sample prep, and then we'll get into QuantiFERON, obviously. But Sample Tech kind of humming along as 1% growth I think last quarter, how are you thinking about it near term? It obviously was certainly in focus kind of on the back of COVID, what is this business going to look like? Feels quite stable at this point, but what's the right way to kind of frame this segment up?

Yes. No, I would agree. Clearly, COVID was quite helpful for us also in gaining market share. And I do think that was something what we always like to see. As we said before, we had a good start into the year. Fourth quarter in all fairness, is a bit more difficult for us because we had actually a very strong fourth quarter last year in terms of sample prep. But putting that aside, we're actually quite optimistic looking also now in the midterm in the business of sample prep. Of course, we have 2 important instrumentation launches coming up. Next year, we will see a new QIAsymphony machine, which clearly should be addressing some of our customer needs if it comes to automation, if it comes to connectivity. And then probably even important in '26, we are going to launch a QIAsprint automation solution, which is in the high throughput sample prep area. While everybody knows, and that's absolutely the right conclusion that QIAGEN is a faster market leader when it comes to sample preparation, there are certain pockets within sample prep, where we don't have any larger presence, higher throughput area is one of them. And we do believe that we are able to fill and grab significant market share in that area as we did in the rest of the areas as well over time. So that should help us also to bring the market as a growth rate also here, at least to market growth or probably even above that. Again, if you are by far the market, it's hard to outperform the market. But I do think here, we have nice opportunities with not only instrumentation launches, but it typically goes hand-in-hand also with the portfolio expansion that should be helpful for us.

Yes. I guess when you think about kind of that high throughput piece, to your point, a couple of new instruments over the next couple of years, given your presence elsewhere in the market being quite dominant. Is it just kind of natural that the share will pick up? How do you think about what that impact could have on the numbers getting into -- with these new systems, maybe opening up a little bit?

One thing what people sometimes overseas is that sample prep market, if you would put it into 3 easy buckets is we still have a larger piece, which is home grown methods as a conversion from home grown to manual kits. And then you have manual kits and then you have automated kits. And manual kit still a bigger share, right? So there's an ongoing conversion from home grown to manual from manual to automated. Once you're converted either to manual or to an automated solution, of course, you ask yourself, okay, I've now typical lab as a $10, $15 different types of sample prep solutions throughput. If you take our market share, let's say, 50%, 60%, whatever your number is, and you have now suddenly all this tests running on a machine, and then you ask it at some point in time, okay, we are not using all others in an automated fashion as well when I do have now an automated solution or I have -- I'm used to a manual step. So it typically, that is helping us in penetrating the market further. We have seen that with EZ2, which was a new machine we launched now last year. We have seen that with QIAcube machine, which we also launched in the last 2 years. I do think we will see the same thing with also Symphony, which even has a larger throughput compared to the machines I just mentioned, it will help us penetration-wise.

And related to that is the fact that you have easily 19,000 to 20,000 peer-reviewed journal article mentions of QIAGEN kits every year out there. And peer-review medical -- peer-reviewed research is what drives the academic market. And that's reflected in the fact that every year, we have 2, 3, 4 customers that will win Noble prizes, easily 40 in the last 10 years. So if you think about QIAGEN over the last 4 decades, we just had our birthday on Friday. As a company, you're starting to see that swell of work starting to come through in terms of being recognized by leaders and that burnishes our reputation.

Yes. And I know in Sample technologies, it's been an area historically given the share that you talked about. You've been able to drive a bit of price here -- what does that look like currently? And what's the pricing strategy in this segment?

Clearly, the last 2 years for us as for many other companies, with the inflationary environment, we grow pricing a bit more. But we clearly do that also quite carefully because we do not want to set up our customers in any negative way. We want to make sure that they understand that we also have our cost increases, and we want to cover our cost increases. That is, I think, the underlying philosophy for us if we do price increases. It's also a reason why this year, for example, the price increases were quite moderate in general. And we do believe if inflation [indiscernible] rates stay on the lower end, we continue with that, given our overall gross margin profile, we feel quite comfortable that to reach our profitability targets despite that.

Yes. And then just in terms of potential growth markets for this piece, I think on the call, you talked -- you might have even mentioned liquid biopsy some of those areas. How do you think about opening those markets opening up your guys' presence there? What's the right way to think about some of those opportunities?

The more you hear about liquid biopsy, the more you hear from the Guardants, the Nateras, all these, companies that they're seeing explosive growth in liquid biopsy, that's music to our ears because for us, liquid biopsy, is that first step? How do you get the targets you're looking for out of the blood sample, recirculating DNA, exosomes or circulating tumor cells? Those are the three modalities that you're looking for. We're the only company that can offer such a comprehensive portfolio. We're now moving towards urine samples as well to do liquid biopsy which is important for like prostate cancer testing. So that's for us what we're working for, and that's what's critical to building that franchise. And that's where you see us wanting to expand and strengthen our position there.

Yes. And then maybe we can turn to QuantiFERON, obviously, one of the more exciting parts of the story. You guys have posted pretty consistent double-digit growth in another quarter, $100 million plus of revenue last quarter. Maybe talk through the growth drivers. I know there's things like immigration, students returning, what you're seeing there? And again, just the durability of that growth. It's been a pretty incredible part of the story.

Yes. As you said, I think it's now the sixth quarter in a row with more than $100 million in revenue. It's actually more like kind of $20 million of revenues. And clearly, a very solid track record of double-digit growth rate as well. At the end of the day, it's in brackets easy conversion story, right? There's still 60%, 65% of the overall market is literally 120-year-old skin test. As we all know, the clinical market in general is a very sticky environment. It took us more than 10 years to convert that market. But now with the market share we're having, suddenly, our QuantiFERON test is a new standard and all the labs and the customers, they are converting to the new standard away from the traditional test. It still will take some time. But in addition to that, also the underlying market is growing, we believe that general latent TB market is probably growing around 4% year-over-year. So there's clearly opportunities for us for several years to go into that market as well. As you know, it is a market with quite a different set of customer segments. You mentioned immigration-based testing. For us, here a legal immigration test is clearly the more important one. Illegal immigrants typically do not get tested whether I heard rumors about that. That might be an issue for us, of course, we are focusing more, by definition on the legal immigrants and drug related. But we see that, of course, also in Europe, quite that. But we have also customer groups like healthcare workers, back-to-school testing. So there's a lot of different pockets where you have also dedicated sales activities and sales forces, penetrating that market. I would say that we built this set up over the last couple of years out quite nicely. It's clearly also a reasonable, profitable business for us. So we continue to do so. And -- But given where the penetration is, given where the underlying growth of the market is, I think we are even far away from any kind of reasonable market share.

Because remember, this is an esoteric test. This is not a commodity test. We estimate that it takes a sales rep about 6 months to convert a customer from the skin test into QuantiFERON testing. It takes time because you have to walk them through what are the clinical benefits? What is the cost of the skin test versus the cost for the QuantiFERON test? And why it makes clinical sense and economic sense to make the transition. And that's what people grossly underestimate. This is not like ordering an HIV test or ordinary offering, that to a lab. You have to create the demand and push it in. What's helping us to also drive demand on this increasingly growing base, you got to remember. We more than doubled sales from $200 million in 2019 to where we are today. And then we hear that a competitor gets up and says, they've had flat line sales for 5 years. Yes, then we're like, that shows you that we can execute and drive this market. And what we're getting is much better data about where is that clinical testing market for TB testing. When you listen to the TV commercials on the TV in the U.S., you'll often hear them say you must be tested for TB before the drug is prescribed. People forget that TB kills more people than malaria and HIV combined. It's the #1 leading cause of death from infectious disease in the world. So there's a real need for this testing. We're targeting the people who have to get the TB test because not everybody needs one. But that's what gives us confidence in getting the 600 million in 2028.

Yes. Yes. And I'm glad you mentioned the 600 million in '28. I mean it seems like that LRP, I think the CAGR is 7-ish percent. Obviously, again, coming off another strong double digits. Is it just conservatism? What's the right way to think about obviously, law of larger numbers, right? It's definitely going to be a big revenue line. But how do you think about just that LRP versus some of the larger numbers on the growth side we've seen recently?

Well, I think it's a realistic number. Again, we feel quite comfortable with this number. It's clearly also a mix up between price and volume. At the same time, we clearly also recognize that there might be an additional competitor coming into the market that is factored into the number as well. As you know, it is always a competitive market. We had, as you John just mentioned before, there was Oxford now part of [ Revvity ] always in the market. We had [ BMIU ] in the market, off the market. Now in the market there's handful of Asian players since 10 years in the market. So I think we are used to competition, but we are by far the standardized product into the market. And it's also quite clear that we're working very hard to have very successful and very loyal customers also going forward.

Yes. And the competitive landscape, as you guys know, always a topic on this one, even though, again, the growth speaks for itself. But I guess, how do you view the competition? I mean, John, you touched on, again, one of the competitors more flat growth over multiple years versus what you guys have done, there's the threat of a larger player always looming out there. What's -- I guess, what's the right way to frame up the competitive landscape here and where you guys sit?

Like Roland said, we've been dealing with competitors for many years. And we've been -- people forget that the QuantiFERON technology has been around for over 3 decades. We're now in the fourth generation. We're continually improving. It's hard to imagine that somebody can come out with a better clinical test than what we have. We've also automated this test with our partner, DiaSorin. So it's hard to believe that somebody can come out with a better, faster automation. That's why we win. Our test is, they would say, IR proof, even I can process it. You draw the blood, you put it into the incubator for 16 hours, you take it out, you aliquot it into a plate. It goes into the machine, you get the results. And then we're also in all the guidelines. It took us years to get the guidelines up to talk about QuantiFERON to bring this up on par. What people sometimes grossly underestimate is how hard it is to change medical practice, and that's QuantiFERON-specific. And the last point is this is a really difficult technology to get to work properly. It's not like you're going into a sample and trying to find the target you're looking for. You have to measure the signal back that you're sending into the whole blood signal based on the interferon gamma response out of the T cells. So you're trying to measure a signal coming back. It took us years to get that right. And that's why you see a major European company that's now under second attempt to come into this market and again, having trouble. And that's why you're seeing -- to us, we haven't found the signs of a competitor doing clinical trials. And that's where like, okay, we've been dealing with this room now for 1.5 years. We wish we would get past it.

I don't see the main competition, as we said that before.

Skin test.

It's skin test, the 60%, 65% of the total market. There's a lot of way for us to go into that.

Yes. And John, to your point there, I mean, in terms of the large European player, if they're still locking in the panel and having started trials, what does that timeline look like? Let's say, they started today, even though it doesn't seem to have, but what's your perspective there?

We want to be ready by the end of this year, early '25, we want to have our customers mapped out where do we see potential risk and then start to talk to these customers about how do we prepare and what are we doing there. So we want to be ready now. But again, we thought they were coming over a decade ago. We bought this product in 2012, guys. And this product since from '12 to '23 has kind of grown year in, year out 10% in that CAGR. We've been preparing for competition for many years. But it's going to -- we've said '26, '27-ish. That's what we're hearing they're saying the coming, when they're ready, they'll come, but we're ready too.

Okay. And then just given some of the administration changes in the U.S., China, not the biggest piece for you guys and about 5% of revs. But and you're a European company, maybe that helps. But what's your perspective on China overall? What are you seeing over there?

Yes. As you know, you said everybody, China is around about 5% of our revenue. So it is somewhat meaningful, but it's not as big as most other companies. And I do think what it really differentiates us in China from other companies that we have since actually 2005, a dual brand strategy. On about 40% of our revenues, we do with a local brand in 2005, we actually bought our single largest copy cat. We always kept it separate, own R&D, produces in China. It's only China for China, so we do not export that. And here, we clearly see that China, from our perspective right now, as I call it, two issues for Western companies. One is the overall GDP issue, which is affecting everybody. But there's clearly also a underlying trend on buying local. And because we see that our local brand is doing actually quite well in a more difficult environment. Nevertheless, we do believe China right now is for us probably mid- to high single-digit negative. We believe it's sequentially going to improve and hope that in the second half of next year, there's a more flattish environment. What is helpful for us is clearly here also our second point.

Yes. And I guess in terms of that recovery, -- what are you hearing there? I mean are you guys tied at all to the stimulus piece? Again, there's always fear when you just hear China diagnostics, things like VBP and anti-corruption. Maybe just talk through some of those.

The last buzzword are not affecting us, which is good for us, I guess. But we hear a little about the budget. We haven't seen too much offset incremental budget available if it comes. Happy to see that. Right now, we're not planning for that. Nevertheless, we do see also here the benefit of having an 85% consumable business. It's clearly more stable than some of the other more capital expenditure businesses. So as I said, we see also this year, slight improvements quarter-over-quarter. We hope that it's going to continue for next year as well.

Yes. And then the other part of the administration piece is kind of this academic NIH piece. I mean any real exposure on that front? How do you think about just the academic research?

NIH in general for us is around 5%, 6% of total as well. As you know, overall academic has 20% within that U.S. piece and then NIH piece is around 5%, 6% of total. Have in mind, it was always bipartisan approach. If you go back to Trump's first presidency. There was also a lot of talk and not really larger changes. Have in mind that NIH budget clearly got significantly improved during COVID. And we always assumed for this year, but also for next year, kind of a flattish environment. It looks like that, so we are quite happy with the current setup.

Okay. In the last few minutes here, I would love to talk through some margins. I know that your guidance, I think you put out the 250 bps of expansion through '28. What are the key levers there? And what's the right way to think about that progression, particularly when you look at '25, the right way to think about just OpEx trajectory and the margins?

Furthermore, I think it's hard to argue that QIAGEN is one of the most profitable companies already as of today. Particularly, I think this year is a good margin improvement here, but I think it's also already quite visible that next year will be another one. Reason for that is just by roll forward some of the decision, which we started to implement by mid of this year, rolling into next year, particularly NeuMoDx but also some of the smaller site consolidation, which we initiated will be beneficial. We also started earlier this year a program what we call QIA Efficiency. So it's a kind of continuous improvement program. And here, we believe that we should be able to, again, also for next year, and again, I'm not giving guidance today, but just if you look at the numbers as today that the margin improvement should be at least another 100 basis points for next year over this year, and we'll see it will be even more than that when we give guidance end of January, early February. Main drivers is probably for the next 12 months on the operational expense side. Beyond that phase, you will see also mix playing a larger role for us is the gross margin piece, should have a larger contribution factor than beyond 25%. Overall, I think our goal of 31% for the year '28 in terms of adjusted EBIT margin is very well on track.

Yes. Yes. I guess when you look at next year, obviously, a lot of moving pieces, as we talked about with China and some other areas I think -- the Street is somewhere around kind of that mid-single-digit growth rate that has been thrown around. I mean is that a reasonable starting point when you think about the various factors that are out there?

Again, official guidance is end of January, early February. But again, put it differently, like first half of this year was a kind of a flattish profit. Second half of the year is around a 5% growth rate. If you look -- I think a 5% growth is a great starting point moving into next year in a not easy environment. We talked about China, we talk about CapEx. If some of these things are normalizing, I think we are well of. I think a lot of companies now I understood got cheerish this year, but for a negative growth rate. We have a very solid growth rate, and I'm missing that a bit. But let's see how we deliver going forward. I feel quite good about that.

Yes. And then maybe last one in the last minute here. Just on the balance sheet, again, pretty clean in terms of the balance sheet. We've definitely had investors push and say, I wish they would do more share repurchases, things like that. What's your guys' appetite?

We do right now. In all fairness, since 2012, we had this share buyback around, call it, $100 million installments. We now recently stepped it up to $300 million. We did a $300 million share buyback, synthetic share buyback earlier this year, we asked for an approval on the AGM mid of this year for another $300 million. So we have to execute on that. And I think there's opportunities for us to step that up given our significantly improved cash flow given also the cash on hand and the net debt of EBITDA below 1%, which we have. So I think there is flexibility for us. The nice thing as being a Dutch company, we can do the synthetic share buyback. That means you can reduce your share count while you actually give cash back to your shareholders. In many jurisdictions, that's even tax free. So I think you get actually best of both paying a kind of a dividend and reducing your share count. We like to continue that and maybe we step it up.

Okay. I think we're right out of time. So Roland and John, thank you so much.

Thank you.

Thanks for having us. Thanks for coming in. Thank you.