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

Great. Thanks, everyone, for joining us this morning. I'm Vijay Kumar, the life science device analyst at Evercore. A pleasure to have us QIAGEN this morning. We have CFO, Roland Sackers and John Gilardi from Investor Relations. Roland, John, thanks for the time this morning.

Well, thanks for having us. Thank you, everyone.

In QIAGEN, it's a fascinating story. You touched a lot about the areas, which are at the forefront of biology, maybe when you take a step back and review third quarter, it was a solid mid-single. That's a very, very distinct number very markedly different from the rest of Life Sciences what we're seeing out there. I mean, talk to us about how 3Q progressed? Were there any surprises? What did better, would it maybe perhaps in line or below?

Thanks for the question. And yes, as you said, I would say we had actually a good 2024, so far. And again, we clearly had a good start into the year, but also third quarter was very solid, 6% growth rate overall was a good result and even being able for the third time this year, increasing our EPS numbers and guidance for the full year, I think, was also quite helpful for us. What we see is actually that our focus strategy pays off quite nicely. If you go back to 2019, what changes is really we stopped developing our own sequencer, but focusing on our core competencies which is around PCR, which is around sample preparation, launched 3 new platforms. And you clearly could see that is driving the growth right now and it's paying off. We still clearly are very much focused on expanding the menu. Therefore, also the third quarter was not only number wise, but also strategically an important quarter. We got for QIAstat 3 incremental FDA approvals, which is clearly a big event for us, because now we also can address the U.S. market is 50% of it in a very effective way, and we're looking forward to that. Again, number wise, not really something important for '24, but clearly much more important for '25. Nevertheless, also other areas, we were able to address NeuMoDx in the third quarter, which will be helpful for profitability. We will end the year with at least a 28.5% EBIT margin -- adjusted EBIT margin, so I would say also here, nice development. And last but not least, our growth drivers delivering QuantiFERON the sixth consecutive quarter with more than $100 million in revenues and another 10% growth rate. QIAstat, we briefly talked about that 40% growth in the quarter. I'm not going to promise you 40% every quarter, but we feel, of course, well on our way to our 2028 target here as well. QIAcuity, our digital PCR platform, I would say, also a good quarter, particularly the consumer growth rate was significantly double digit. I do think that is nice to see. And last but not least, sample preparation, a solid quarter. Fourth quarter will be a bit more difficult just because last year, the fourth quarter was a quite strong quarter. So comparability is a bit off. Nevertheless, seeing in sample preparation, I would say also another third good quarter was helpful for us.

Got you. No, that's helpful. And certainly, we'll dive into some of these in product areas you mentioned. Before we get there, your Q4 guidance seems to assume a seasonal step up of 2025, is that a normal seasonality for you? Does it assume a year-end budget flush?

Yes. Again, on instrumentation, it's clearly not the easiest environment out there. Nevertheless, you are right, we do expect a certain improvement in the fourth quarter. I do think QIAGEN is somewhat special here because most of our instrumentation has rather a lower pricing point if you listing on QIAstat or QIAcuity, so the entry platforms here, somewhere between USD 30,000 and USD 40,000. So there's not too much scrutiny around them. So I think that is clearly being helpful. On the consumable side, I think that's the strength of QIAGEN, about 85% of our business is a very resilient consumable business as long as you don't see that people are laying off significantly headcounts in people, people burning our consumables as we work daily in the laboratory.

Got you. And sort of that segues into the macro in post elections, I think some nervousness around NIH budgets, what does QIAGEN's exposure to NIH and what are customers telling you?

I think it's a fair question. Just to frame it, the NIH budget is probably somewhere between 5%, 6% of total for QIAGEN. And therefore, I think it's meaningful, but I think it's also relatively manageable. Nevertheless, I do think we also have to realize that over the last few years, NIH budget got a significant push with some years even with double-digit growth rates and now it stays on this high level, which I think is good news for us. I think it's also good news that the allocation with the NIH budgets, which, as you know, is a multibillion dollar budget is quite favorable. A lot goes into areas like oncology and others where QIAGEN's footprint is probably even more significant. So I would say that is good as well. We have to see what the new government is going to do. But if you look back what happened more or less under the first presidency of Mr. Trump, there was clearly a lot of noise, but not too much change, because we also have to make sure that we understand that typically, the NIH budget is driven by a bipartisan approach as this year and 2/3 of NIH budget goes into the States as it is people related. So there's a lot of scientific highly educated people, jobs are tied to this funding. It's not an easy target, I guess.

Understood. What is your, I guess, sensitivity to overall NIH budget? Does it matter or...

As I said, it's 5%, 6% of total, I think that's reasonable.

Great. No, sorry what I meant was is your business, perhaps the areas you touch in even under a constrained budget environment, like you do better, you do much better because your exposed are slightly different?

Within the NIH, as I said, there's a couple of areas. Again, the consumable one way, for example, is with NIH budget typically quite high because they are doing quite intensive research. So I think there's a significant consumable share for us within that, which I believe is anyway quite stable. That is one area where we feel quite comfortable. Then, of course, in terms of indication, John, I know it's oncology, what other areas?

We're hitting all the hot areas, translational medicine, cancer moonshot projects. These are the key areas where we're going into. If you hear the buzzwords of liquid biopsy, MRD, these types of product areas, sequencing, we can support all these workflows bioinformatics.

Got you. And then the other kind of macro questions here on tariffs. What is your exposure to China, Canada and Mexico, how are you thinking about tariffs?

Very political question, therefore, a very hard to answer because who knows where that goes. I always find interesting everybody is focusing on tariffs, which is way awake, where corporate tax law reduction is quite concrete is going to happen, but nobody asked about that. Is it a take, again, which I think is an upside. Anyway, on tariffs, we have to see what is going to happen right now, as you know, the focus for some U.S. perspective. And again, you're probably more in the topics than we do. It's more on the brick side, on China, less than Europe. Nevertheless, we do our exercise as well. Quite sure at the same time, if something gets imposed on Europe, it goes way around in the same segment. So I'm not sure that it's going to happen in areas like health care are getting touched or not. The question is also, again, we have seen it, for example, the first period when U.S. was imposing certain tariffs on China and China, the way around, we had certain terms on a few products in China, which were just holding for 1 -- literally 1 day because then they figured out, we were the only approved product in China. So things might change also quite quickly. If there is an impact, that is clearly something what could be sizable, might be a low double 8-digit number for us. But again, I do think it's too early to frame that right now.

Got you. Understood. No, that's fair. It's the other sort of post elections, what's come up as customer behavior and FX. Have customer behavior change? Has anyone signaled anything post-election and FX has been volatile? Like how you thinking about FX at current levels?

The good news on FX is that we are at QIAGEN have more or less a natural hedge. So the fluctuation between dollar and euro, in particular, is not affecting our results in a larger way. Of course, there's always some smaller events. But as you see historically over the last 5 years, it really didn't matter too much as we're also reporting constant exchange worth results. We are typically more exposed into areas where we don't have any larger cost base, so like Turkey or Brazil. There, of course, fluctuation has a different impact. Nevertheless, also not meaningful to us.

Got you. And one other sort of, I guess, a comparative kind of question. Roland, because it's come up. I think the main sequencing player they announced. They're trying to get into sample prep. I know it's a library prep, if you will. Does it have any impact to QIAGEN?

So when we talk about sample prep, we talk about going from any biological sample, blood, hair, plasma, urine, CSF sample, it could be any type of material to get to purified DNA and RNA. That sample prep. That's a $650 million business for QIAGEN. That's what the brand is really known for. What we're talking about, some of the competitors talking about what's called sample prep, they mean library prep. Once you have that, how do you prepare the genes that you want to be able to extract, enrich and then put them into the sequencer into the widget maker. That's an area we compete in, in our genomics business as part of our NGS -- NGS product line. Remember that, that also includes our QIAGEN Digital Insights business, which is targeting about $110 million of sales in 2024. Then we have our QIAseq portfolio for library prep. That's where you see QIAGEN signing several partnerships with Ultima with Element. We also work with Illumina on sequencing. And so we're able to support and we're sequencer-agnostic that way.

Got you. And so overall, it probably to the market fares, John, when you say that you guys are pretty well prepared to handle whatever competitive noise there is?

There's some competitive noise in that area about whether you lock down the flow cell in terms of library prep, but that would go against the way that this competitor has operated for decades. And the question is, what would customers think about if it was a lockdown situation. That's where it could cause some -- I think the question is not to ask the question to the customers. But again, we're here to support -- our products can be used on Illumina, Element on bio, and then you can go from there into our bioinformatics downstream as well.

Got you. Have you quantified how big library prep is for you guys?

We haven't given a number, but it's the most meaningful number in that genomics line NGS bucket would be our QIAGEN Digital Insights bioinformatics by far.

Got you. And maybe Roland back to you on the other topic for tools companies has been around China. It's been very challenged. What has China done for you guys maybe in the last 18 months or so?

Yes. No, just also here to frame it, China for us is 5% of total. So while it is sizable, I think it's relatively small for us. One thing which I think is different at QIAGEN to the outside, but also to the inside is that in China, we have a dual brand strategy. Actually, in 2005, we acquired our single largest copycat at that point in time. It has its own R&D in China. It has own production in China. It's run by Chinese management. And here, we clearly could see that the global brand and the local brand have, I would say, different benefits right now in the Chinese market. I think it's very obvious that China in general has a GDP pressure, and therefore, the overall revenues are clearly somewhat down. But in addition to that, global companies are clearly facing certain buying Chinese -- buying local pressure, and therefore, the local brand, which is about 40% of our China exposure is doing actually better. So what we have seen in total is that the first half of the year, first of all, it is still negatively. I think the third quarter was like 6%, 7% negative, but it improved quarter-over-quarter sequentially. We also expect that it will be similar in the fourth quarter and probably also the first half of next year staying negative. We do expect there's an opportunity to become a bit more flattish in the second half of next year if the trend continues as it is. On top of that, but we are not quantifying that because we hear a lot of rumors on the Chinese stimulus package. We hear it. We don't see it yet. And therefore, again, it's not in our numbers if it comes happy to recognize and to report on it.

And what's your exposure in China to either industrial or clinical markets or government academia? How does stimulus -- or how has to stimulus benefit QIAGEN in prior cycles?

I think the mix in China is not too different to our global mix. So I would say there's clearly a certain benefit we would get out of it. At the same time, we have also here the overall benefit of relatively resilient consumable business, which again kept our negative exposure, if you like, much more limited than you have seen with many other companies.

Certainly. I mean those numbers, I think it's you guys have outperformed tool peers in China, those numbers, minus 6%, minus 7%, certainly better than your peers. I think the other question for tools companies has been the longer-term outlook on China. How do you see longer-term China?

When we did our Capital Market Day at mid of this year and clearly looking into all the way up to 2028, we did not expect that China is returning to the typical double-digit growth rates, which we have seen pre-COVID. So we were -- we do believe that China will be over time, is the single largest health care market. And therefore, it's a market where you have to be present and we are actively looking at opportunities to, again, increase our exposure in China by, for example, more localization, but we will do that carefully. We will do that where we see a real opportunity, and we will do that measured. Nevertheless, it is a market opportunity, which should grow high single digit over time, but it will take some time before we go back there.

Got you. That's helpful. So it will still be accretive to corporate high singles.

I think over time, it is an opportunity, for sure, not next year.

Got you. Any VBP kind of impact for you guys sort of tendering?

No, we are not involved there.

No. Those products are staying out of that area.

Fantastic. Turning to some of the positives. You mentioned QIAstat 40% growth. That's a big number, right? I mean what drove 40%? Was it timing? Easy comps?

I think, first of all, we should have in mind, there is still a global trend in health care for decentralization, right? It is for 2 simple reasons. As a hospital, you want to be closer to the patients. You want to -- if you can give an answer in 45, 60 minutes, why should you send a sample to a centralized lab even in the hospital until the patient, call me in 3 days for a result. And second, of course, we can make money with it. So it's a big incentive for any health care professional to -- if you can combine both, right, you can make money with it and have a better service for your patient. So I think that's a general trend. I think what was always quite clear is that QIAGEN has one of the best, if not the best instrument for syndromic testing in the market, fast turnaround time, 45, 60 minutes. It's a cartridge. It's easy to use. It's stem plastic. We actually can do both, right? We deliver to our customers quantitative and qualitative results, which is a significant advantage compared to competitors. I think it was fair to say that in the past, we had a limited offering in terms of portfolio. We addressed that. We have seen, as I said before, significant improvements here as well. I think having that visibility also for customers was very helpful and is driving the placement numbers.

Yes. On that topic, remember that the majority of our sales for QIAstat-Dx are outside the U.S. So we've shown that we can compete in, let's call them cost-efficient markets in Europe, Middle East, Asia, with this product. And now that we have the full menu like Roland mentioned, we're able to come in full force into the United States. We're working on menu expansion. '25 should be the introduction of -- I mean the submission of a blood culture test, so we could start to give in the sepsis testing. '26, we want to be able to offer a -- submit a urine-based test for complicated urinary tract infections, to be able to help identify what's going on there, and that will help to also reduce overuse of antibiotics in that area. But the real hook coming for QIAstat-Dx that the others cannot do is our push into companion diagnostics. We signed a partnership with Eli Lilly and AstraZeneca. For Lilly, we're working on first on Alzheimer's disease testing for APOE to help them in terms of stratifying patients for their Alzheimer's drug. Then with AstraZeneca, we're working on various types of hereditary disease testing. So we're moving that companion diagnostics business that we built up over a decade, 35 pharma partnerships, 14 FDA-approved tests, we're moving that now out of oncology on the QIAstat-DX, also on the QIAcuity digital PCR, but we're expanding that business. So those are the 2 hooks that are coming ahead.

Yes, that's helpful color, John. The -- I guess, with -- if Europe is already at north of $100 million of QIAstat revenues, I think your longer-term targets are $200 million by fiscal '28, with the U.S. launch. Are those targets now feeling perhaps maybe a little conservative?

Let us move into action and happy to increase the numbers if you're getting closer to the period. I would say right now, we feel quite I would say, well in our way we said. And clearly, having now the 3 launches and some of them even faster than we thought is incrementally beneficial for us.

Got you. In terms of the U.S. commercial launch -- is that a soft launch initially? Or when do you expect to be fully launched in the U.S.?

I think gastro, as you know, was a launch, which we were expecting for mid of the year as it happened mid of this year then. And there, we were literally full speed ahead, and we're clearly able to more or less start production on all other topics ahead of time, which others came a bit quicker than we expected, which is sometimes is also good news, right. And so there, we have to push it a bit more. But overall, I think it is clearly helpful for us.

We had the QIAstat-Dx system in the U.S. during the pandemic. We had an EUA respiratory panel. So we had some sales here in the U.S. We had some presence here in the U.S. But what's also interesting to look at with QIAstat-Dx is that we have more sales today than we did at the peak of the pandemic. So we've been able to really drive that business and move beyond the pandemic because there are so many products that went up like the spatial, although, during the pandemic and then came back down to earth so quickly. And this is a product that went up quickly during the pandemic, but it's continuing to grow up into the right.

But it's also important to remind investors on is that particularly also in the U.S., there is a larger portion of the business, which is so-called tender-based business. That means you not only have to offer 1 or -- 1 product, you also have typically offer a combination, for example, respiratory and gastro or respiratory gastroeningitis as we didn't have gastroeningitis in the U.S., we couldn't even participate in this tenders. So we were also lacking certain respiratory revenues as well. So now being able to participate in the tenders will be an incremental gain also on the respiratory side. Again, it's nothing what happens overnight because these tenders typically go 2, 3 years. So it rolls in over time, but it's clearly an incremental market opportunity on top.

Great. And maybe the last question here on QIAstat-Dx. And when I look at the point-of-care market, you have a few different -- you have the syndromic players and then you have the more targeted players. I think you guys are more on the syndromic side. What kind of customers are expressing interest? Are these hospital customers? What's been the early feedback from U.S. customers?

Well, the U.S. customers, remember, we've been in the market since 2020 in the U.S. So we know that the customer base, and like Roland said, now that we have a minimum viable menu, we can go in and really start to go after these customers. These would be hospitals. You're looking at hospitals with being the university medical centers that have integrated health networks that you're trying to get into, but you can move down to 200, 300-bed hospitals in the United States, that's an area that's also interesting because they want to decentralize the test. There's the interest in providing results quicker and faster to patients, but also capture the revenue stream and not be a send out to one of the big labs. So that's a key area of these hospitals, university medical centers. That's what we see across the world. That's where we're able to drive adoption. Even in countries like Indonesia, Vietnam, we're placing these systems. But then there's this nontraditional market environment as well. Obviously, this is a small portion of the market, but we're selling the machines to mining companies, Formula One race teams. We were selling them to professional soccer teams in Europe that wanted these systems in Europe. Even Roland sold one to a company to be able to do executive management testing.

Nice. Maybe one in Evercore. Fantastic. And it's -- when you're placing these systems, have you sized what the potential opportunities in the U.S., what the peak installed base could be in. Are you -- is that a greenfield opportunity for you? Or are you replacing other systems?

I think what we -- there's a couple of things. First of all, there's still a lot of greenfield opportunities out there because again, most of you are living in the big cities in the New York, Boston and whatever kind of areas where, clearly, the standard health care systems are much more involved in the regional settings, and the regional hospitals, is clearly not standard care in the U.S. as well as in Europe that you have this kind of syndromic testing available in each of the departments. So I think there is a lot of greenfield opportunities, and I think the best evidence for that is that we have today higher revenues and higher placement numbers than even on the peak of COVID. I shouldn't forget it. COVID was a nice helpful time to educate actually patients as well as doctors on what is important and that you can do testing and preventive measurement. And I think that is really having this impact still today. Having said that, on a more concrete measures, what we also see, for example, is in U.S., but in also other countries. One of the disadvantages of one of our competitors is clearly that you have to clean the machine when you switch from 1 pair to another, so we see also a number of customers now buying the second machine rather being a QIAGEN machine and then have dedicated machines for certain panels because you're avoiding the switch because with our machines, you don't need that, you can literally go from 1 panel to another and just switch a cartridge.

That's helpful. Maybe switching gears to QuantiFERON-TB. Maybe I haven't looked at these numbers. It just looked like last year, you guys did 20% and now it's slowed down to 10%. What caused that drop? Is that just the market run rate? Or is it market saturation?

Yes. Technically, you might be right that it is percentage-wise a bit lower. We still quite comfortable with a double-digit growth rate in the sixth consecutive quarter with more than $100 million in revenues, in fact, actually $120 million last quarter, quite sure the fourth quarter were not much different anyway. So overall, a very healthy market and the #1 reason for that is actually, we are penetrating into the 120-year-old, but still 60% of the market skin test. And that is a nice opportunity for us. It clearly took us a long time to gain this traction. But now where we are clearly the largest player, we are also the new standard for latent TB testing, and that is driving this acceleration. Yes, underlying dollar basis gets larger, therefore, also the percentage ramp probably comes a bit lower, but the incremental dollar win is still quite big. And so I think there's nice opportunities. It is always competitive. As you know, there was always Oxford in the market now part of Revvity. There was a handful Asian players out in the market. We had bioMérieux in, bioMérieux out, bioMérieux in again. So it is competitive, but QIAGEN by a factor is growing faster than everybody else combined. And I think that's good news. But the driver for that is, I think, also the combination of our leading test with a leading DiaSorin platform. and again, being the new standard.

Again, take a look at what's an esoteric test for labs and what is a commodity test. Commodity test would be like HIV, hep C, hep B and HPV became a commodity test, too. QuantiFERON is still 30 years into it and esoteric test, like Roland said, we're only 60% of the market is still available for penetration. So we are nowhere even near saturation. What you saw in '22 and '23 with these growth rates going up above 20%, you saw this bolus effect of catch-up testing after the pandemic. But if you look at this product sales starting in 2012 with $20 million and where we are today, year in, year out, the things like a 10% CAGR, in terms of grinding this market. The average time to convert a customer from latent TB testing over to QuantiFERON, 6 months of hard work for our sales rep, 6 months. So this is a market that you still have to go out and convince people cost-wise, clinical wise, automation wise, this is here for conversion, and that's what our reps are doing. So that's why we see this 7% CAGR up to 2028, then anticipates the law of bigger numbers, but also that there could be some potential competition that's part of the overhang right now that we're fighting. But this is a market, even with multiple players, there's still opportunity for growth.

And just on the [ competitve comment ]. A lot of people try to make an analogy to HPV or other...

Couldn't be different.

Can you just walk us through and what is different about this market?

Yes. First of all, I think, very straightforward at some point in time in HPV, we clearly had 100% of the market because we were the only approved test, and if you have 100% of the market, I think there's only 1 direction possible, just mathematically. But probably more important, and I think that is a significant difference is what went wrong with HPV at QIAGEN is we were not able to develop the next-generation automation solution. Here, we have the best automation solution available with the DiaSorin platform. There's nobody out telling that's LIAISON platforms, as you know, is 2 different platforms because depending on the volume you are looking forward, you can want it to be tested on is the best possible solution. So I think it's a very different environment. Also in terms of penetration, as John was just saying, HPV was much more penetrated compared to the pep test. Here, we have still under QuantiFERON on the TB test side, we still have 65% of the underlying market, which by the way, is also growing 4% every year, which we can penetrate on. And last but not least, we are here in ongoing competition. Again, we're not alone in that market, right? We are gaining against Revvitys, against bioMérieux, against Asian players, everday as we speak, we are -- have now the fourth generation of test on the market, we are not standing still. I think there's fundamental differences between HPV and delay in TB.

Yes, absolutely. Automation was the issue on HPV remember that Roche came out with a medical advancement in HPV testing when they went to genotyping. We're now on the fourth generation of QuantiFERON. They're not going to move the needle. Even competitors who are looking at market and acknowledge they can't come up with a clinically better test than what we're offering. This is the gold standard. Over 100 million people tested since QuantiFERON was launched, were written into the WHO guidelines into the Stop TB guidelines by name, not as a class. And then you hear a competitor in the market say they've had flat line sales for 5 years. For 5 years, flat line sales in that period, we went from $200 million to $400 million in sales. We doubled the business.

Yes. That's great. That's great. And I think related to that sort of technology was Lyme's test, you guys submitted to the FDA last year, approval expected...

[indiscernible] It was a partnership, but technically, you're right, it's clearly a product which we both want to drive. We have it approved in Europe, as you know. We expect approval, hopefully, we'll see over next year, maybe the year after next year for the Lyme product, which is a nice opportunity because, as you know, Lyme is a $300 million to $400 million global market opportunity. Again, we will tuck in a couple of millions next year in Europe and then hopefully soon in the U.S. as well.

Is there a customer overlap in the sense that existing QuantiFERON customers can adopt this test?

You're going to see certain medical centers depending on the region from the lab customer we do it. But the -- you got to remember on QuantiFERON, we have 2 types of reps that are out there and also the big reference labs in the U.S. and also worldwide are pushing you have people who create demand with different types of groups. And then you have the lab customers that you line up to bring that in. You're going to have the same lab customers are going to run these tests, especially like for your area in Connecticut. And then you need to target different types of physicians who are doing the Lyme disease testing, but that's where we're going to work out and find a way. The problem with Lyme disease detection right now is that people go to the doctor, they look at the bull's eye. It's a flip a coin to see what's going on. It may not have even already shown up, but they're affected, but then they're doing the current diagnostics too late. The goal now, together with the [indiscernible] products is to do that earlier and be able to get a much better read and analysis. People don't necessarily die, they don't die of Lyme disease, but it can cause severe neurological and other complications, and that's where there's a real urgent need for better diagnostics here.

Got you. maybe switching on to another bright spot digital PCR, you expect that business to more than double by fiscal '28. Talk about what drives it? Is that just a continuation of existing momentum? Or do you expect some inflection because you're launching new assays and menu?

I think a fair question. I think it's fair to say that we clearly had a great start with the products. And as you know, we have dedicated machines, depending on the volume you want to drive, you can pick the right machine. In the meantime, we're actually seeing customers buying the second, third or fourth machine, which is a great testament of the success of the machine. More important for us is clearly also menu expansion because I think it's also a question where at the beginning, we had probably the best machines on the market, and that hasn't changed, but we had some unlimited portfolio. Now we expanded significantly on a menu. We have now also with our gene opportunity -- opportunities for customers to customize their own panel, dedicated one, for example, a biopharma research side where they are doing the work on [indiscernible] design their own panels, we produce them and they can use them in a very dedicated way. That makes a difference to customers. And therefore, I would say what we're seeing right now is a significant uptick also in terms of throughput. We're seeing customers are getting bigger, particular biopharma customers are being very helpful here for us. And nevertheless, we have to expand menu going forward. And John probably can give a bit more insight what we're planning to do here.

So if you think about where QIAGEN is going in the next couple of years, you have 3 drivers out in front, incrementally that you're bringing $350 million of incremental sales from '24 to '28 million. QIAcuity, QIAstat-Dx and our QDI business, $350 million of incremental sales coming from them. You're right that QIAcuity is the one that we're trying to triple from about a $90 million target this year, up to over $250 million. As these products get up over $100 million of sales, they get bigger, they get chunkier, they start to become more than 5% of sales. I think we think that investors will start to pay more attention to them. But remember, there's these -- 2 things that become additive. One is the instrument sales because you're placing boxes. Right now, that's tougher in this CapEx environment, but then the consumables start to snowball. You're seeing the applications from academic research, where they like our one-box solution into pharma, cell and gene therapy, biological drug development. That's where they like the 4 and the 8 plate versions of our machines, where we can compete with the incumbent on the market and be able to go into strong footing against them and have competitive wins. We've even come up with an application partnership with the FBI here in the United States to bring this machine into forensics testing, that complements what we're doing with NGS technology and our GED match. Whenever you hear these stories about people with cold cases being solved after 20 years, they're relying on our product here with geneology forensics. So that's where we're competing here, and we're building out all these applications, and that's where we have specialists that go and build these applications and target customers and convert them from qPCR and NGS into that. Then you move over to the clinical side. We got the clinical version of the box approved by the FDA earlier this year. The first target area there will be oncology, especially in blood cancers, leukemia, but we're also seeing the interest coming from infectious diseases. Remember with digital PCR, you can multiplex. You can look at 5 different targets from 1 sample. We're going to increase that multiplexing capability and make it more attractive there. We have 3 companion diagnostic partnerships signed already using digital PCR. We're going to build out that business, and then we're going to see where the other opportunities to go beyond wastewater testing where we are today. That's a small one, but it gave us this halo effect. This is a technology that has a good 20-, 30-year run ahead. Remember, qPCR has been around since, what, late 1980s? And it's time to move from Nokia phones to smartphones. That's how we sell this going from this analog technology into digital.

That's a great analogy. John, I'll remember that.

You remember Nokia phones don't you?

Yes, I did use that. I did use pagers too. Maybe the other aspect here is NGS and QDI was flattish in the third quarter. I know you've had some transition from -- to SaaS sort of impact. When is all that getting sorted, what should be normalized growth for that business?

What we'll see right now is as I said, I think overall, the order -- ingoing orders is still quite good around the bioinformatics business in general, but particularly, the larger pharma companies are changing their purchasing patterns in the past, they were quite flexible in taking 3-plus years license deals and paying in brackets easily $300,000, $500,000 just for that period. And of course, you had onetime events on the revenue side, which would make it a little bit more volatile as well. Now you see clearly there is not only in our industry but overall a trend for SaaS kind of models, which as a number is actually probably more profitable, but you clearly have different revenue recognition. And we are going to that transition. It's probably a period will take some time. Nevertheless, I do also believe that next year, including the SaaS model, we should see probably high single-digit growth environment for the QDI business again, and then hopefully returning quickly to the double-digit growth areas. We're still doing major investments in that area on the R&D side, particularly also to a certain extent on the sales and marketing side as well. We're also looking on selected bolt-on acquisitions here if there's interesting technologies out there. As you know, it's not an easy environment. We are one of the few companies, which has, I would say, a quite profitable business on the QDI side, where a lot of other companies, while being small, also losing significantly dollars here as well. That is clearly something what we do not want to do.

Fantastic. And last couple of questions here. On fiscal '25, I think street is modeling about 5%, most of their peers are still -- tools peers are still looking at some puts and takes for fiscal '25. It's not a normalized environment. Are you comfortable with where street numbers are?

I would say in general, as you said, we had a flattish environment in the first half of the year. We have grown about 5% in the second half of the year. So I think 5% in the second half of the year is a good starting point also looking into next year because it is not a normalized environment. You have CapEx limitation, you have China exposure. So the things which are probably continue to be somewhat difficult for quite some time. Nevertheless, on the profitability side, I do believe it's quite visible that we also see next year another step-up in EBIT margin improvement because certain of the topics we initiated this year will also roll into next year and have a full year impact. On top of that, we have an ongoing, what we call QIA efficiency program, continuous improvement program, which, again, will drive profitability as well. So I think we will see both a good combination of underlying organic growth rate, but also profitability increases.

That's fantastic. I mean just most tools companies, I think they've been cautious. It's refreshing to hear your confidence in the business. Maybe on...

We are somewhat cautious, as I said, in terms of -- again, it will be a sequential phase. There's no January, new year, January 1 different world. But I do think we have seen this year a sequential improvement from Q1 to Q2 into Q3. So I don't think there's any reason to believe that underlying trend, while you might argue it's a slow trend, but it's still moving in the right direction should not continue. I even believe that with now a clearer picture on the U.S. politics, hopefully, over the first 6 months of next year, that should be also rather beneficial.

You know, Vijay, QIAGEN has been a steady execution story for the last 4 years since 2020, quarter in, quarter out on the sales and EPS line. But on top of that, we're a stock that gives you an opportunity to avoid the hot button issues in the industry. China, 5% of sales. And then you see some of the competitors with 20%, 25% exposure and all the concerns there. Bioprocessing, we're not involved in it. And then heavy CapEx -- challenging CapEx environment, 85% recurring revenues.

And those are all great points and which gets me to my last question, Roland. Net leverage is sub 1 turn. If the Street hasn't given credit, thoughts on capital deployment and perhaps share repurchases?

As you know, QIAGEN has a commitment since 2012 in share buybacks. We typically started at that point in time with $100 million incremental year-over-year. We recently stepped up to $300 million. We did $300 million in January this year. We asked already on the AGM this year for another $300 million. We gave a commitment of $1 billion all the way to 2028. But I do think it's a fair observation that if you look at our plan for 2028, $1 billion share buyback or return is clearly not stretching it too much. So there is opportunities for us over time to step that up and increase, if possible. We're clearly also looking on bolt-on acquisition opportunities. It is something that fits in our current environment and our current platforms, if it is a software platform, if it is an enhancement on our QIAstat or QIAcuity menu, happy to look at that. But I think it will be a combination of both.

Great. Fantastic. I think with that I'm out of questions, Roland, John, thank you so much for the time this morning.

Thanks. Thanks for having us. Great conference. Thanks.