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

Thanks, everyone, for joining us this morning. A pleasure to have with us QIAGEN. We have the CFO, Roland Sackers. From Investor Relations, we have Daniel Wendorff. And we have John Gilardi, VP of Communications.

I guess, Roland, for me, when I looked at the numbers, your organic has been the best-in-class, right, in Life Science Tools. It's been a challenging year. I know historically, QIAGEN -- when I think of QIAGEN, NIH and government academia comes to mind, I mean, despite those challenges, like you guys have done phenomenally well this year, well above your Life Science Tools peers. So when you just do a review of the year, right, what has surprised you? And what do you attribute this above peer performance to?

Yes. First of all, thanks for having us. And again, it's a pleasure to be here and finally also have good microphones. So I think you congratulate you that. I've seen that differently in other conferences. But again, what is important is, and I think it's fair to say that we had a really good start of the year with a 7% growth rate in the first quarter and also the second and third quarter with a 6% overall growth rate was actually, I think, well received by the market as well. I think it is testament also to our strategy on the one hand side, being very focused on around 5 different growth drivers, which we are, for sure, going to review in detail. But I think it also due to the testament that 85% of our business are consumables and consumer-related business, which is clearly much more resilient than an instrumentation business. So I think overall, the portfolio strengths played out. I think it's important that we are not probably see ourselves, but I think the market ourselves sees us as innovation driver. Our customers like to work with our consumables also long term. And even in days where you have funding concerns or even funding issues, clearly, our customers want to continue their operations. And as long as they come to work daily, they have to burn our consumables. And I think that is clearly the strength of QIAGEN.

Great. Since you brought up macro, right, what was the total impact from NIH sort of funding constraints? And what do you think growth could have looked like without those issues?

Think NIH for us is probably like 4%, 5% of total. Overall, academia is probably somewhere, let's say, between 6% and 8% in U.S. of total, which includes that. So I would say there is clearly, I would say, an impact of the NIH. And there's also a reason why we were a bit more careful when we have given for the fourth quarter guidance because while I think the overall consumable business is going on quite well, you clearly see that people are a bit more careful on the instrumentation side, which I do think is a natural behavior. If you are not sure that you have funding for the next 12 months or even more visibility beyond that, you rather wait for a couple of whatever weeks or months and say, okay, before I make that material decision, which also then, of course, triggers maybe a new operational guy in front of the machine for sure, incremental pull-through on consumables. I want to have clarity.

I don't want to come back to that fourth quarter guide. But before that, you also announced the CEO transition. Look, it's never an ideal time for CEO transitions, but this came in along with some M&A seemed a little bit abrupt for us, but maybe this was planned from an internal standpoint, right? So maybe some context on transition?

The context is German law. As you know, Germany, we have this ad hoc law. That means once you have a discussion, it contains material news, you have to release it publicly. I would say in the U.S., you probably would have waited until you have identified a successor. But Thierry and the Board had a discussion on succession planning. I think both agreed that the timing after, again, 10 years being with QIAGEN, 6 years of that CEO and this includes clearly the significant COVID days, it would be a good time for transition. But under German law, you have to then release it immediately. And yes, we have to deal with that now.

And from a new CEO standpoint...

Search is continuing. We are looking, as you know, from -- when we released it the same on internal and external candidates. I would say the European time frame is typically somewhere between 3 and 6 months. As you know, Thierry will stay on board and work on a very professional handover. There's no question about that.

And then we'll touch on the M&A, but maybe a couple of macro items. China comes up a lot. From your -- when you look at the macro end markets you serve, right, pharma, diagnostics, how would you say, characterize the current environment versus 6 months ago? Do you feel like the environment has improved?

I'm not so sure. I'm a bit more optimistic for '26 because you see things moving in the right direction, but I'm not sure that we made significant steps. A good example is China, right? I think we all hope that China in the second part of the year would be improved somewhat. I would say it probably improved, but micro steps. Again, China for us is also only 4% to 5% of total. So I would say it shouldn't concern us too much. Nevertheless, we -- of course, we, as many others would have wished that more macro impact would happen that more funding would hit the street. And again, we see little signs, but not like big step forward. I would say there's clearly a good news that the shutdown has stopped, but I think you know better than I do here out of Europe that you still don't have a budget, right? You might or might not set end up in the same situation in January again. And while nobody is hoping for that, that might happen. And so again, overall, no concerns for our consumable business because as people go to work, they have to burn our consumable cost otherwise, there's not much to work. But would I buy a new machine? Of course, I would, but would have scientists who is a bit more concerned. You probably say, okay, wait another 4 weeks, and let's see what happens end of January.

Since you brought shutdown, has shutdown had an impact so far?

Sure. Again, you clearly had -- again, you have seen it even in the third quarter, which I would say we all would agree was a good quarter for QIAGEN. So again, compared to the market, we're doing well. So it's probably also the reason why we can speak a bit more freely on that topic than others. But of course, again, if you get threatened at some point in time, 20% of funding cuts everybody knows that's not different in your environment. The CEO -- CFO can do certain things, right? If somebody tells you have to cut down your cost by whatever, 5%, 10%, you can do it, okay, let's do less travel, less training, skip the Christmas party, fine. But if somebody goes around 20%, 30%, you know who. It probably means headcount. And that concerns people, right? And so why should I increase fixed cost if my job is under scrutiny. So I would say it has an impact. Again, not too much on the consumable business because people are still working. But on CapEx, yes.

That's helpful. And I think China -- did you say China is 4% to 5% of revenues?

Yes, that's correct.

Can you just maybe high level and remind us what did China do in '24 year-to-date?

Again, for us, it was last 2 quarters actually double-digit negative, like, I think, 12%, 14% or so. The interesting situation for QIAGEN is, again, I think, therefore, we are probably a good observation of what's going on in the market. You might recall, Vijay, that we have this dual brand strategy in China, which is unique for us to China. That means more or less half of the business is with our global QIAGEN brand. And actually, in 2005, we acquired at that point in time, our single largest copycat in China, produced locally, developed locally, local management, seem very much a Chinese company. And here, we clearly see that the local brand is doing better than the global brand. So this whole theme of buying local, buying Chinese is a topic. We can't ignore that. The benefit for us is, of course, we are right now looking, okay, can we enhance that, right? Because we believe that might be a longer-term trend.

I see. That's helpful. And when you roll up all of these, right, there is China, there is shutdown, right? But still I have a hard time when I look at the 3Q and the 4Q, 3Q, you guys did 6% core. And we're guiding to 2% core in Q4, a 400 basis points of deceleration. Comps don't necessarily get harder. How much of this is like shutdown versus China?

I would just slightly rephrase it when we arrange it. Comps get a bit more difficult in the fourth quarter, particularly if you look on QuantiFERON, actually had a very strong Q4 last year. Again, I'm not concerned in general, as you know, on QuantiFERON in general, but I think it's worthwhile to point it out that it is a bit more difficult in the fourth quarter gets easier again next year. In general, we were clearly -- when we have given guidance, we were in the middle of shutdown. And I would say nobody at that point in time expected that the shutdown would be over 2 weeks later, right? So I would say there is an impact. Nevertheless, I still also believe that the instrumentation impact, as I laid out before, will continue. I also go back to what we did earlier this year. We sometimes give guidances where we believe it's realistic and the market might believe it's conservative, and we tend to come out better than you thought. Again, I wouldn't mind if we do better as well. But at the same time, keep it balanced, I think, is the right thing right now.

And just the point that you made on shutdown, the guide had contemplated a full quarter shutdown impact?

Correct.

I see. And that shutdown Roland, is that limited to the U.S. academic and government, that's your 6% of revenues?

Yes, it's more or less what we're seeing in the academic environment, particularly the U.S., of course, is imports.

Okay. That's helpful. Diagnostic Solutions?

It's a healthy business for us. Again, if you go through it, I'm quite sure if we can't complain about TB testing. I think we can't complain about QIAstat. Both are very solid double-digit growth drivers, as we said publicly on the call as well as, again, we typically say it's a good quarter if we have more than 150 placements per quarter. We said publicly Q1 was a very strong quarter. We said Q2 was a very strong quarter in terms of placement. We clearly have seen Q3 being very strong. I'm quite sure in January, I'll tell you the same thing about Q4. So this whole symptomatic testing is a strong business for us. The enhancement of the portfolio for us plays quite well. As you know, we got 4 approvals end of last year in a tender-based market. So it will take some time to roll in, but we're seeing being quite successful in rolling it this additional test into the U.S. market, but it's also a global product for us, right? So again, in all markets, we're growing double digit, and we do have strong placements.

And I know like is there a first half versus second half dynamics in core diagnostics? First half?

Again, sometimes you have impact, again, not as big for us and for other companies like, of course, if you have a stronger respiratory season, it is not hurting us, right, by definition. Again, I would say the larger impact for us right now comes from the launch of new activities. As you know, we have more launches coming up. We will probably submit in December still something to the FDA in the U.S. and there's more to come. So we have continued expanding menu, not only on QIAstat, but also in digital PCR. So I would say, overall, we feel good on the diagnostic franchise. Again, if you like the focus point, not even saying a concerning point because, again, if you grow in the areas you're growing, most people would probably die for that in our business is clearly on the budget situation.

And sticking to diagnostics, I think QuantiFERON, that's been a phenomenal growth driver for you guys. If I go back like 12, 18 months ago, there was a lot of concerns around competition. I know the stock, it didn't reflect in the share prices. Just talk about the competitive landscape within the latent TB testing.

Yes. Let me kick it off and then Daniel might enhance on that. First of all, just to remind everybody, TB testing was always competitive only because we have a significant market share means that there is no competition. It's not correct, right? There was always other companies from Oxford to others in the market, right? Yes, we are probably doing since 10-plus years much better than everybody else, but it is competitive, right? But the biggest competition for us is still actually the 60%, literally 120-year-old skin test. But the good news for us is even this 120-year-old skin test is growing 4%. So the opportunity for us to penetrate that market is not getting short at all, right? So while we are growing, let's say, 10-plus percent, we barely penetrate into the underlying market, which is good news. It's driven by population growth, but it's also driven by more and more mandatory testing. More and more governments want to have mandatory testing, either work-related, legal immigration related, health care worker related. So I think there's a nice opportunity. Second, of course, we are not standing still, right? As you know, we are now working on the fifth generation of the test. We are improving workflow. We have, I would say, an outstanding instrumentation partner with DiaSorin. So I would say also the way over the last 10 years, the product developed is quite nicely. I still go back, as you know, until 2012 when we acquired the product. And literally, some of your colleagues at time hammered me, right, how can you pay $300 million for a product with $20 million in revenues. In hindsight, we all look smart. But of course, in the meantime, we have now $2.5 billion in revenues with a very healthy gross margin. So I think the deal worked out quite nicely. And again, the competitive situation really hasn't changed. [ BioMARC ] now for the -- I think 5 years is in the market, sometimes had to pull coming back, really didn't make a difference. Roche since 10 years tries to enter the market. I think they clearly got more vocal over the last couple of probably 2 years. Nevertheless, on the last CMD, they didn't talk about any U.S. launch anymore. We still assume that they will come to the European market some point next year. But I do think we are well prepared. We work with our customers. We develop our products. Again, I think the product we're having is well recognized.

You mentioned the fifth generation of test, right? Is there a time line on when it might launch? And what is different on the fifth gen versus the current version?

So every couple of years, we're continually improving the QuantiFERON test. We're now on the fourth generation, and that's been on the market for a number of years. In the fifth generation, we're looking for workflow improvements. If you think about the sheer volume of test tubes that our customers have to handle, remember that there's 4 tubes in every QuantiFERON test in terms of the complexity of the test. That's a key barrier to entry to make this test work. People are looking for ability to be able to process faster and more tubes. That's what you saw from our partner, DiaSorin, recently announced that they come up with a way to increase the high throughput capacity for certain customers up to 75%. And we're looking at additional ways to help them with the workflow and in terms of the processing, and we'll tell you more about that in '26.

Is that launching in 2026, John, or?

Some of the products will start to launch in '26 and '27.

Okay. Okay. That's helpful. And Roland, since you brought up skin testing, which is still 60%, we know QuantiFERON, it's a superior test, right, and it's been demonstrated well enough. Why are we still at 40%? Why shouldn't this be at 80% penetration?

Because you have to change behavior, right? And you know that health care in general, but I think diagnostic specific is a sticky environment. You still have doctors saying, I'm doing it since 20 years, my patients are happy, right? What is helpful us and that, therefore, you see this acceleration, and we're still growing double digit is of course, more and more papers coming out supporting the superiority of our products. You see that more or less all the large labs are offering it. So there is clearly an acceleration in terms of volume in general going on, but you still have to educate people's behavior.

Is QuantiFERON -- should this be a double-digit growth asset for the foreseeable future?

And as you know, we have a midterm guidance, which calls for a 7% CAGR. So technically, I should say no because right now, we are growing quite well. At the same time, we feel quite good about the product. It's clearly ahead of our plans right now. And while I said probably Q4 might be facing a tough comparison, I'm quite confident looking into next year as well.

That's super helpful. And then you called out strong instrument placements with QIAstat-Dx in 3Q. Where -- I guess that's -- that for me stands out as unique because some of your peers are still talking about capital challenges in the market. What drove 3Q? And how are you thinking of sustainability of those trends?

Yes. So first of all, we have really seen 3 quarters of strong placements of QIAstat-Dx. In fact, in the U.S. in the first half, we placed already more than we placed in the full year of 2024. And this was really driven by menu expansion. We have now 3 of our core panels on QIAstat-Dx in the U.S. We have 3 mini panels and we are not standing still. So we are on track to submit another panel, both in the European Union and in the U.S. in blood culture identification still this year. And next year, we're looking for submitting another panel, both jurisdictions again with complicated urinary tract infections. So we are expanding our menu, and this is certainly helping also our instrument placements for QIAstat-DX. And what we are also now moving more into is the area of companion diagnostics. Our platform has 2 very important advantages for the clinical field there. And this is CT value calculation amplification curve. So you can basically track disease progression. You can track pathogen load, and this is in particular important in the clinical setting. So we feel really comfortable for the further development of our QIAstat-DX platform. And we actually almost forgot to mention it. We started -- we got the FDA approval for the RISE platform, which can do 160 samples a day with limited need for lab space, which is also a very important feature. And this already had a good start.

Have you disclosed an installed base for QIAstat?

Not for this year. We typically do it at year-end. But you can do the math.

Got you. Sorry, the assay that you're launching in 2026, is that a major one? Or any way to quantify what that assay is?

It is unique. So I do think it will help us, again, driving penetration into the market. I think it's fair to say that, again, it will be no different in the fourth quarter. Respiratory has the majority of the panels. But again, if you go back pre-COVID, and I'm not indicating that at some point, we'll go back to pre-COVID, pre-COVID, the mix on respiratory was 1/3 and the rest was then probably gastro and others. I do think with everything what is going on in respiratory and also that people want to know post-COVID much more, okay, is it COVID? Is it flu? Is it RSV or whatever, that respiratory probably will always stay half of the business.

That's helpful. And then moving to Sample Tech. I think that grew low singles in the third quarter, but certainly improved from first half rate. And that's why, again, going back to my earlier question, is the macro improving or sentiment changing? So can you just talk about the puts and takes and what drove 2Q?

Sample Prep by definition is an important product for us. And I would say it's clearly also a market where if you have the market share we have, it is not easy to outperform and the overall market growth. Therefore, it is important that you work on innovation and new product launches. And I do think that is clearly something what QIAGEN is driving right now. We did quite some launches on the consumable side over the first half of the year. And as you know, we are even more important for us now adding the time where we had 3 new platforms to our Sample Prep franchise. And we just more or less introduced the QIAsymphony Connect to the market a couple of weeks ago, as you know. So there will be a revenue impact more or less kicking in, I would say, over the course of the first half of next year. And mid of next year, we're going to launch probably more important machines of QIAsprint, which is a high throughput version of a sample prep machine and the QIAmini, which is on the other hand, which is rather low throughput machine. Why do I believe in particularly the Sprint is important? Well, Symphony, as you know, is a well-established QIAGEN platform since actually, I think, 2008. And now the successor is a significant advancement of the machines in terms of workflow integration, throughput, connectivity, all the features a lab wants to have. It is clearly also hitting a midsized and throughput environment where a lot of Symphony again, have a huge and good utilization. The high throughput machine is brand new to QIAGEN because we never played in that market. And again, while we have this, I would say, significant market share overall, the high throughput market, QIAGEN doesn't have any footprint in yet. So every machine we're selling there is incremental to our business. Every machine we sell there comes with an incremental consumable business. And as we're talking high throughput, it is even material, right? And so I would say, therefore, we are quite confident that over time, our Sample Prep number probably goes up further. Clearly, also the acquisition of Parse on top of that is being very helpful for us.

We'll get into Parse. But this QIAsprint, I mean, this feels like it's one of the more significant launches in 2026. Would you agree with that?

Absolutely. And again, as I said, it is addressing a market where we believe there is need for innovation. The question you could ask is, okay, why haven't you entered that market much earlier, right? Because we always were looking for an automation platform, which really makes a generational shift to the automation solution that in terms of continuous loading, turnaround, again, automation figures. I don't think anybody will be surprised that QIAGEN will be able to come with a significant portfolio from day 1 because, again, we are the Sample Prep company, right? But we clearly always have to look for an automation partner, which helps us on the automation to be state-of-the-art as well. It took us some time, but now over the last 3 years, I think we developed a nice machine. People will be very pleased with the features.

How large is that -- when you look at the Sample Tech market, Roland. What percentage is high throughput, which is now greenfield for QIAGEN?

We haven't really sized the market in that way, but we think there's probably at least 10,000 of these systems out there that are eligible for replacement. So like Roland was saying, this is not a recycling story or a rejuvenation story. This is a fully incremental market for us.

And when you -- are there any economics for box you can share, John? And what do each of these instruments cost? Or is there like a rough range?

It's hard to imagine that goes above 6 figures.

We give you a discount if you want to have one.

I will let my Director of Research who want to start a lab. I will let him know.

Investment banking team pays more.

I guess that kind of segues nicely into my next question. A liquid biopsy MRD, that's -- those have been the buzzwords, right? Is this the Sprint -- is this the system that would cater to those kind of markets? Or how should we think of those markets being a driver of Sample Tech?

So when you think of the liquid biopsy market, the instrument we have developed actually with one of our customers to service the needs of that market is the QIAsymphony Connect. And the 2 important new features for the QIAsymphony Connect is faster time to result. So it can process more samples within a given time period. And the other feature is lower elusion volumes. So we embedded a new magnetic technology, which allows to concentrate the magnetic beads even further. So you have the already precious DNA then eluded in a smaller sample size. So this is really the instrument we have developed for the liquid biopsy market. And it's actually a very attractive market for us. It showed growth over 35% over the last year, really. We are not also for competitive reasons, disclosing how much we generate in that field, but it's a very attractive market for us.

Is that -- I guess, when can it become significant enough that you need to start disclosing? I know you do a good job on the diagnostics side, right? What is QuantiFERON versus different drivers? Could this end up being meaningful enough or you might have to break it out within Sample Tech or...

[indiscernible] a guy who always tells us we are disclosing too many details. But no, again, I do think, as Daniel pointed out correctly, the QIAsymphony is a new one, clearly makes a difference. We believe once we see that hitting the street, we're for sure going to be updating you on more details, and that probably will include also liquid biopsy.

And then when I think of everything that you've said, right, between QIAsymphony Connect and Sprint and Mini, it just feels like Sample Tech could be inflecting in 2026? Would that be a reason...

For the course of '26, we are quite positive. As I said, the 2 big other machine launches are coming mid of this year. But we are -- yes, we're clearly seeing that, as you said it and framed it correctly at the beginning, these are important inflection points for QIAGEN. That's the reason why we are so focused on these 3 launches. One is now on its way. Customer feedback is good. Again, we had a couple of customers testing the Symphony now for months. They even didn't want to give the machines back, which is fine because they are life science customers. But -- so I would say the feedback there is good. We expect similar feedback from the other machines. Now again, it's an important inflection point for QIAGEN. It will not go overnight by definition. At the end of the day, it's a consumable business. We like to sell the machines. But as you know, at the end of the day, we like to sell machines to sell more consumer goods.

Makes sense. Then maybe switching to genomics side of things. Let's start with the acquisition that you did on Parse Biosciences. I think you highlighted single cell RNA products, right. I mean it's an interesting time to be doing deals in that space, just given NIH constraints. So maybe talk about the rationale and timing.

Yes. Let me kick it over to Dan for sure can enhance on that. I think what we like really on Parse is their unique setting. I think one of the very strong features is that you don't have to have an instrument and automated solution to get to results, right? It is clearly also an opportunity that you have a consumables-based only solution, particularly in what we described before that CapEx is a more difficult environment. We see that clearly as a strong differentiation factor from Parse. We're also following that company, I think, actually since 2017, 2018 quite detailed and probably on a quarterly basis over the last 2 years. And they delivered literally every quarter on what they promised. That's not always true on the small companies, as we all know. And they have a strong performance. Again, as we said publicly, they delivered around about $20 million of revenues last year. We expect at least $40 million for next year. So strong performance. And that doesn't even include, I would say, a larger revenue impact by, again, having QIAGEN getting involved. Our involvement at the beginning is clearly focusing a lot on R&D activities. We're doubling up on the R&D framework. Of course, we bring them in our global network and -- but they had a good footprint, right? They were very strong around the top 10 pharma customers. We, of course, know more than the top 10 pharma customers. The same is true for the overall global network. So there will be opportunities to really drive that business quite nicely. It's also the reason why we believe that not only will be accretive in '28, but also over time, will be margin accretive for QIAGEN.

Yes. And actually, the single cell market is currently also in a very interesting point of its development, also driven by Parse because its Evercode technology allows now to generate millions of billions of individual single cell data sets and this now allows basically to create with the help of AI with bioinformatics software like we also can offer with our QDI IPA and OmicSoft platforms to create -- to start creating virtual cell modeling. And this is now also becoming very interesting for the pharmaceutical industry. So we think the single cell market is sort of at the brink of a new interesting development with that possibility to generate millions to billions of data sets and actually Parse together with a company called Donal Therapeutics, they generated a data set of 100 million single cell data sets and the development doesn't stop there.

Very interesting. How -- I thought single cell, it's about maybe a $600 million market -- but obviously, capital environment has been constrained. When you look at that $40 million estimate for '26, Ronald, what gives you the confidence in that $40 million? Like I don't know if this market has like a backlog, right, to give you visibility.

Again, by definition, we, of course, talk to many customers they're working with, and we clearly see the pipeline for next year. And so I would say, as I said before, we see this $40 million already more or less by extrapolating what they're doing right now. Again, the QIAGEN benefit, we haven't expected it. It starts as of January 1 because, again, they did a good job, but we for sure can enhance that. So it will not stop at that $40 million. It will continue to be a significant double-digit growth driver for us. But I think it's also -- and I think as Daniel was alluding to that the market is shifting. I think the market overall is shifting in the direction literally, they are by far the leader. And again, if you compare their $40 million next year to what, for example, scale is doing, there is a significant difference, right? And again, that's the reason why we double up in terms of R&D because we clearly want to expand the difference there. And we have a strong feeling that, that will work out quite nicely for us.

That makes total sense. I mean just given your leadership position within Sample Tech rate. And my understanding, our problem is Parse uses barcoding tech, and that's how you eliminate the need of instruments, that correct? You barcode these cells?

It is easy to integrate in our overall offerings, right, from the Sample Prep side all the way to the bioinformatics side and for us it's a perfect fit.

And once -- let's say, I use the QIAGEN solution, where I use QIAGEN power solution to barcode these cells and separate them. What do you do after them? Am I doing sequencing or PCO...

Sequencing. You go into a sequencer and then off the back end with bioinformatics. It's upstream of the library prep step or if you want to do a whole genome and then you can mix and match what you want. But it's clearly like Roland was saying, it fits right into the wheelhouse of QIAGEN selling sample prep kits. Then we can cross-sell it with library prep as needed or we can start to bundle it with bioinformatics.

I think we also got in the meantime, it's also fair to say a couple of calls from pharma customers saying, guys, we're glad that you bought that because, again, knowing that it is in a larger scale, it gives us also, by definition, increased confidence that it will take from where it is today to the future.

That's -- I mean this space, like we've been doing some work, and it makes total sense for us, eliminating instruments and barcoding, right, [indiscernible] test makes total sense. You brought up -- John, you brought up sequencing, right? Downstream, you do sequencing. Genomics NGS did high singles for you guys in the third quarter versus flattish in first half. Talk about the first half versus second half dynamics. What's driving this strength? And is it sustainable?

We see improvements in the genomics portfolio. Remember, this includes what we're selling for the wet lab work in terms of library prep for universal NGS panels. We're agnostic to the sequencer. So we will work with any partner that's out there in terms of working with their systems. And then we're picking it up on the back end of the sequencer with our QIAGEN Digital Insights Bioinformatics business. That enjoyed very good growth at a double-digit rate in the third quarter. It had good underlying solid high single-digit growth and then combine that with the Genx acquisition that we did earlier in the year, where we picked up an Israeli bioinformatics business on the clinical side that's known for a lot of very good work for hereditary disease. We like the platform, and we can expand that somatic cancer analysis as well into other types of clinical decision-making tools.

How big is QDI for you guys at this point in time, QIAGEN Digital Insights and...

It's actually doing quite well. it's north of $100 million business for us. While we're going through a transition from a licensing-based deals to a SaaS kind of business, which clearly hurting the revenue recognition, the order income is actually quite good. You have seen also last quarter being double digit I would assume for next year, high single, low double-digit growth rate to continue. So I would say we're quite happy with that business, particularly, it also has a very healthy gross margin. While we're investing into R&D, it is clearly a business also helping us in terms of profitability quite nicely.

And where are we on the SaaS transition, Roland.

Yes. Typically, I would say the contracts have been 3 years in the past. So I would say, technically, we are probably just a bit more than halfway through. I'm not sure that you feel that much from the outside because, as I said, we are now more or less again, back to the high single-digit, low double-digit environment. So yes, it could be better. But I would say, overall, compared to the market, we're okay.

And that customer mix out there, is that more clinical versus research or...

It's a fair mix. I think there's a lot of pharma companies in that. There's a lot of life science research. Of course, there's a few -- also a couple of clinical. So it's a mix. Right now, I think the companies who, I would say, are most engaged around the pharma side.

And then switching the last segment for you guys on PCR, that was slowed down in 3Q versus first half, right? Was that the -- I thought NIH was mostly a first half impact, right? So maybe just talk about first half versus second half.

Again, digital PCR is an outstanding technology. And even in that environment, us growing like last quarter, double digit, I think, is a good performance. Would we love that it would be more? Absolutely. And we have seen very solid consumable growth rates, but instruments are difficult to sell in an academic environment. Again, even if the instrument is only 30%. And yes, we are growing. But again, people are concerned, they want to see funding flow. So I probably also believe once you have an approved budget in the U.S., that might be the area where people say, you know what, I always wanted to have that machine now I finally can buy it. I'm not a big fan in general from, call it, budget flush situation or whatever because I'm not typically believe in that. Here, I would say, yes, because the technology is so unique and the demand and people want to learn about that is still high that I can see that. But now what is driving the growth is the machines we sold more or less over the last 2, 2.5 years and people are utilizing and increasing the utilization. So the consumable run rate is good. As you know, we're also adding more or less 100 panels per year. We did that over the last 2 years each year. We're going to do the same thing as well. So the portfolio for our clients get much bigger as well, which is being helpful.

U.S. academic income, and you said at 6% of revenues, right? What is it?

Academia is around 8% of total including.

Okay. And what has it done year-to-date? Has it grown? Has it declined?

On the consumer side is okay. On the instrument side, it's declining.

Okay. And when I look at like Street numbers for next year, Street, I think it's modeling mid-single organic. Is that something that you're comfortable with or...

Yes. Again, I think overall, the consensus, I think, is reasonable for next year. I think the revenue profile has around 5 percentage points. I think EPS are like $2.50 or whatever, right? So I think that is probably a reasoning starting point.

And what macro should -- like when I look at the levers, right, like you guys have done the guidance is that mid-single CER this year. Next year, maybe China has bottomed out.

We all hope so. I'm not sure it's happening. We'll see.

Possibly U.S. academic and government environment improves and you have new products right. So when you -- can you just frame the pluses and minuses when you think of '26?

I would say, in general, we are clearly -- if I could ignore the volatility around macro, by definition, we are more positive for '26 than for '25 for the things we discussed before. I'm quite positive that our 5 growth pillars are continuing to deliver from QIAstat about Sample Prep with the new launches and QuantiFERON again, will have a good one. I do believe there's opportunities, what we just said on normalization on digital PCR. And I think the overall volume might increase once people have more certainty. So I would say, yes, the one thing which, again, might lead to a situation similar to this year, you and many others thought, okay, we have given a careful guidance in Q1. The good news is we were then beating Q1, we were beating Q2. We were beating Q3. And so I can't guarantee that, that should happen every time, but I'd rather have it that way than being too ambitious and then falling short, right? So I think in a volatile environment where you are, to a certain degree, depending also on outside factors, playing a bit more cautious is not necessarily a wrong thing.

And maybe my last question on EPS.

Easier for me to answer.

Go ahead. Go ahead for '26. Street is modeling 6%...

Yes. As I said, the $250 million, I think, is a consensus. I think that's fair. We clearly have quite -- again, interest income is, of course, by definition, much lower than it was this year. So we have to offset this margin performance. Nevertheless, I would say it's very quite obvious that we have a midterm margin target out from 31% for '28. We were quite outspoken in the past that we are going to update that, meaning increase that at some point early next year, we will continue to -- we are planning to do so. If you be more specific on margin improvement for next year, we will end this year, give or take, let's say, at 29.5%. But of course, with the acquisition of Parse, we will have probably a headwind of around 100 basis points for next year. Probably currency as it is right now might change a bit still is probably another 50 points headwind. And of course, tariffs being 12 months a headwind instead of 6 months a headwind is probably another 50 points headwind. So if you add that up, you probably have around 200 basis points of margin headwind for next year. Despite all of that, what I just said, I believe -- I'm not giving official guidance today, but margins should stay flattish for next year because we have still a lot of opportunities to improve margins not only for next year, but also for the years beyond. Let me give you a couple of examples, right? One is clearly QIAstat. We're still running underutilization. Production capacity was built during COVID. We are ramping up, standard costs will come down, significant impact. Overall, the mix is positive. We are growing there faster where we have higher profitability. You know historically, Sample Prep is an important product, which has higher margin for that with all what we discussed on sample prep coming up. I do think that has a gross margin impact as well. R&D, we feel comfortable with 9% of revenues as in on output. We have a lot of opportunities around SG&A to get leverage. We have around about 40 initiatives going on from smaller footprint initiatives to put even more resources into shared service centers and so on. So I think there's a lot of things where give us good confidence that we're also able to improve margins beyond end of next year.

That's fantastic. I think with that, we're out of time. Roland, John and Daniel, thank you so much for the time this morning with us.

Thanks for having us. And again, thanks for taking the time.

Thank you.

Thank you.