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

Welcome. Good morning. Dan Brennan from TD Cowen Tools and Diagnostics team. Pleased to be joining here, kicking off the 46th Annual TD Cowen Healthcare Conference, CEO of QIAGEN, Thierry Bernard. So Thierry, thank you for being here, and welcome.

Thank you.

So listen, you've been at the helm around 6 years, Thierry.

A bit more.

A bit more than that.

Close to 7, yes.

Close to 7. I'll blame that on Tom who wrote the question. So maybe just speak through -- I've gotten to know you, I knew Peer before you. Just what are some of the ways that you've shaped QIAGEN? And what do you consider to be some of the most attractive features of the profile today?

First of all, thanks for having us. I think the most -- the main highlight of the last 7 years, I believe, is twofold. One is this is a very focused company. As a reminder, and it's not the first time I'm saying this, we are a mid-cap. And therefore, as a mid-cap, we need to make sure we invest where we can take between the #1 and the #3 position on the market. And this is what we have achieved. I mean, if you look at the performance again of 2025, our growth priorities, the so-called 5 pillars of growth, it's roughly 75% of our business, it grew at 8% to 9%. It's a phenomenal performance. So very focused. And the second main feature is the focus on increased profitability. If you look at -- we were starting already from a very solid P&L. I'm talking gross margin and operating margin. And we have strengthened that despite some events last year, for example, obviously tariffs and that we are getting closer and closer to 30% EBIT margin. This is way on track. So very focused, very profitable executing on numbers.

So maybe speak a little bit about the search for the new CEO. So just what type of candidates are being evaluated? How close are you maybe to announcing hire? Just anything along those lines? And again, are the types of people you're looking for? Is it just to continue the strategy that's in place, which seems to be working, but is it -- are you also looking for someone who's maybe going to implement more change?

The Board and I are, I think, in the final steps of the process. Obviously, profiles were significantly experienced executive, preferably with experience and knowledge in tools and diagnostic with an international background, significant experience with public markets. And we have now a very short list of final candidates, of which a #1 into those candidates. So I think that if everything continues to go well, that's something that can be announced way into Q2 and with someone new on board by the end of Q2, clearly.

So you've had some changes at the Board level, too. You've got Steve Ruschowki, Chairman in June; Mark Stevenson joined Supervisory Board. Just what changes maybe, if any, of emphasis is the Board putting on the business today?

Well, since 2020, we have continuously tried then to enhance the competencies within the Board. We brought in more than 5 new candidates, most recently, as you said, Steve Ruschowki and Mark Stevenson. So there is a significant a number of very experienced executive in health care in every dimension, science, finance, strategy, human resources, quality, you name it, even also IT and cybersecurity and digital. So we have a very strong Board, extremely cooperative supporting and challenging with management. I cannot be happier clearly. And I always insisted to the Board that I wanted ex-CEO, because this is a unique job, I would say, and having the opportunity to benefit from the input from ex-CEOs or current CEOs is a great value to me.

So maybe it's a good segue into M&A. Not lost on anyone here. There's been a bunch of media outlets reporting we're in a period where strategic players are potentially evaluating a possible acquisition of QIAGEN. I know it's hard to comment on rumors. But just kind of wondering, the first question would be more technically under German law, what are the circumstances by which the management team or the Board would need to disclose strategic interest if it was real?

Well, it would have to be material, but I'd like to highlight something very important here. The Supervisory Board and the Managing Board, we are really working to enhance value creation to our shareholders, all our shareholders. And so we are not only ready and open to engage, but we are doing this with the help of advisers working with us. I mean, in this case, we work hand to hand -- hand in hands with Moelis and with Goldman Sachs. And so I cannot be clearer on this, very open to engage. We are working on different alternatives, and it has to basically create value for our shareholders, for our stakeholders. We need to see obviously a decent deal feasibility. But we are definitely convinced that we need to review those strategic alternatives. That's number one. At the same time, as we just discussed, we continue the search for a new CEO. I think both process and can go in parallel. And at the same time, we also continue to execute on very solid numbers that we disclosed to the market, if you remember in our last Capital Market Day, which is executing on 7% growth for sales. We are on it. Going to or above 31% operating margin. We are on it. Returning $1 that -- more than $1 billion to our shareholders. We have done that. We are at $1.1 billion between share buyback and dividends. So we are executing, but I think the main message here is that we are definitely with advisers, Goldman and Moelis ready to engage and convinced that having strategic alternative reviews is good for our shareholders.

And can you speak to that a little bit because I don't think we've heard that before. So how are they -- how long have you been hired? How long have you hired them for? Was this back when the rumors first broke, whatever that was ago? Or just any more context around the timing at which you engage with these strategic advisers?

Well, it has been a constant. The difference here is that we never disclosed that we had advisers, which is step to prove how serious we are here. I don't have to disclose when we sign or when we didn't sign. We are closely working with 2 advisers and taking the stance to say that publicly is also a clear sign. So...

And I know in the past, when there was the -- I think a few years ago, we hosted you and there was potential of BioMéu was interested in the company. There was, I think, a Wall Street Journal article in that. I think back then we discussed your view on a merger versus an outright acquisition if something were to happen. Any context how you feel about that today in terms of getting the maximum value if something were to transpire for QIAGEN? Is it really an acquisition that would create the most value in your opinion? Or are you open to other forms such as maybe something more like a merger?

I think, Dan, we need to have one obsession if we are serious here is creating value for shareholders. And making sure that also the legacy of the company, what I mean basically creating value for the stakeholders, the people who have been building QIAGEN for the last 40 years is also respected. But the only criteria is, does it create shareholder value? And do we see a pathway that would be ridiculous in my view or value disruptive if we would engage with no clarity of a regulatory pathway for that combination. It's very time dilutive. It's sometimes disruptive for employees as well. So that's -- those are the criteria, yes.

And maybe just final one on this aspect, too. So if -- I mean, if it were to be -- say, for instance, the most value accretive opportunity was through a merger, that require maybe not merger, it was more of like a size equal, but it required a significant amount of equity. Like would you consider the financing of any potential acquirer such that would that be a calculus in the decision around how to create the most value?

Once again, I mean, value creation for shareholders is the main criteria. Then it's always normally simpler or it's most of the time simpler to go to a straight cash acquisition. But if you create a good combination between cash and paper and it creates value once again for our existing shareholders, that makes sense as well.

And maybe -- sorry, final one. So you have the decision maybe on a new CEO, which could be announced in the second quarter. If we see that decision, announced, are we -- should we be under the presumption that the strategic initiatives and evaluation probably isn't going to materialize at this point?

No. Absolutely. No. That's why I said, and I insisted that those are 2 parallel processes. The candidates in our short list are fully aware. And I think, once again, I mean, having the best man for the job for QIAGEN as a CEO is also creating value for our shareholders, proactively reviewing strategic alternative is also a way to create value for our shareholders.

Okay. Great. Maybe just kind of flipping around to the business. You've guided to similar organic trajectory ex discontinued businesses in 1Q and 4Q, like flattish. When we think about the guide, it does appear to be that there is a benefit -- a stronger growth in the back half of the year. I'm just wondering how you think about the layout of 2026 as you foresee it in the context of your guidance?

Yes. I think we have been explicitly describing this with numbers. I think that the trend and the sequence in '25 -- in '26, I'm sorry, will exactly be the reverse of what we have been through in '25. '25, everybody, not only QIAGEN, but especially QIAGEN started very strong. For example, we were at more than 6% growth in Q1 of '25. If you remember, 16% growth for QuantiFERON alone, for example. And then little by little, we had a sequential decrease of that growth for many reasons, uncertainties, tariffs, difficulties to have visibility on funding, especially for research and academia. If you look at '26, we guided that more than 1% for Q1. And indeed, H2 will grow faster than H1, but it's very easy to explain that. First of all, you have roughly 2 percentage points coming from new products that we are launching in 2026. I'm talking here mainly about Sample tech. I remind you that we are launching 3 new instruments. This is unprecedented, but also new panels for QIAstat, for example, new assays for QIAcuity. All this impact mostly H2. Another 2 percentage points are coming from a base effect. In H1 of last year, we still had in our portfolio activities such as NeuMoDx, for example. In H2, as a comp effect, they disappear. It's 2 percentage points once again. And then you have 2 smaller impact. One, in my view, is on QuantiFERON mainly, once again, a base impact because in Q1 of last year and Q2, we signed big deals, either in Oman or in Brazil on QuantiFERON. This accounts for basically 0.5 percentage point. And last but not least, there is the Parse acquisition impact. Parse has much more revenues in H2 than H1. We told you that it would account for roughly above $40 million revenues next year in our sales. And we also take an assumption. You can blame us for this, but the assumptions that in H2, capital expenses in laboratories is going to normalize a bit, not fully, but people will start reinvesting. Again, those 2 phenomenon, Parse plus a return to quite normal in capital expenses, it's 0.5 percentage point. So that explains really the sequence. We believe that we are on our way to execute that. The environment is not easy. I mean there are still -- there is still a kind of wait-and-see attitude as we were discussing, you and I, from labs before investing clearly. Let's hope that what is happening for the last weekend is not going to add more disruption to that, but we'll see. But we are going to execute. Once again, there is no way we do not execute on the sales, on the operating profit and on the EPS as well.

And when you talk about the environment being still kind of conservative or maybe risk averse a bit, is that just on the U.S. academic side? Is that across all research, pharma included? Just...

I think research and academia, especially are cautious when it comes to investing into capital expenses because as we discussed last year, then, the environment is better, not only in the U.S., but also, I think, in many other geographies. We have more visibility on NIH funding. There are still some details to fine-tune, but there is visibility on NIH funding. After some elections in Germany, I mean, budget situation in Germany has clarified. There are no bad signs from the U.K. I'm talking about major markets, obviously. France is a bit tricky, but they have a budget now. So I think the visibility on the environment is slightly better. But I think that especially research and academia, some labs are waiting to see a bit more. What does it mean in terms of real investment in the U.S., what does it mean in terms of non-direct versus direct funding? We will clarify that around the month of April. So that justifies that in H2, we are more optimistic. At the same time, if you think about it then, especially in Research and academia, that sluggish capital expense environment has been lasting now for 2 to 3 years. In Research and academia, they invest. They need to invest on a regular basis. And guess what? QIAGEN comes, for example, just for Sample tech with 3 new solutions. This obviously is very favorable to us in H2.

And when you say research and academia, you really specifically motion academia or research, you mean pharma as well?

No. Pharma for us, we have disclosed that for the last 3 years consistently. We see pharma being quite dynamic. You know that we have an interesting business with pharma in companion diagnostics. This goes very well. It grows very fast, especially on account of digital PCR. But pharma as a direct customers to us, our solutions, it's a good growth as well, especially in Sample tech, for example, or in digital PCR. Pharma companies were the first one to signal that they would buy the QIAsprint, one of our new launches in Sample tech, even before the system was launched.

Okay. So maybe just pivoting over to some of the newer product areas. You talked about the sample prep launches. Just -- I know there's a bunch of questions on this. We spoke about it a little bit before. Just any color as we think about what the realistic upside could be from sample prep. Obviously, the CapEx environment is a bit restrained, but just speak to kind of what you think about those.

I mean the way we see it, remember in our Capital Market Day in New York, June '24, we said CAGR for Sample tech will be 3% to 4%. Never forget that it's a significant revenue for us, but it's a highly profitable revenue. So any time you can grow positively, I mean, it's very beneficial to your P&L. And so we are perfectly executing on that. We said at that time, it will come partially from our new instrument. This year, it's fair to say that -- we expect $15 million of sales from those new launches. So it's important, obviously. But it's also showing that we are clearly the leader in Sample tech, an activity where you have long-tail customers, extremely profitable. And any time you are putting an instrument, you are generating consumables after. And those consumables are high margin as well. So we are executing. The reception from customers for not only the QIAsprint, as I said before, but QIAsymphony Connect in our major customers like Natera, Guardant Health, Exact is very good. And I saw also a very, very set of interesting questions from customers for the QIAmini as well. So this will come later in the year. But yes, we execute perfectly on what we said here. Parse will reinforce and strengthen this. Parse this year is $40 million revenues, at least -- the double -- we confirm a double-digit growth profile for this activity, at least for the coming years. And so it's, as we disclosed, slightly dilutive to our EPS this year, but this is going to be managed very quickly. It's a very good acquisition.

So maybe since you hit Parse, we just came back from AGBT and the academic market is still challenged, but hopefully bottoming out, 10x has had a little bit better numbers lately. But double-digit growth is still well above, I think, what the market is growing at right now. So the $40 million this year, you sound good on. What gives you confidence in that double-digit growth rate? Like where are you growing? Are you taking share as a unique solution?

First of all, the confidence is coming from the fact that any time we do an acquisition of that kind, we always choose a highly differentiated solution. Genoox in bioinformatics is very differentiated. QIAstat is very differentiated. Remember when we acquired QIAstat, people were saying, well, the syndromic market, there is a clear leader and at the point, QIAstat in 2025, 25% of growth. It's significant. Parse is not 10x. Parse is a much better solution, which is instrument-free, first feature. Second, the number of cells that you can process is absolutely with no comparison of what competition can do, whether it's 10x, scale or Becton Dickinson. And so we have stronger features to address customer needs than competition. We need to continue to invest in R&D to maintain that edge. Parse has built in the most recent month, a Giga Lab as well to address even higher volume from customers. I mean it's -- that's why I say it's a very good acquisition. And I don't look at what competition does not achieve. I look at what this solution can achieve on the market, which is definitely growing, which is the ability to work at the single cell level.

Okay. Okay. Maybe just moving over to digital PCR. Continues to do well in a tough environment. I think core PCR is declining, I think, is what's assumed here. Maybe just give us a little bit of color on the delta between those 2. We'll dig into digital PCR in a moment. But just on the core PCR market, just kind of what's happening? Is that just all economic and government weakness that's pressuring that?

No, Dan, I'm not sure that -- I mean, at least the answer is very straightforward. I said we are a mid-cap. And I'm pushing for the last 7 years our teams everywhere, sales, research and development, customer service to focus, focus, focus. And so we are paying much more attention to digital PCR than PCR. And if you ask me what is the strategic priority of QIAGEN, PCR is not a strategic priority. We are a PCR company. But from a product standpoint, it's digital PCR. And this is where we want to push the market, and this is where we want to convert the market. So the evolution of PCR in our portfolio versus digital PCR will continue to happen. Guess what? Because we clearly said last year, our priority in digital PCR is to focus on gene expression assays and solution. Gene expression is the core market for digital PCR. The day will prove, and we will prove it that digital PCR can be as cost efficient as PCR in that field of gene expression will convert even more of the market. But let's make no mistake, we work on focuses. Digital PCR is a focus. PCR is much less a focus for us.

So can you give a little color on like where you're winning in digital PCR types of accounts who are adopting? I know you feel you have a really differentiated portfolio, but speak a little bit to the competitive profile.

It's not that we think it's the truth. We were the first company to launch fully integrated system. It's not a drop technology. It's a plate-based technology. Look at the cost efficiency overrun by QIAGEN as customers, they will tell you the same. overrun with QIAGEN compared to competition, it's much more cost efficient. So it's not QIAGEN statement. It's -- and look at our growth. The installed base we created in less than 5 years is remarkable. We are below our objectives in '25 on capital expenses. Why? Because of the environment that we described before. But what do we say when we say we are below our objective. Last year, we still put 500 QIAcuity on the market. So yes, it was below our budget, but 500, I'm happy with that. It's difficult for me to be happy, but you see what I mean. And this will generate more consumables. Growth in consumable for digital PCR, double digit. Growth in companion diagnostic, double digit. It's good. It's good. This field, this activity, we will become #1. There is absolutely no doubt if we continue to add menu. We already have a new generation of system for digital PCR in our R&D pipeline. We'll tell you more about this in due time. We have new set of assets, especially in gene expression. We will become #1. It's -- or not -- if not, blame it on the management, clearly, that's clear. I cannot be clear out there.

Okay. So QuantiFERON, obviously, Roche has been out there for a while saying they're coming, they're coming. I think you just want them to come out because they just get it out of the way. But just speak a little bit to kind of how you anticipate when they do enter the market, kind of what kind of impact it could have in your profile?

I don't want to be facetious. They have been out there on PowerPoint. So let's also state the facts. While they were out there on PowerPoint, QIAGEN was delivering on results. Double-digit growth systematically for the last years, and we are on our way to be $600 million revenues, as we said in our Capital Market Day. In addition to that, we continue to invest. What you're going to see on QuantiFERON in 2026 is even beyond what we have communicated. We are just waiting for the right time because we want to have data. Once again, we present data, solid data, but you will see more innovations in QuantiFERON in '26 that we have disclosed so far in 2 directions: proprietary enhanced automation and AI-based results. So -- but obviously, we respect competition. And Roche, we believe, will enter the market probably in H2 in Europe. We don't know what's going to happen in the U.S. because we cannot speak on behalf of Roche, but they have stopped mentioning the U.S. market at least in the last 2 years. What I also highlight is on the few presentations we have seen on their solution, it's not QIAGEN talking. It's clearly written that the solution will not be differentiated versus QuantiFERON interferon gamma solution. So we welcome the competition. I think we are ready commercially. We are ready technologically. We continue to invest into the solution. Let's see who is going to win.

At what time in the year do you think we might get an update on some of the new features which you just mentioned?

I think around Q2. I think around Q2, that's the current plan. But again, I don't want to play with statements for the sake of communicating. This is not QIAGEN. So when we will have relevant data, you will -- but I'm trying to share the message here that we continue to invest on that product clearly. We gave you a 7% CAGR in the Capital Market Day in June '24. When we are coming from double digit, it means that in our forthcoming numbers, we are already factoring new competition.

Got it. So maybe just on QIAstat-DX, you mentioned it earlier, the success you've had since you've taken it over and the menu keeps expanding. Just when you think about the kind of go forward, I guess it's menu, menu, menu, but when you think about the go-forward growth rate, just what are some of the maybe like upside and like downside drivers to this business over the next couple of years?

That's a very fair question. I mean the syndromic market, which is the core of QIAstat continues to grow. It's high single digit in many mature countries, double digit in more, let's say, emerging countries. Let's also add to that, that the market so far is still massively U.S. and Europe and even very unbalanced. U.S. is probably still 60% of that market, Europe between 20%, 30% and the rest is the rest of the world. So we still have to do a lot outside of the U.S. The double-digit profile for QIAstat, if we continue to execute, as you said, on new panels, and I'm very excited with the complicated UTI panel that we want to have on the market, at least in Europe by the second half of 2027 because there is nobody there. So -- but -- the double-digit profile of QIAstat for the coming 3 years, I think I have no doubt that we are going to execute. Then for the market, the big question will be, is the market moving to shorter panel or long panel? QIAGEN plays massively on long panel, 20-plus pathogens. It's inpatients that we are targeting, not outpatient. We are not targeting point of care. We are targeting hospital settings. We need to defend that market because there is a value there. But after 3, 4 years, we need to see where the market obviously will go shorter panels or longer panels, clearly..

Okay. So maybe jumping over to QDI for a moment. I know it's a smaller percentage of the revenues, but there's a lot of noise in the marketplace, obviously, from AI and the risk and disintermediation and software. How do you feel about your QDI portfolio from that perspective?

I mean QIAGEN is dealing with AI for the last 20 years. I mean, AI has not become fashionable at QIAGEN because everybody is talking about AI. From the very start, when we decided to invest in bioinformatics, more than 20 years ago, we took a very, very important stance. The power of bioinformatics will come from the combination of manually curated data boosted with LLM. And this is exactly what we have been doing. We have created a significant knowledge base coming from manually curated data, and we are boosting this with LLM solutions for the last -- we just need to keep doing that, especially from our research and academia portfolio, this is where we are having more difficulties for the last 2 years. Clinical portfolio in bioinformatics grows double digit. Research and academia portfolio grow low single digit because of the environment, but also because we need to reinvest into AI for this portfolio. This is why we told you that in the coming 3 years, there will be more than 14 AI-based developments just for bioinformatics. But what is clear is that it's not new for us. It's just continue to execute on what we have been doing for the last 20 years.

I think we're out of time. But Thierry, do you want to wrap it up with what message would you like to leave investors with?

Well, first of all, thanks for the trust. I continue to believe that this company is solid, much more solid than 7 years ago, very focusing, increasing profitability regardless of the external environment and very open to strategic alternatives that we continue to try to create value for shareholders.

Terrific. Well, thanks, Thierry, for being with us today.

Very good. Thank you so much, Dan. Thanks, guys.