Qiagen N.V. ($QGEN)

Ladies and gentlemen, thank you for standing by. I am Katie, your call operator. Welcome, and thank you for joining QIAGEN's Preliminary Q1, 2026 Earnings Conference Call Webcast. [Operator Instructions] Please be advised that this call is being recorded at QIAGEN's request and will be made available on their Internet site. [Operator Instructions] At this time, I'd like to introduce your host, Daniel Wendorff, Vice President, Head of Investor Relations at QIAGEN. Please go ahead.

Thank you, Katie, and welcome to our call on our preliminary results for the first quarter of 2026. In light of the update to our 2026 outlook, the pre-announcement was issued in line with [ German ] disclosure requirements yesterday evening. We are planning to publish full Q1, 2026 results on May 6, 2026. We appreciate your time and interest in QIAGEN. Joining the call today are Thierry Bernard, our Chief Executive Officer; and Roland Sackers, our Chief Financial Officer. Also joining us is Dr. Domenica Matorana from our Investor Relations team. As always, today's call is being webcast live and will be archived in the Investor Relations section of our website at www.quiagen.com, where you can find the press release and presentation accompanying this call. Please also note that this call will include forward-looking statements. Actual results may differ materially from those projected due to a number of factors outlined in our most recent Form 20-F, and other filings with the U.S. Securities and Exchange Commission. We will also refer to certain financial measures not prepared in accordance with U.S. generally accepted accounting principles, or GAAP, that provide additional insights into our performance. Reconciliations to the most directly comparable GAAP figures are in the release and presentation. All references to earnings per share refer to adjusted diluted EPS. With that, let me hand the call over to Thierry.

Thanks a lot, Daniel, and good morning, good afternoon or good evening, depending on when you are in the world. Thank you for joining us, and thank you also for your interest in QIAGEN. As you saw in our announcement for our preliminary results for the first quarter of 2026, we delivered strong profitability as adjusted diluted EPS achieved the outlook despite mixed sales results. Sales were below our target due mainly to significantly lower QuantiFERON immigration testing demand and continued caution among U.S. life sciences customers. The important point, however, is that 4 of the 5 pillars achieved or exceeded our expectation, and we do continue to believe in the long-term opportunities for QuantiFERON. While we are taking a prudent approach to the updated outlook, we see tangible drivers for stronger growth trends in the second half of the year. Let me now highlight some key messages. First, we delivered adjusted EPS of $0.54 at constant exchange rates, in line with our outlook despite mixed sales trends and a tougher macro environment. Net sales were $492 million, up 2% on a reported basis, but down 1% at CER, and below our outlook for at least 1% growth CER. This reflects a mixed performance with solid momentum across many areas of the portfolio, offset by the weaker-than-expected QuantiFERON sales. Despite the lower sales, disciplined execution supported earnings and enabled us to deliver on our adjusted EPS outlook. Second, our growth pillars delivered a solid performance with 4% increase of sales CER. Sample Technologies grew 9% at CER, and also rose 3% CER excluding the Parse acquisition. QIAcuity delivered double-digit CER sales growth on gains in both consumables and instruments. Our bioinformatics business, QIAGEN Digital Insights, delivered solid single-digit CER sales growth, led by growth in clinical applications. And [ QIAstat Diagnostics ] sales declined 1% CER, facing a tough comparison to a stronger prior year quarter. At the same time, for QIAstat, consumables were up on double-digit growth for GI and meningitis panels, where instrument placement continued at a growth at a good pace. As I mentioned at the start, QuantiFERON sales declined and those were down 5% CER. This was mainly due to significantly lower immigration testing demand in the U.S. and in the Middle East. This impact is exclusively isolated to immigration-related volumes. We did not see changes in pricing, competition on our underlying demand in the key patient testing markets. We continue indeed to see stable ordering patterns and solid growth in the remaining 90% of the QuantiFERON business. As we have said before, the underlying market for latent TB testing is growing at about 4% to 5% annually, and we now see the U.S. market growing about 1 percentage point lower at this time due to the immigration situation. Overall, we expect sequential improvement over the course of the year for QuantiFERON testing. Third key message. We maintained a high level of profitability in the first quarter with our disciplined approach to managing the business and making value-creating investment. The adjusted operating income margin is expected to be at about 27.4%. This reflects continued efficiency gains while absorbing headwinds from tariff and currency, as well as the impact from the Parse acquisitions. Fourth, we have updated our outlook for 2026 to reflect those developments and a more cautious macro environment. Net sales 2026 are now expected to grow about 1% to 2% CER, with adjusted diluted EPS expected to be at least at $2.43 CER again. The updated outlook reflects lower expectation for QuantiFERON, continued caution among the U.S. Life Sciences customers, volatile OEM customer ordering trends and ongoing geopolitical uncertainty for 2026. At the same time, we see very tangible reasons for faster sales growth of about 4% CER in the second half of 2026. This includes the end of headwinds from the discontinuation of NeuMoDx and [indiscernible], benefits from new product launches, a sequential improvement in QuantiFERON and better-than-expected contribution from Parse, and last, a modest improvement in Life Sciences demand. With that, I'll hand it over to Roland for more details on the financials.

Thank you, Thierry, and good morning, good afternoon. Let me now take you through the financial details behind this announcement and make us through our updated outlook. As Thierry said, Q1 was a mixed quarter. We hit our outlook for adjusted EPS through disciplined execution, while sales were slightly below target. For Q1, the preliminary net sales of USD 492 million were up 2% on a reported basis and down 1% on constant exchange rates. The positive impact of about 3 percentage points on sales at actual rates was in line with our planning. Same was the case for adjusted diluted EPS of $0.54 on a reported basis, and $0.54 at constant exchange rates, in line with our outlook. Let me now review the sales results. Sample Technologies delivered USD 170 million of sales, up 9% CER compared to the first quarter of '25. Excluding the Parse acquisition, which is performing very well, the sales rose 3% CER. Growth was supported by demand for automated consumables and instrument placements, as we saw good trends worldwide. In Diagnostic Solutions, sales were USD 185 million and down 4% CER. The main driver here was a 5% CER decline in QuantiFERON sales, which overshadowed solid trends in many patient testing groups. [indiscernible] sales were down 1% CER, which was expected given the tough prior year comparison to a period with a very strong respiratory season. Diagnostics Solutions also included a year-over-year headwind as expected from the mid-'25 discontinuation of the NeuMoDx system. PCR nucleic acid sales declined 13% CER to USD 69 million. With this product group, QIAcuity delivered double-digit CER sales growth. However, we also saw significantly lower sales in other areas, including PCR consumables and the OEM business as we felt the impact of life science funding constraints. And in the Genomics NGS product group, sales were up 4% CER to USD 57 million. This was supported by QIAGEN Digital Insights, which grew at a solid single-digit CER pace, driven by growth in clinical bioinformatics. Let me now turn to profitability. We are expecting adjusted operating income margin of about 27.4% in the first quarter of '26, supported by ongoing efficiency gains as we absorb the impact of tariffs and currency movements while also investing into the future of the [indiscernible] single cell analysis business. With that, let me hand back to the call to Thierry.

Thanks a lot, Roland. Let us step back a bit for the quarterly numbers and share a few reasons why at QIAGEN, we continue to feel confident about the portfolio and the path to stronger growth. The message here is that our pillars continue to move ahead and only the 2026 sales target for QuantiFERON has been adjusted. As we mentioned earlier, the issue with QuantiFERON is isolated to immigration demand. Importantly, this does not change our view of the long-term opportunity. Trends in other patient testing groups remain solid, and the underlying market for latent TB testing continues to grow. As you have probably seen, new data published around World Tuberculosis Bay further reinforce the role of QuantiFERON in detecting latent TB infection, in particularly in high-risk and immunocompromised population. We are also advancing scalable laboratory workflows for QuantiFERON. A new generation of chemistry for QuantiFERON detection on [indiscernible] system with our partner, DiaSorin is now being rolled out in the U.S., in addition to the earlier launch in Europe and other areas of the world. We are also seeing targeted screening initiatives ramp up in various patient groups, diabetes or dialysis, particularly as well those being prescribed biologic therapies and immunocompromised individuals. Looking ahead, we will host a virtual QuantiFERON spotlight session on May 7, where we will provide you with more details on our strategic priorities, workflow automation plan and the additional enhancement that underscore the long-term opportunity of this product. Turning to sample technology. This remains one of the clearest example of the portfolio moving ahead as forecasted. We continue to advance our automation strategy with our 3 new system launches for 2026 moving ahead and receiving positive customer feedback. As an example, [indiscernible] Connect was launched in February, and we are very encouraged by the first wave of orders, with the first sales contribution expected in the second quarter. We also have the first orders for QIAsymphony Connect after the launch in late 2025. Full IVD commercialization remains on track to begin in the middle of this year. QIAmini is also on track for launch later in 2026. We continue to see good traction in strategic high-value areas such as liquid biopsy, where QIAGEN system are being integrated into the workflows of major players. The Parse business is also performing better than expected, and we are on track to exceed the '26 sales target of about $40 million. As you remember, Parse gives us an entry into single cell analysis, a highly attractive area where researchers need scalable workflows and high-quality data generation. This was also reflected at the recent AACR Cancer Research meetings where we showcased application across our oncology workflow. This includes our expanding capabilities in sample preparation, single cell analysis and digital insights. For QIAcuity, we continue to see strong momentum in digital PCR. Our focus, as you know, this year includes expanding applications such as gene expression while continuing to develop a portfolio of companion diagnostics with our pharma partners. Turning to QIAstat diagnostic. We continue to broaden the panel menu and strengthen the platform for syndromic testing while also advancing our pharma partnership in companion diagnostic. In the first quarter, for example, we received U.S. clearance for the GI panels on the QIAstat Rise, which is, as you remember, the high throughput version of this modular system. We now have the respiratory and GI panels clear for the Rise version. QIAstat is also being expanded into bloodstream infection testing. In Europe, we launched the first of the new blood culture panels in January. We also submitted the first panel to the FDA, and we are awaiting a decision. This marks a very important expansion beyond respiratory, GI and meningitis to support better, faster clinical decision support. Finally, QIAGEN Digital Insights, our bioinformatics solution, continues to strengthen our Sample to Insight strategy with its status as a leader in bioinformatics. Within [ QDI ], clinical bioinformatics remains the key growth area, double digit in this first quarter, as we are building capabilities through the integration of the Franklin platform from the recent acquisition of [indiscernible]. So across those areas, the message is very consistent. We are addressing the QuantiFERON immigration testing demand issue, while the rest of the portfolio moves ahead as planned. And now back to Roland to discuss our outlook.

Thank you, Thierry. Let me now provide some additional perspectives on our outlook for '26 and for the second quarter. As we have said, we are taking a prudent approach to reflect the development in the first quarter and the current macro environment while remaining focused on delivering solid profitable growth. For the full year '26, we now expect net sales growth of about 1% to 2% at constant exchange rates, compared with our previous outlook for at least 5% CER growth. Adjusted diluted earnings per share are now expected to be at least $2.43 at CER, compared with our previous outlook for at least $2.50 at CER. The updated outlook reflects two main factors. First, QuantiFERON sales in '26 are now expected to be steady at a CER basis at around USD 500 million. This compares with our previous target for about 6% CER growth, or about USD 535 million. We have reduced these expectations in light of the integration testing demand trends. This customer group represents about 10% of total QuantiFERON sales, or about USD 50 million. We reduced this by about USD 35 million for '26, and we have not seen changes in demand for the remaining USD 15 million, which is largely European immigration testing. This impact from QuantiFERON reflects about 1.5 percentage points of headwinds to full year '26 growth compared to our prior year outlook. Second, we have taken a more cautious view on mainly U.S. life science customer spending for a total of about USD 40 million, or about 2 percentage points of headwinds. This involves 3 components. About $15 million to $20 million of headwind comes from research customers in the U.S. Another $20 million comes from volatility in customer ordering in our OEM business, which also includes government agencies in the U.S. And lastly, a few million dollars of pressure comes from the Middle East conflict and the broader geopolitical uncertainty that has developed since the start of the year. Turning to the second quarter. Net sales are expected to decline approximately 2 percentage points [indiscernible] compared to $534 million in Q2 '25. These sales trends take into consideration that QuantiFERON sales continue at a largely unchanged level from the second quarter of '25. While we believe in the full year target for QIAstat-Dx sales, we have purposely taken a more conservative view on these product sales for the second quarter in light of the strong year ago comparison. The pillars as a group are expected to grow about 4% to 5% CER in the second quarter, compared to the 4% CER growth in the first quarter of the year. And as a reminder, the second quarter will be the last period with headwinds from the discontinuation of NeuMoDx and [indiscernible]. For adjusted diluted EPS, these are expected to be at least $0.60 at CER in the second quarter compared to $0.60 in the prior year period. Operational efficiency and disciplined cost control remain a key priority for QIAGEN and continue to support profitability despite lower expected sales. At the same time, earnings in Q2 will absorb a dilutive impact of around $0.01 from the Parse acquisition. Let me now address 4 drivers for faster sales growth in the second half of about 4% CER. First, about 2 percentage points of incremental growth come from the roll-off of headwinds from the discontinuation of NeuMoDx and [indiscernible] and unchanged from our prior expectations. Second, about 2 percentage points are expected to come from new launches, including the sample prep instruments and additional offerings for QIAstat-Dx and QIAcuity. This is also unchanged from prior expectations. Third, about 1 percentage point is expected to come from improving year-over-year growth from QuantiFERON as we anticipate growth in the second half of '26 compared with the first half. Finally, about 0.5 percentage point of improvement is expected from a combination of the past acquisition transforming better than our target for about $40 million of sales in '26, and modestly better trends in U.S. life science funding as the year progresses. Taken together, these factors explain the expected bridge from sales declining about 1% to 2% CER in the first half to a growth rate of about 4% CER in the second half to reach our target for about 1% to 2% CER growth in the year overall. And looking ahead, in terms of midterm growth, we see very positive trends for QIAGEN as we work through a period of [ rebasing ] QuantiFERON demand. The pillars of the group are expected to grow about 7% for '26, and we see this continuing at a healthy pace in the future and supported by QuantiFERON returning to a more normalized growth rate in '27. With a series of new product launches on the way, in particular, the new instruments and sample technologies, this provides even more confidence in delivering faster sales growth. The pillars are also increasing as a share of total sales. They are now at about 75% of total sales and rising, and we are taking actions to stabilize the base business. Let me also briefly address currency trends. For the full year, we currently expect a tailwind of about 1 percentage point on sales, and a neutral impact on adjusted EPS. This is unchanged from our previous assumption. For Q2, we expect a tailwind of about 1 percentage point on sales and a neutral impact on adjusted EPS. Overall, we have taken a prudent approach in updating our outlook, reflecting current market conditions and known headwinds. At the same time, we remain focused on disciplined execution, protecting profitability and returning to growth in the second half of '26. Last but not least, we also confirm our adjusted EBIT target of 29.5% CER for the full year. I would like now to hand back to Thierry.

Thank you, Roland. And before we go to the Q&A session, let me go over a brief summary of this call today. Q1 was a mixed start to the year, but we delivered adjusted EPS in line with our outlook through disciplined execution. The sales shortfall was driven mainly by the QuantiFERON immigration testing demand reset, and we are addressing this directly and proactively. We continue to view this as a rebasing of demand in this testing group, but absolutely not a change in the long-term opportunity for latent TB testing. Trends in all the patient testing groups remain solid, and we expect sequential improvement during 2026. The rest of the portfolio continues to execute on target. Sample Technologies, QIAcuity and QIAGEN Digital Insights delivered solid growth in this first quarter of 2026. New product launches and portfolio additions support our confidence in stronger growth trends in the second half. We have updated our 2026 outlook to reflect what we are seeing in QuantiFERON immigration testing trends, as well as ongoing caution among U.S. Life Sciences customers and the broader macro environment. But at the same time, we see tangible reasons for faster sales growth in the second half of the year. So in closing, we are updating expectations prudently, and we are staying really focused on delivering solid profitable growth. With that, I'd now like to hand back to the operator for the Q&A session. Thanks a lot.

[Operator Instructions] The first question comes from Michael Ryskin with Bank of America.

Great. I appreciate the color you provided on the slide deck and on the call. I want to dive into a little bit more of the difference between what you saw in the first quarter versus how you're updating the guide. If we look at your reported results for the quarter, you missed consensus by about $9 million, $10 million. And if we look at QuantiFERON at down 5% CER, it seems like the majority of the miss was specific to QuantiFERON, maybe $8 million of the $10 million was QuantiFERON. But then for the full year guide update, $35 million is QuantiFERON, but $40 million is that U.S. Life Sciences. So I want to really focus on that. Just didn't seem like it was that much worse in the quarter itself. So is it something that deteriorated in March later in the quarter? Is it order trends you're seeing? Just you commented $15 million, $20 million from research customers, $20 million OEM. Just didn't really seem like that played out in the quarter itself. So why is a steep revision to the full year guide there if you didn't see it in 1Q?

So thanks a lot, Michael. And I think that you are nailing it indeed for the first quarter. Out of the $10 million shortfall, QuantiFERON indeed represent at least $8 million of that. Now for the full year, we take a realistic but also cautious view based on many factors. We believe indeed, as you said, that the total impact, rebased on an annual basis for QuantiFERON immigration testing is around $35 million. In addition to that, we take a cautious approach to the current U.S. Life Sciences customer environment and kind of wait-and-see attitude that we have seen in the quarter 1. This represents roughly $20 million of cautious expectations. And then we also take -- and this is not new, if you remember our previous call, a prudent approach for our OEM activities. By definition, OEM activities are more volatile because they are based on deliveries of big bulks of product on time. And so year-on-year, you have that volatility. And for the year 2026, we believe it's another impact of around $15 million to $20 million. So overall, between QuantiFERON immigration testing and those 2 events, cautious Life Science kind of wait-and-see attitude, especially in the U.S. and OEM, you get the difference to the re-forecast for the year.

Okay. All right. I appreciate that. And then for my quick follow-up, on QuantiFERON itself, you kind of alluded a couple of times on the call to this is a rebasing year, and you expect it to improve in the second half and you expect it to improve going forward. Just sort of what gives you confidence in that? You saw QuantiFERON already slow a little bit in 4Q '25 to about 5% CER. Why do we think QuantiFERON is going to reaccelerate? Why isn't this a low to mid-single-digit grower going forward, given the robust growth you've had over many years and the fact that some of these immigration pressures are very likely to persist?

A fair question. You can imagine, Michael, that we have done a lot of analysis of the most -- in the most recent weeks. And this is why we came to the conclusion that it's an immigration isolated event. And we don't imagine and we don't expect this event to happen again with the same magnitude in 2027, for example. The reason is very clear. Once you have reset the basis because you have lost a market of immigration that you are not going to test anymore, the impact on the following year, obviously, is not happening with the same magnitude, first. Second, because when we look at other applications for QuantiFERON, immunocompromised patients, diabetes patients, dialysis patients, for example, we still see very good growth. And so to give you a precise numbers internally, but also with external experts, we have analyzed again our growth expectation for this market. And the conclusion is the following. In most of the world, the testing demand for [ Latent TB ] continues to grow at around 5%. In the U.S., you indeed lose that immigration testing base, but the rest of the market continues to grow at around 4%. So it's still a healthy market to be. The second reason why we are confident, and this is why I confirm our invitation for the spotlight session on May 7, is that we continue to invest on this range of products. We have a new, more efficient workflow together with DiaSorin is that we call -- is what we call the [indiscernible]. And on May 7, we are going to show you enhanced automation investment and also progresses into patient scoring to show that we have still a potential to target probably around 5% growth for this range of products.

We will take our next question from Tycho Peterson with Jefferies.

A couple here. So you guided 6% to 7% growth in QuantiFERON in February. That was after the immigration policies were in place. So I'm curious, were you expecting a reversal of the policies? Or did something get worse in the quarter? It'd just be helpful to hear about the guidance philosophy because we knew about the immigration policies then. Second, to Mike's question on Life Sciences, sluggish academic spending is not a new dynamic. NIH grants were flat in January, down 9% in February, actually got better in March. So did something deteriorate in your order book? Is the environment getting worse relative to what you were thinking before? Or were you just previously too optimistic on the recovery? And then lastly, just get us comfortable with the margin ramp. You're maintaining full year on margins. Get us comfortable that you can actually hit 29.5% for the year.

Thanks, Tycho. Those are good questions. Let me address first the question on QuantiFERON. Tycho, as usual, in full transparency, this is probably where I blame myself the most. And what do I mean by this? As you can imagine, Tycho, we follow sales in our customer base on a daily basis. Sales of QuantiFERON to address the migrant testing market are done in different kind of labs, what we call our key accounts, [indiscernible], [ Quest ] or normal labs in the U.S. We didn't see any inflection in growth until December, which means that probably our customers didn't see that immigration impact either. And if you remember when we reported the Q4 result, we highlighted that softer December month. Should we have seen earlier that, that trend on immigration, softer demand would amplify in January and February, that remains a good question, and that remains a question where I blame myself. But nothing until early January was showing us that this would amplify. Second, Tycho, if you remember, this current administration in January announced an expansion of forbidden countries, up to 49 countries, if I remember now. This created a second impact. So yes, I blame myself because I wish I would have been more proactive with the first signals that we saw end of December or early January. And this is why I said that we are taking very proactive actions. And this is why we decided to reset the market potential for QuantiFERON because we know now that it's a solid trend. Second, Life Science and [ Academia ]. We are not more impacted than most of our competitors. And indeed, Tycho, I would agree with you, and I said that for many quarters now, that we have more visibility now in Q1 on funding, especially in the U.S. compared, for example, 6 months ago. This is a fact. At the same time, it is also a fact that money is not flowing back as quickly as expected, and this is not just impacting QIAGEN. When I look at our competitors' results in Life Science, for example, you clearly see that it's negative to flattish. So it's nothing new. But what is new is that everybody, I believe, was expecting the money to flow back quicker. And this is why I mentioned that kind of wait-and-see attitude. I don't think in addition to that, that the increased geopolitical tensions in the Middle East did help positively that kind of wait and see attitude. So basically, we are a bit more cautious. We still expect a rebound. It's 0.5 point of growth in the second half of 2026, but it's taking a bit more time. And now on the margin forecast, I'm going to ask Roland to chime in here.

Tycho, fair question on margin development. First and foremost, you will see already that within the second quarter, we will deliver an adjusted EBIT margin north of 29%. So we go very quickly into the direction of also our full year target. And then in the second half, we will even above that. Again, if you compare it also to last year, you see some developments here. And I think there's a couple of drivers to that. You know from prior discussions we had, we clearly continue with our roundabout 40 efficiency projects. And therefore, I would say they were clearly supposed to help us to overachieve our margins. Right now, I would say at least for this year at least will help us to achieve the 29.5% gross margin in addition is going to be helpful. You have seen that also in Q1 [indiscernible] was being very helpful for us in general, and we do believe that trend continues in particular with some of the new launches, there's even an acceleration dollar-wise expected. I think it's no surprise that sample preparation is one of our higher -- or probably highest gross margin product. So I think there's also clearly a factor coming from the gross margin side in addition to operational leverage. Big step, just to finish it up, is mid of this year, actually another significant step in terms of launching our next wave of our implementation of the ERP system, which again clearly takes a lot of incremental cost out of the system. So overall, I would say the 29.5% is well on its way. And again, you will see that number already quite close in the second quarter.

We'll take our next question from Casey Woodring with JPMorgan.

So you left the 5 pillars unchanged outside of QuantiFERON for the year, meaning that the Life Science capital spending headwind is seemingly not hitting [ sample prep ] or QIAcuity. So can you maybe just elaborate on where exactly in the portfolio you're taking a more cautious stance here outside of the OEM business that you talked a little bit about, but purely on the research side? And then I guess what gives you confidence that the Life Science capital exposure that you do have in [ sample prep ] and QIAcuity won't be impacted this year from the weaker market that you're adjusting for elsewhere? And then just as a quick follow-up, I would also be curious to hear your confidence level in the new product launches. You maintained the guide of 200 basis points of contribution for the year from those despite calling out a weaker capital market. So just maybe walk through the order book for those visibility into that contribution guide for the year.

Thanks, Casey. And I'm going to start with the second half of your question, which is the confidence in our new product launches. The confidence is based, Casey, on the buildup of the pipeline as we see it. If you remember, for QIAsprint, for example, we told you that we were receiving purchase orders even before the system was officially launched. Yes, we launched it earlier in the year. And when I see the building up of the pipeline, it's above our expectation. That's why we are feeling good about it. We continue to acknowledge the softer, or the less or -- less quick stabilization of the capital expense trend in labs, especially in the U.S. But when you -- we continue to believe as well that if you bring a differentiated solution, value solution, you have opportunities. And it's the same for QIAsymphony Connect. Our relation with our biggest customers, be them Natera, Guardant Health, Neo for QIAsymphony Connects are very strong. So [ confident ] as well. QIAmini, it's a bit too early to say, but the time line for QIAmini is fully on target, and we know that it's going to answer a need for automation in sample tech. And it's not going to be an expensive instrument. Second, QIAstat, the new panel on blood culture and bloodstream infection. It's a need in many European countries. As you know, it's not going to impact the sales for the U.S. because it's going to probably be approved around November or December, but it's going to be mainly in Europe. So the combination of new solution improvement because indeed there is more visibility on funding. That doesn't mean that it flows back, as I just said before, but there is more visibility allows us to confirm the number that we gave you earlier in the quarter. I think those answer both of your dimension. We continue to acknowledge that money is not circling back as quickly as we expect, but we believe that this is going to sequentially improve.

We'll take our next question from Jack Meehan with Nephron Research.

I wanted to spend a little bit more time on QuantiFERON. Could you remind me the breakdown across different test categories and the size of the immigration testing pool? I didn't realize there was so much exposure to specific regions. Maybe just talk about the magnitude of the weakness you're seeing there? And I'll squeeze in one follow-up at the same time, which is you mentioned you don't think any of the weakness is competitive related. Just any more color you can share on this topic in terms of your latest thoughts.

I do apologize, Jack, because the second half of the question, there was a lot of background noise and your voice was extremely muffled. And so I couldn't get the second part of the question. Could you repeat the second part, please? Jack?

Sure. Can you hear me okay now?

Yes. The first part of the question, I could get it. I will answer it. But the second part of your question, I didn't get it. I'm sorry.

Yes. No worries. Sorry about that. It was just -- you mentioned you didn't think any of the QuantiFERON issues were competitive related? I was curious what your latest thoughts were on that topic.

Okay. Two good questions again. I mean I'm a bit surprised because I really believe, Jack, that in the past, we segregated the different components of the QuantiFERON applications, trying to make a balance between normal testing, immunocompromised patients and new buckets of growth, such as, for example, diabetes patients and so on. So our best estimation based on obviously actual numbers is showing that around 10% worldwide of our QuantiFERON testing is based on immigration testing. And it's not just in the U.S.. It's in the U.S., it's in Europe, it's Middle East. Look, remember, if you have in mind the contract that we won in Oman and QuantiFERON where the state of Oman gave QuantiFERON the testing, it was the testing of all their immigrants. And so with the current policy in the U.S., with the fact that the geopolitical situation in the Middle East is not favoring movement of people, you have that impact. We believe that -- the Middle East situation is a bit more [indiscernible] short term, [indiscernible] In the U.S., we believe this is going to be a remaining and a recurring number. And this is why we preferred, and I think it's a transparent decision, we prefer to reset the base. It goes across legal and illegal immigrants. In one-to-one, I can give you more details if you want, but that's the explanation. For the competitive pressure, look, we are like you. First of all, we never been in the business of bad mouthing our competitors. We are used to competition in QuantiFERON. We have many on the market. The recent publication I saw recently from potentially coming competition is just showing that it's an equivalent to our third-generation QuantiFERON. We are ahead of that already as far as we are concerned. So I'm not being it. I said we are prepared.

We'll take our next question from Aisyah Noor with Morgan Stanley.

My first one is on [ Sample Tech ]. Could you unpack the 3% organic growth a little bit? So instruments versus consumables, U.S. versus Europe? And could this accelerate further to a mid-single-digit type of organic growth in the second half? And then my follow-up, which I'll also ask in this question is on the strategic review, given it's top of mind for investors at the moment. If you could give us some color on how that's going. And based on the headwinds you're seeing in the U.S. market right now, whether it's immigration or life science weakness or flu, does this change the direction of your strategic review and how you're thinking about the future of this business, and how soon we could be to an outcome of this review?

Thank you so much. On [ Sample Tech ], I mean, this 3% organic is confirming the strategic decision that we took some years ago is moving as quickly as possible, manual customers to automated. So it is supported by all the upgrade in automations that we have done in the past. If you remember, EZ1 to EZ2, QIAcube to QIAcube Connect, for example, this is what is in our numbers in Q1. Why are we confident in Q2, Q3, Q4 is that as we have said this morning, you still do not see the impact on the new automation. The QIAsprint, the QIAsymphony Connect and the QIAmini in the Q1. This is going to come starting Q2, Q3 and Q3 and Q4. Can we push it to [ 5 ]? That's a good question. I rather to say step by step, we took a commitment to you in our Capital Market Day in New York 2 years ago to bring [ Sample tech ] back to 3%. We are there. If we can beat that, we will, obviously. And I think in this regard, the acquisition of Parse is a very smart acquisition. Second, the strategic reviews, they are not impacted by our environment. I think we have always said that management and Board together are always open to work on options that could create more value for our shareholders, and that remains the mindset.

We'll take our next question from Doug Schenkel with Wolfe Research.

Two topics. The first is a follow-up to the last question. Thierry, any update on the CEO process? And any -- obviously, if there's something material, we'd know it at this point, but I'm mostly just curious on how that's progressing and what the time lines are? So that's the first one. Second is on Life Science spending. Could you give us a little bit more detail on which segments, really which product categories is what I'm trying to get at, were the ones where you saw a notable weakening in demand? So I'm trying to get at -- obviously, there's the issue on QuantiFERON, but putting that aside, within Life Sciences, what product categories weakened the most over the course of the quarter? And was that weakness largely U.S. academic and government? Or were there other dynamics that were surprising in areas like mid-cap biotech, pharma discovery, any other areas?

Thank you, Doug. So very simply for the first question, this is probably one of the most important decision of the Board and the process of the CEO succession is still ongoing. We expect this to be [indiscernible] in H2, but it's going very well, and we are paying extreme attention, obviously, to this process. And as you know, I will be serving the company as long as needed, but H2 is our time line. For the Life Science, I think first of all, to the different part of your question, we see softness mainly in pure research and academia, which is confirming what I said before. Yes, there is more visibility on funding, but money is not flowing back as quickly as expected. Where do we expect and we see the main weaknesses? It's in traditional, what I would call a bit commoditized PCR, and other components, for example, enzymes or oligos. Our sales, for example, to some major U.S. institutions like the CDC, or the NIH, they have decreased in Q1 around enzymes and oligos, for example. So components and traditional PCR. And third, we confirm that it's mainly [indiscernible] academia, [indiscernible] research. We are satisfied with our pharma business, especially on the companion diagnostics. This is going very well, and we do not see specific increased weaknesses in the biotech environment.

We'll take our next question from Odysseas Manesiotis with BNP Paribas.

On QuantiFERON, I wanted to ask out of the Roche launch, there's a few claims that have been made on our industry conference that there's big automation improvements here. I wanted to get a sense of how much of your QuantiFERON sales are generated from your fully automated workflows using Tecan and [ Hamilton ]? And secondly, on your margin, considering you maintained your target for the full year despite the lower sales growth. Roland, you did touch on some [indiscernible] programs doing better than expected. But is there any mix effect involved as well that we need to know regarding QuantiFERON or the OEM sales?

Very good. I will -- since you asked Roland, I'm going to ask Roland to take the efficiency point, and then I'll come back on the QuantiFERON.

And I'm happy to go first. Producers, I do think, again, as I said, there's a very good level here and confident on the margin development. I don't think there's, at least from our perspective, any reasons that we are not able to achieve that. And actually, some of the drivers are exactly the ones you're referring to. Mix will be helpful for us because, as I said before, sample prep is clearly a significant opportunity for us. It is clearly a high-margin product for us and some of the new launches will also clearly generate an increase on the consumable side because, again, just think about [indiscernible] being a high throughput machine, that means by definition, the more consumables going into this kind of a machine than to any other kind of instrument. So therefore, also not only the instrumentation part, but particularly also the consumable revenue stream should increase. Therefore, I think, again, a good driver. Second, some of the product areas, which right now are not developing as planned, are clearly coming with a lower margin contribution. I do think that is clearly in brackets somewhat helpful relatively as well. So I think that is a component. I do think, nevertheless, the single largest component is actually the activities we started now it's more or less 18 months ago with the efficiency program. Again, I talked already about what we're doing on the ERP implementation. We still continue our activities around business shared service center. So we are moving here from 15% to 20% over time of employees being in business shared service center. We're talking about significant AI implementation programs within QIAGEN, not only to the customer side on the QEI side, but also the internal processes for customer services in the finance area, again, in coding, right? We have significant opportunities around software development internally. So there's a lot of areas where we see improvements coming up, and they come faster than most people believe right now. Again, as I said, AI is clearly changing the world to a certain degree. Clearly also in our environment, and we are riding that as well.

And to your first question, look, I would take it like this because I cannot speak on behalf of competition. What we have seen are slides that are showing a product which is by no means differentiated to the QuantiFERON. It has even less features than the current QuantiFERON. But from an automation standpoint, what I'm going to say is that there is at this moment, only one full workflow, and one fully flexible workflow on the market. And this is what is provided by QIAGEN. When I say full is that when you start with a Tecan, or Hamilton, then the QuantiFERON and DiaSorin in the back end. Or you can perfectly pick and choose and say, I'm only interested in the frontload automation, Tecan or Hamilton, or I'm only interested in the back-end automation with DiaSorin. So we have a mix of situation. What we want to show you on [indiscernible] is that beyond this, we want to even enhance automation further, make it even smoother, more integrated and leveraging the full power of what we call the [indiscernible] from DiaSorin. And we want also to improve the product from a medical and patient scoring standpoint. So stay tuned, but I can guarantee you that you will see that once again, we are taking a step ahead on what we are going to present on [indiscernible].

We'll take our next question from Harry Gillis with Berenberg.

Just following up on the previous questions relating to the step-up in your margin through the rest of the year. I was just wondering if you could maybe discuss whether the Middle East conflict is having any impact on your raw material, freight or energy costs? And what's your exposure there should the conflict persist for maybe for a significant part of the year? And then just a second very quick one. I noticed your restructuring adjustments increased from $25 million to $45 million, what you guide to for the full year. Could you touch on what that incremental $20 million is and where in the business you're taking some measures there?

Yes. I would say more or less the Middle East conflict -- the good news is, of course, it doesn't affect us directly in terms of production, whatever, again, thanks to the overall COVID environment. At that point, we had to change more or less our whole energy infrastructure a lot. So we are totally flexible there. Where it clearly impacts us as many other companies is on logistic costs because it's quite clear that the big logistics providers and forwarders are charging surcharges to us. As you know, to a larger extent, we're able to share that with our customers, but probably not to the fullest extent because, particularly on the intercompany side. We still hope that there is a certain normalization come up at some point in time, but we do not expect that short term. Nevertheless, I don't think that, that is too much of an impact for our overall margin situation. I'm quite sure that we see also here, as I said before, rather improvement, something at the end of the day, given our cost of goods sold structure that is not too meaningful from the outside perspective, but just to give you the complete picture here. On the restructuring effort, as I said, there's a couple of efforts which we are doing right now. I was referring to them is around our current ERP systems. There's changes coming up. Some has to do with some of the other topics I was referring to, building out on the knowledge we accumulated over time in our shared service centers. So that's clearly something that we want to strengthen over time.

We will take our last question from Catherine Schulte with Baird.

I guess just going back to the Life Science caution. Thanks for giving some color on those product categories. But just given it's impacting only that more commoditized side and kind of the non-pillar side of the portfolio, is what gives you confidence that this is market related versus share or product issue on that non-pillar side of your business?

Well, I would say, Catherine, that over the last [ 67 ] years, we clearly said that this company was focusing on where we are relevant and we can take definitive market shares on growing market. And therefore, from a strategic standpoint, it is no surprise to say that QIAGEN becomes more and more a digital PCR company rather than a PCR company. It's perfectly in line with our strategy. We focus our sales force attention as well on products where we bring differentiated value and where we know that the margin over time are going to be the most interesting. So this is why also you see also that kind of results. The rest, I mean, as I said, enzyme, oligos, those are normally products that you sell in big birds. So they are depending on order patterns. So it's not surprising. We have always said that OEM was volatile by nature. I think it's wise in any kind of model to model the OEM business at QIAGEN between $70 million and $80 million per year of revenues, give and take, you see. So -- and then I think this is -- and I think it's wise for a size -- for a company of our size to continue to focus our people. We cannot be everywhere and I prefer them fighting for [ Sample tech ], pushing for digital PCR, pushing for QuantiFERON for QIAstat and for [indiscernible] with those products, and it represents already 70% to 75% of our revenues. With this being said, I think we need to end this call. I would like to thank you for your attention and repeat again before closing that we have a virtual quick spotlight session on May 7 on QuantiFERON, and I'm sure that you will find it quite interesting. Thank you very much.

Thank you. At this time, I'd like to turn the call back over to Daniel for any additional or closing remarks.

Yes. Thank you, Katie. Thanks, everyone, for joining our conference call today. If you have any further questions or comments, please do not hesitate to contact us. Thank you very much for your participation, and goodbye.

Ladies and gentlemen, this concludes the conference call. Thank you for joining, and have a pleasant day. Goodbye.