Qiagen NV

NYSE:QGEN

Earnings Call Transcript 2018-Q3

[Operator]

Ladies and gentlemen, thank you for standing by. My name is Emma, your Chorus Call operator. Welcome, and thank you for joining QIAGEN's Conference Call to discuss the Q3 2018 results. At this time, all participants are in a listen-only mode. Please be advised that this call is being recorded at QIAGEN's request and will be made available on their Internet site. The presentation will be followed by a question-and-answer session.

At this time, I would like to introduce your host, John Gilardi, Vice President of Corporate Communications and Investor Relations at QIAGEN. Please go ahead, sir.

[John Gilardi, QIAGEN NV]

Thank you, Emma, and welcome to our conference call today. The speakers today are Peer Schatz, the Chief Executive Officer of QIAGEN; and Roland Sackers, the Chief Financial Officer. Also joining us is Dr. Sarah Fakih from our IR team. Please note that this call is being webcast live and will be archived in the Investors section of our website at www.qiagen.com. A copy of the press release is also available in the same section.

Before we begin, let me cover our Safe Harbor statement. The discussions and responses to your questions on this call reflect management's views as of today, Tuesday, October 30, 2018. We will be making statements and providing responses to your questions that state our intentions, beliefs, expectations, or predictions of the future. These constitute forward-looking statements for the purpose of the Safe Harbor provisions.

These statements involve risks and uncertainties that could cause actual results to differ materially from those projected. QIAGEN disclaims any intention or obligation to revise any forward-looking statements. For more information, please refer to our filings with the U.S. Securities and Exchange Commission.

We will also be referring to certain financial measures not prepared in accordance with generally accepted accounting principles. You can find a reconciliation of these figures to GAAP in the press release and to the presentations for the call.

With that, I'd now turn over to Peer.

[Peer Michael Schatz, QIAGEN NV]

Well, thank you, John, and thank you to all for joining us for this call today. Our results for the third quarter of 2018 confirm the solid performance our teams are delivering during an exciting year of growth. They also show the progress we are making on building a unique and differentiated portfolio of Sample to Insight molecular testing solutions across the continuum of customer needs from basic research to clinical healthcare. We are on track to achieve our targets for higher sales and adjusted earnings in 2018 along with a significant increase in cash flow.

I have these key messages for you today. First, QIAGEN exceeded the target set for the third quarter of 2018. Total net sales were $377.9 million, rising a solid 6.5% at constant exchange rates and above the target we had set for about 6% CER growth. Adjusted earnings per share was $0.35 on a reported basis and they were $0.36 at constant exchange rates; this was ahead of our outlook for about $0.33 to $0.34 per share on a CER basis and reflect the significant efficiency gains our teams have achieved. The improved profitability was also reflected in the adjusted operating income margin, which rose 1.5 percentage points on a CER basis and was 28% of sales on an adjusted basis.

Second, we are advancing our Sample to Insight portfolio to address opportunities across the continuum from basic life sciences research to routine clinical healthcare. Among the highlights, sales of the QuantiFERON-TB test grew at a solid mid-teens CER rate, achieving the target we had set for QuantiFERON growth. A key development during the third quarter was the European launch of our strategic collaboration with DiaSorin and the new automation option for customers to use the LIAISON system for the test readout. We believe this partnership, along with the new pre-analytical workflow option with Hamilton will enhance growth and give us additional confidence in achieving the 2020 target of more than $300 million in annual sales.

As another highlight, our teams are establishing a European footprint for the QIAstat-Dx system, which is gaining recognition as the next-generation solution for providing accurate insights into complex disease syndromes, such as respiratory and gastrointestinal conditions. We are on track for the U.S. regulatory submission and market entry next year in time for the fall 2019 respiratory season.

We're also moving ahead with new placements of the QIAsymphony automation platform and are set to soon reach more than 2,300 cumulative placements during the fourth quarter. QIAsymphony has become the most highly versatile and modular automation platform in our industry, and we continue to look forward to a solid placement rate in the coming years along with solid growth for the related consumables.

In next-generation sequencing, we are on track to achieve our goal this year of more than $140 million from this portfolio, up from about $115 million in 2017. QIAGEN recently launched a breakthrough technology for RNA sequencing on any platform. Meanwhile, the GeneReader NGS System is growing in placements and consumable sales, and we're launching new assays, further expanding the available menu.

Third, QIAGEN is emerging with the leading portfolio of disruptive new molecular diagnostic technologies addressing very large market opportunities. The strategic partnership with NeuMoDx announced in September added two new fully integrated testing platforms. NeuMoDx is a highly synergistic platform with our portfolio and shares the sales channels with QIAstat-Dx and QIAsymphony. This new partnership will enable us to offer the ease of clinical chemistry testing automation now to molecular diagnostic laboratories.

I will come back to this topic later. First, based on the solid performance in the first nine months of the year, we are reaffirming our sales guidance for 2018, while raising the target for adjusted EPS. We continue to expect about 6% to 7% CER total net sales growth. This outlook includes about $7 million of first-time sales from QIAstat-Dx weighted into Q4. It also assumes about 1 percentage point of headwind from reduced U.S. HPV test sales and also absorbs the adverse impact of the recent product portfolio changes. For adjusted EPS, we have raised our outlook to $1.33 to $1.34. This is an increase from the prior range of $1.31 to $1.33 per share at constant exchange rates.

So, as a quick summary, we are pleased with the progress QIAGEN has made in 2018 and the progress we are making toward our mid-term 2020 targets.

I would now like to hand over to Roland.

[Roland Sackers, QIAGEN NV]

Thank you, Peer. Good afternoon to those of you in Europe and good morning to those of you in the U.S. I will first review the financial results for the third quarter of 2018 and later provide you with an update on our guidance for the fourth quarter and for full year.

As you saw in our press release, we had another strong performance in the third quarter as we exceeded the targets set for sales and adjusted EPS. Furthermore, free cash flow for the first nine months of 2018 was up 21% to $176.7 million and this was after taking into account the $30 million of prepaid royalties for the Natera partnership announced earlier this year.

The net sales growth of 6.5% CRE, exceeded our target for about 6% CRE growth. On a reported basis, net sales was 3.8% to $377.9 million and this includes the adverse currency headwinds compared to $364 million in the year ago quarter. As expected, the launch of the QIAstat-Dx system provided initial revenues amounting to less than 1 point of incremental growth.

The rest of the portfolio showed solid organic gains and this was particularly impressive given that the results absorbed the negative impact from the disposals of several product portfolios. These changes included the divestment of a veterinary testing portfolio announced in early 2018 as well as a structural change in China announced in late 2017 to sharpen our (00:07:29) focus.

After two quarters of currency tailwinds, we saw a sharp reversal in the third quarter and had been up 2.7 percentage points. This was due to the weakening of several emerging market currencies during the third quarter against U.S. dollar.

Moving down to the income statement. The adjusted gross profit margin was 71.5% of sales in the third quarter of 2018, showing an improvement of about 50 basis points from the third quarter of 2017 and was supported by efficiency gains, despite an adverse mix in the product portfolio and higher instrument sales.

Adjusted operating income rose 8% to $105.6 million, which has led (00:08:14) to the adjusted operating income margin rising about 150 basis points at constant exchange rates and rising about 100 basis points on a reported basis to 27.9% of sales compared to 26.9% in the year-ago period.

We have been able to realize more gains than initially planned for the efficiency program that we launched in recent years. A key focus area has been realizing the benefits of our Shared Service Centers in Poland and the Philippines. We also achieved these results, while making significant investment in the launch of the QIAstat-Dx system and also funding our growth drivers.

Along with the increase in the adjusted gross margin and the benefits of the efficiency programs, we have been managing cost in other areas. You can see despite the lower levels of sales and marketing and general and administration expenses as a percentage of sales compared to the third quarter of 2017. For the full year, we continue to expect about 100 basis points of improvement in the adjusted operating income margin compared to 26.2% in 2017, and this includes the QIAstat-Dx investments.

Moving down to the income statement. Adjusted diluted earnings were $0.35 per share on a reported basis for the third quarter of 2018 and versus $0.36 at constant exchange rates. This was ahead of our outlook for about $0.33 to $0.34 at constant exchange rates. The adjusted tax rate was 19% for the third quarter, while the outlook for the fourth quarter and full year 2018 is 20%.

I would like to now review our sales results for the product categories and our four customer classes. Among the product categories, instrument sales were up 11% to $46 million and provided 12% of total sales, advancing on higher sales of QIAsymphony, GeneReader NGS and (00:11:07) platforms, along with first-time contributions from the recent launch of QIAstat-Dx. Underlying instrument sales growth was about 24% CER, when excluding revenues from instrument service contracts. This has been under pressure during 2018 due to shifting from third-party contracts to QIAGEN instruments.

Consumables and related revenues was 6% CER to $331 million in the third quarter, continuing the same trend from the second quarter of the year and representing 88% of total sales. Here, we saw solid business expansion in the Molecular Diagnostics, Pharma and Academia customer classes along with underlying low-single-digit CER growth in Applied Testing, when excluding the veterinary testing portfolio divestments earlier this year.

As mentioned earlier, we are pleased with the commercial start of QIAstat-Dx system, but revenues are expected to be most heavily weighted for this year through the fourth quarter when we expect about $5 million of incremental revenues.

Molecular Diagnostics led the performance, rising 9% CER to $189 million and provided 50% of total sales. This came on the combination of robust double-digit CER growth in instrument sales along with high-single-digit CER gains in consumables.

The life science customer classes provided 50% of total sales and rose 4% CER on a combined basis in the third quarter of 2018. As mentioned earlier, Applied Testing sales trends in 2018 have been impacted by the divestment of some veterinary testing assays, with sales in the third quarter, up 1% CER to $35 million. However, we continue to see solid trends in our human ID and forensic business.

The Pharma and Academia customer classes maintained solid growth rates in the third quarter and consistent with trends over the first nine months of 2018. Pharma sales rose 5% CER to $71 million on a mix of (00:12:40) mid-single-digit CER growth in consumables and largely unchanged instrument sales.

Academia sales also rose 5% CER in the third of 2018, thanks to double-digit CER growth in instrument sales and modest single-digit CER growth in consumables.

I would like to now review the performance among three geographic regions. The Americas regions continued to have the strongest growth rates, rising 9% CER to $186 million and representing 49% of sales thanks to ongoing double-digit CER gains in the U.S. and Mexico along with solid single-digit CER growth in Brazil and Canada. We have seen positive trends in both Molecular Diagnostics and the life sciences, including the U.S. Academia market.

The Europe, Middle East, Africa region grew 1% CER in the third quarter with sales of $111 million and providing 30% of sales. This was below the trend seen earlier in 2018 and due mainly to the timing of national tenders in 2017. Furthermore, the divestment of the veterinary assay business was primarily focused on Europe. We saw improving trends in Germany, Switzerland and Italy against weaker trends in France, Benelux region and the Middle East. Sales on a constant exchange rate basis was at a double-digit pace in Turkey, but were significantly reduced by the adverse currency movements.

The Asia-Pacific, Japan region grew 11% CER in the third quarter with sales of $80 million that represented 21% of total sales. Sales growth at an even faster 90% CER rate when excluding sales of the QuantiFERON latent TB test in South Korea which enhanced results in 2017. We saw sales growth in China at a double-digit CER pace and also a return to growth in Japan after a period of challenges in this country.

I would like to now give you an update on our balance sheet and cash flow. QIAGEN has a very healthy balance sheet and the strong cash flow trends during 2018 have enabled us to continue with our capital allocation policy focused on targeted acquisitions and increasing return to shareholders.

Net cash provided by operating activities rose 18% to $249 million in the first nine months of 2018, and this includes a payment of $30 million for prepaid royalties to Natera for the genetic screening partnership. Property, plant and equipment expenditures were about 7% of sales and in line with recent trends for QIAGEN and amounted to $72.3 million for the 2018 period. As a result, free cash flow rose 21% in the first nine months to $176.7 million.

Our leverage ratio stood at 1.6 times net debt-to-EBITDA at the end of the third quarter of 2018, which remained stable compared to the level of 1.5 times at the end of 2017. This is even taking into account the cash payments for the QIAstat-Dx acquisition and share repurchases as part of the current $200 million return commitment. We continued to view our shares as being undervalued and completed the second $50 million repurchase tranche in October.

I would like to now hand back to Peer for a strategy update.

[Peer Michael Schatz, QIAGEN NV]

Yeah. Thank you, Roland. I'm now on slide 9 to give you an overview of key developments in our Sample to Insight portfolio. In the intro, I mentioned our QIAstat-Dx system for syndromic testing, which we discussed in detail during our last quarterly call. We are rapidly expanding our placements in Europe, Asia and Africa.

In addition to our focus on placements, we are also working on a long-term plan for a significant menu expansion, and as part of this plan recently added a new very comprehensive gastrointestinal panel. Our flagship QIAsymphony automation platform continues to show a robust placement rates and solid consumable pull-through. Our leadership in differentiated technologies continues to produce growth in areas, like processing samples, for microbiome research or in liquid biopsy.

Now, let me go into more detail on the other four areas, including NeuMoDx, our newest molecular platform technology; QuantiFERON-TB; next-generation sequencing with our GeneReader NGS System and universal NGS solutions; and our Personalized Healthcare franchise.

I'm now on slide 10 to give you an overview of QIAGEN's comprehensive portfolio of automation systems, how it addresses the majority of the Molecular Diagnostics market and how NeuMoDx Dx (00:17:33) fits into this portfolio and complements our overall platform and technology offering.

On this slide, we want to show how significantly our footprint changed since 2015. The graphic shows you the 2018 Molecular Diagnostics market. On the outer ring, you can see how QIAGEN today is positioned to address almost all of the key segments of the MDx market with a broad portfolio of synergistic and highly complementary platforms.

This compares to the inner ring of the graphic, showing our competitive profile in 2015. Only three years ago, QIAsymphony RGQ was our only automation system and while QIAsymphony continues to be the leading platform with a high market share in the modular MDx market segment, this is only a small part of the overall MDx market. Building a full suite of automation platforms over the past three years was critical for us to ensure the best scaling of our technologies and in particular sales channels.

We are very pleased that we have been able to create this platform footprint, but also that we now have emerged as being very uniquely positioned with an unparalleled footprint across the market's key testing segments and in many aspects also with quite disruptive new platform technologies and systems. Our focus in MDx is now shifting to building the menu as rapidly as possible. In more detail, in addition to QIAsymphony RGQ, which continues to have a strong position as a leading platform in modular testing and an unrivaled position as the solution of choice for all sample processing needs in MDx, we have today a very attractive platform for clinical NGS with the GeneReader.

Early this year, we added a next-generation solution for syndromic testing with QIAstat-Dx and now, we have added the NeuMoDx Dx (00:20:07) technology which has the promise to be a disruptive solution for the largest market segment in Molecular Diagnostics, fully integrated clinical testing. With NeuMoDx, we can now offer scalable platforms from medium to highest throughputs with full menu compatibility across systems as the core modules as well as the consumables are identical.

I'm now on slide 11 to give you an update on the strategic partnership and distribution agreement with NeuMoDx that we announced in mid-September. As already highlighted on the previous slide, NeuMoDx represents not only the latest addition to our automation portfolio, but it forms an integral part of our unique footprint in Molecular Diagnostics.

Within NeuMoDx partnership, QIAGEN gained access to a disruptive microfluidic-based technology for integrated PCR that is applied in a similar way also in QIAstat-Dx and is implemented as a compact and fully integrated microfluidic consumable that can be scaled across all throughput sub-segments of this very large laboratory MDx testing market segment.

We have been working for years together with QIAstat, NeuMoDx and others on microfluidic-based methods for Molecular Diagnostics. These methods have evolved significantly and now offer important advantages over traditional methods. The micro-channel architecture not only allows more flexible and economical tests set-up due to strongly reduced sampling chemistry input, but also gives much tighter control of critical reaction conditions. A larger surface-to-volume ratio enables more immediate heat conduction, faster temperature cycling and much faster PCR detection times.

Most systems in the market, and also those currently in the pipelines, simply use an automated liquid handling approach using standard-sized consumables. But replicating manual steps creates higher automation complexity and slows down the overall process. On the other side, using a fully-integrated microfluidic approach for both sample technologies and assay technologies in one cartridge is novel in the space and has very significant performance advantages. For example, NeuMoDx systems show dramatically faster time to result performance with times as short as 40 minutes compared to existing platforms in the market taking around three to four hours. Improved time to result is crucial as it allows labs to achieve much faster sample turnaround and to deliver many more results to physicians in a much shorter time and many more results within the same day.

Platforms powered by NeuMoDx technology also offer true random access, meaning the possibility to load and process any sample at any time and in any order. While this is often claimed for other integrated lab systems, they really are batching due to limitations in terms of assays that can be run concurrently, often only three to four assays at a time.

With NeuMoDx, a first true random access solution is introduced as up to 30 different assays can be stored on the instruments and run in any combination. Also, onboard stability of all assay chemistries excludes the need to load assays from a refrigerated storage and allows many more assays to be preloaded onto the system. As you can see from these mentioned features, and there are many more, the workflow features of NeuMoDx are best-in-class for labs and Molecular Diagnostics.

We've been in this market for 20 years and have worked with NeuMoDx for about four years. We've chosen to back this platform after a thorough analysis and have come away very excited, in particular after the first customer demos, and we believe this is not only a unique platform technology, but one that allows disruptive performance features. We are still in early phases of the rollout of both NeuMoDx instruments but we'll keep you updated on our progress.

I'm now on slide 12, to give you an overview of key developments for QuantiFERON-TB, the gold-standard test for detecting latent tuberculosis directly from blood samples. The growing awareness around latent tuberculosis and the increasing rate of market conversion from the 120-year old skin test to molecular blood-based diagnostics have increased the demand for more streamlined workflows to allow for even faster and more scalable latent TB testing.

To satisfy the constantly increasing testing demand of small to large scale TB screening programs, we have focused on highly efficient automation solutions and have built up key strategic collaborations with Hamilton and DiaSorin. The resulting workflow that you see on the left sets new standards for economical latent TB testing covering all sample throughputs. We just launched a CE-marked DiaSorin automation solution in Europe to use the LIAISON system for the test read-out and the launch in the U.S. is on track for 2019.

With the DiaSorin partnership, we significantly raised the bar on automated TB testing, now providing not only the current market leading screening test for latent TB, but also by far the best-in-class automation solution. The value of this offering is increased by the comprehensive menu of around 120 essays available for the LIAISON platform opening up a dedicated content in more than 25 different application areas for uses of QuantiFERON-TB.

As of today, we have proven that we not only have the best-in-class assay, but also the best-in-class automation, and give customers the best-in-class menu with this automation.

TB control is getting more and more attention. The latest move from the public sector comes from the world leaders meeting at the UN (00:25:02), the first summit focused on eradication of tuberculosis. The heads of state committed to invest $13 billion a year in TB prevention and care by 2022, which will give a further boost to program screening for latent TB.

Also, you might have read about GlaxoSmithKline's therapeutic vaccine for tuberculosis, a clinical trial for the first vaccine showing efficacy in the treatment of latent TB infection reported in The New England Journal of Medicine, relied heavily on QuantiFERON-TB as the gold-standard screening test to accurately identify patients with the latent TB infection. We're excited about the progress made in treating latent TB as improved treatments will also be a great benefit for latent TB screening.

I'm now on slide 13 to review the progress on our next-generation sequencing portfolio. We want to touch on our platform-agnostic universal NGS solutions, as well as on our Sample to Insight GeneReader NGS automation system, both of which contribute to the $140 million we've reaffirm (00:26:01) as a sales goal for 2018. This week we will be attending the Association for Molecular Pathology Meeting, AMP 2018, and launching multiple new NGS products. AMP is one of our high profile opportunities to meet experts and customers as they gather from around the world.

In our differentiated universal NGS portfolio, we will have built an industry-leading offering for RNA sequencing. Two weeks ago at ASHG, we launched our new QIAseq FastSelect RNA Removal Kits, a breakthrough technology in library preparation for RNA sequencing, which is a key segment of the NGS research market. This novel solution addresses a major bottleneck in RNA sequencing, namely the efficient removal of highly abundant, but scientifically irrelevant RNAs.

The total contaminating RNAs make up more than 90% of the overall cellular RNA content and only most efficient removal enables the preparation of RNA-seq libraries that contain only RNAs of primary interest, such as messenger RNA or long non-coding RNA. QIAseq FastSelect technology is compatible with virtually any library preparation kit and reduces the mandatory depletion procedure from about two hours to as little as 20 minutes, with only one single pipetting step.

We also have news on the GeneReader NGS System, which continues to build critical mass. At the AMP meeting this week, we are launching two new panels for the GeneReader; a broad panel covering 30 genes and detecting more than 850 variants in major cancer types; and a more focused panel for profiling gene variants involved in breast and ovarian cancers. Both panels are based on QIAGEN's proprietary Digital NGS technology.

On slide 14, I would like to update you on our Personalized Healthcare franchise. Let's start with immuno-oncology, an exciting emerging area in cancer treatment. I-O, as people call it, was in the news recently when the Nobel Prize in Medicine was awarded to two pioneers for discoveries in this field. At AMP, we are launching an exciting new QIAseq panel to analyze the key biomarkers that indicate the likelihood that a patient will respond to immuno-oncology drugs. This assay measures tumor mutational burden and microsatellite instability as well as single-nucleotide variances and insertions and deletions. The QIAseq TMB panel is designed to run on any NGS platform.

QIAGEN provides key biomarkers and novel gene expression profiles for I-O research and we are partnering with pharma companies to provide companion diagnostics for these I-O drugs. We're also launching enhancements to QIAGEN Clinical Insight, our bioinformatics solutions to interpret sequencing data showing patients' biomarkers for I-O response.

In an established companion diagnostic, we've recently received our third FDA approval for the therascreen EGFR kit that runs on QIAsymphony. This time to guide for the use of Pfizer's new lung cancer drug, VIZIMPRO. This is our first FDA-approved companion diagnostic paired with the Pfizer drug.

As you know, QIAGEN is a trusted partner to more than 25 leading pharma and biotech companies that rely on us to develop companion diagnostics for patient stratification.

With this, I would like to hand back to Roland.

[Roland Sackers, QIAGEN NV]

Thank you, Peer. I would like to now review our targets for the fourth quarter and our updated outlook for 2018. For the full year, we continue to expect total net sales growth of about 6% to 7% CER. This is based on the broad business expansion continuing into the second half of the year, along with about $7 million of first-time M&A contributions from the launch of QIAstat-Dx. This outlook also absorbs the change to our business portfolio and also about 1 percentage point of headwind from reduced U.S. HPV sales.

For adjusted EPS at constant exchange rates, we have raised our outlook to about $1.33 to $1.34 and this compares to the prior range of $1.31 to $1.33. This is due to the significant efficiency gains we have been able to realize, while at the same time making significant investment in the launch of QIAstat-Dx.

As for currencies, based on rates as of October 26, 2018, in terms of net sales, we expect a currency headwind of about 1 percentage point on results at reported rates. For adjusted EPS for the full year 2018, we now expect a currency headwind of about – of up to $0.02.

For the fourth quarter, our guidance is for total net sales growth of about 6% to 7% CER, and this includes about $5 million of M&A contribution from QIAstat-Dx. This outlook also absorbs the sales loss to (00:30:52) recent portfolio changes.

Adjusted EPS at constant exchange rates is expected to be about $0.39 to $0.40 per share, also at constant exchange rates. This compares to $0.43 in the fourth quarter of 2017, but the 2018 outlook includes the significant investments in QIAstat-Dx commercialization and the development for entry into the U.S. market.

In terms of currency impact, based on rates as of October 26, 2018, we expect currency headwinds of about 4 percentage points on net sales and $0.01 of headwind on the official CER guidance for adjusted EPS.

In terms of adjustments for the full year, we expect charges on operating income for the amortization of purchased intangibles to be about $97 million in 2018. We also expect restructuring related items to continue to be about $9 million as we have completed the efficiency program started in the late 2016.

Business integration costs are expected to remain at our prior outlook for about $30 million, and this also includes the QIAstat-Dx acquisition. And we expect the full-year tax rate of about 20% for 2018.

With that, I would like to hand it back to Peer.

[Peer Michael Schatz, QIAGEN NV]

Yeah. Thank you, Roland. Here's a quick summary before we move into Q&A. Let me review what we announced. First, we had the third consecutive quarter of solid 6% CER growth in 2018 with adjusted operating income continuing to grow at a faster rate than sales and leading to adjusted EPS of $0.35 per share, which was above our target.

Second, we are advancing our Sample to Insight portfolio across the continuum from basic research to routine clinical healthcare. We continue to deliver double-digit CER growth from our top products like QuantiFERON-TB test or QIAsymphony automation system and differentiated technologies like liquid biopsy, microbiome and NGS solutions. We are also excited about the European footprint we are establishing for the new QIAstat-Dx platform and the growth potential in syndromic testing.

Third, QIAGEN is emerging with the leading portfolio of disruptive new molecular diagnostic platform technologies addressing very large market opportunities. The strategic partnership announced in September with NeuMoDx bringing us two new fully integrated testing platforms is highly synergistic with our portfolio, channel and footprint.

Finally, as a last point, we are on track to achieve the sales outlook we have set for 2018 and have raised our outlook for adjusted EPS due to the significant efficiency gains our teams have achieved. We feel very good about our 2018 and are looking forward to executing on our strategy in 2019 as well.

With that, I'd like to hand back to John and the operator for the Q&A session. Thank you.

[Operator]

Ladies and gentlemen, at this time, we will begin the question-and-answer session. To ensure we can accommodate as many people as possible, please limit yourself to one question and if necessary one follow-up. First question comes from the line of Patrick Donnelly with Goldman Sachs. Please go ahead.

[Patrick Donnelly, Goldman Sachs & Co. LLC]

Great. Thanks. Peer, maybe just recognizing you're not guiding for 2019, but it feels like a lot of investor focus has shifted that way and you guys are uniquely positioned and most are actually expecting an acceleration in growth for next year or so. Maybe just with HPV coming in maybe not as big of a headwind as originally anticipated this year, QuantiFERON, a nice stable growth backdrop. Can you just walk through some of the moving parts and upside drivers at a high level for next year relative to 2018?

[Peer Michael Schatz, QIAGEN NV]

Sure. Thanks, Patrick. So, we are indeed quite pleased with the progress we are seeing towards our ambitions for faster growth. And if you look at the recent years, we have consistently been delivering or over-delivering on our targets.

For 2019, we will provide our formal outlook as usual in January when we provide a wrap-up of 2018 and give formal guidance. As we look into the New Year, it's clear that there are – it has the potential to be a quite exciting year for us. In terms of sales growth, we're looking for continued expansion of our portfolio, which is currently on track for 6% to 7% growth. And clearly also with good growth on QIAstat-Dx, which we guided for about $30 million of sales in 2019 versus $7 million in 2018.

NeuMoDx will take a little bit longer to ramp, because the lead times are a little bit longer on that one, so that's more a 2020 impact. But indeed, we're looking quite positively into 2019, for that matter also into 2020 and 2021. And there is a pretty good trajectory from the foundation that we've created in 2018. But again, formal guidance will be given in January. That will also allow us to have the benefit of the additional ramp, for instance, in QIAstat in the fourth quarter and we'll be able to give a little bit more detail then around some of these growth trajectories that we expect for 2019.

[Operator]

The next question comes from line of Tycho Peterson with JPMorgan. Please go ahead.

[Tycho W. Peterson, JPMorgan Securities LLC]

Hey, thanks. Peer, I'll start with NeuMoDx. I just want to understand a little bit more of the strategy here. The automated PCR space is fairly crowded with some entrenched players. So can you maybe just talk a little bit more about how you think the platform is truly differentiated? Are you expecting any cannibalization around QIAsymphony given some overlapping applications, and then how much incremental R&D is going to be required to clear the assays in development?

And then as a follow-up, just on guidance, I'm just trying to understand for the fourth quarter as well, is there anything baked in? I mean, you are guiding EPS a bit below the Street. Anything baked in in terms of QuantiFERON? You have had some competitive moves in terms of Quest acquiring Oxford's lab business. So is there anything there factoring in? And then anything on Palmetto, the final LCD for QIAstat? Thanks.

[Peer Michael Schatz, QIAGEN NV]

Sure. So first on the – I'll take the three strategic questions, and then I will hand over to Roland for the guidance. So first on NeuMoDx, integrated real-time PCR testing is by far the largest segment of Molecular Diagnostics, and it's a market segment where we are actually in those laboratories on a daily basis with our offerings. With QIAsymphony, we have a fantastic offering, which will continue for many years to show good growth. But it is more of the modular PCR market, which is a smaller sub-segment of Molecular Diagnostics, I showed (00:38:18) that one, that chart with the two rings. We have a very high market share in that segment that will continue to exist. But the integrated PCR testing market has been – is not a market that we really played in and while we were in those laboratories and are in those laboratories on a daily basis, while we have very good relationships with these laboratory directors, we have not addressed the more integrated PCR segment.

And so it was a strategic imperative for us to have a solution in that market to ensure the efficient scale of our sales channel and also the ability to address all kinds of a more integrated disease management solutions, real-time PCR in a high volume testing is absolutely critical for that to happen.

If you look at the systems that are in the market today, they replicate manual processes. I gave a few examples in my prepared remarks on why the NeuMoDx technology really sets a completely new standard in terms of many specifications that are potent (00:39:29) to customers. And if you look at the platforms that are currently in the market, they are basically based on 10-year old designs, at least 10-year old designs. So we – it's interesting also those in the pipeline are very often based on more traditional approaches to this workflow.

With the NeuMoDx technology, we truly have a quite some disruption opportunity and I just gave you the one stat to have a test run in 40 minutes versus three and a half hours, that is a real game changer and for many testing segments a critical need that is currently unanswered. So we feel very comfortable that we have the footprint in this segment, that we have the channel capabilities, the technology synergy with the other application areas. Again, the technology is very similar to the QIAstat and with the QIAsymphony assay portfolio and therefore, this represents a very interesting option for us. We do have a staggered approach. So we have not fully acquired the company as you know. We took on distribution rights, and we will update you in the coming quarters on the progress, probably towards mid-year, it will become visible how the ramp is happening. The feedback from the first customer meetings was fantastic. We showed it in Athens. We will be showing it at AMP, and some of you will be there. And I think the stats and also the simplicity speak for themselves and looking forward to the feedback.

The second is on the QIAstat technology in Palmetto. One of the reasons why we like the QIAstat technology is that it has this tremendous flexibility. It does not basically encase the assay into a very rigid cartridge, but it has a high degree of flexibility of tailoring the assays to the needs in particular the reimbursement needs of sub-segments. This is a feature that we detailed in the first quarter conference call. And this is something we could apply should there be broader application of this Palmetto approach into other segments. However, it currently would only represent a single-digit, maybe teens market share segment of our current business case going forward due to the limited space where this would apply.

So we feel, in terms of technology, very comfortable and this is not really changing our business case. And it was also visible that there would be changes to this area of reimbursement already some time ago and we also highlighted this part in the first quarter of this year.

In terms of QuantiFERON, we continue to grow and we're taking share primarily against the skin tests, but also against other commercial competitors and one such competitor was acquired by Quest and Quest is a very close collaborator with QIAGEN, it's promoting also QuantiFERON, it's by far the larger piece of their TB franchise and Quest has assured us that QuantiFERON will continue to be part of the portfolio going forward. It is simply the better test and one that increasingly now is – it's very evident that it has by far the better automation solution.

It's very difficult to replicate the workflow that we have been able to create and Quest is also a large DiaSorin customer, as also announced by DiaSorin previously. So this is something that we'll see how it pans out as we know that one assay that was acquired Quest had several different product areas and also other quite exciting assays that we're showing much faster growth and not like in TB not losing market share, right? And this we can't speak for Quest in their motivation but there could be many reasons for this acquisition.

[Operator]

The next question comes from the...

[Roland Sackers, QIAGEN NV]

And in terms of – just (00:43:54) last question in Q4, I think it's quite obvious that we also expect for the fourth quarter an overall adjusted EBIT margin improvement. Nevertheless, keep in mind that two things are going to happen as we said before. We clearly do have an incremental dilution from the QIAstat-Dx acquisition due to the commercialization efforts, but also to the preparation in terms of R&D activities for the U.S. launch, so that clearly has a particular impact on the fourth quarter, and therefore, brings down EPS I said before. Nevertheless, the second topic to keep (00:44:33) in mind that typically in the fourth quarters of our gross margin is slightly lower than average, just as quite usual product mix. Nevertheless, even if you add up, you will see and as we announced today, we are above our own guidance, therefore increased our full year guidance.

Operator The next question comes from the line of Ross Muken with Evercore ISI. Please go ahead.

[Luke Sergott, Evercore Group LLC]

Hey, guys. This is Luke on for Ross today? Just two quick ones, following up on Tycho's with the QuantiFERON. You talked about it in your presentation about the vaccine test and how it's associated with that. Can you just give an idea of the timing and the sizing of this and what that would mean – how would that change the outlook for the overall market size for you guys. And then I guess on the – the second one will be on NGS portfolio, solid growth there. But can you unpack any of that where you're seeing the majority of the growth from a product perspective, geography or a specific application? You talked about the RNA-seq, et cetera.

[Peer Michael Schatz, QIAGEN NV]

Great. So well, the treatment of latent TB is antibiotic regimen which takes a few months. There are several approaches to take it down to a few weeks. But it is still a longer process that a patient has to go through. It is obviously much more attractive to address the latent pool in eradicating TB than going after the actives (00:46:12) when it's typically too late and they already have become contagious and are infecting more people.

So the Holy Grail is obviously to have a treatment that would be very easy to administer and you could then administer broadly. And this is why there are a lot of activities in this space to improve treatments now that we can detect latent TB reliable. And this is not something that has been around for a long time. This is now – these new blood tests have only been around for some time and QuantiFERON, a little bit more than 10 years. And so, if you have the ability to treat, it becomes much more attractive to do large space (00:46:53) screening programs if the treatment can be done immediately and without a long treatment cycle. So, this is why we're partnering with a lot of pharma companies and pairing up QuantiFERON with the therapeutic.

The second question is around NGS, the $140 million, the fast growing pieces in there are definitely the panel technologies that we have. We're taking a lot of share in that space. The Digital NGS technology provides a very unique level of sensitivity and specificity of NGS panels. And we have now entered the library preparation space and more for us (00:47:36) in particular the RNA library preparation area which is a multi-hundred-million-dollar market, and this is also why we're featuring it. And we're moving into that market with some quite interesting products. So, panels, I would say is that the largest segment of growth in that space. And obviously, GeneReader is growing very rapidly as well, but this is in terms of the overall revenue size where we're seeing probably a very sizable panel business.

[Operator]

Next question comes from line of Bill Quirk with Piper Jaffray. Please go ahead.

[William R. Quirk, Piper Jaffray & Co.]

Great. Thanks. Good afternoon, everybody. First off, Peer, can you help us think a little bit about the risk elements to the NeuMoDx story? If my memory is correct, they were able to develop this system in a fraction of the time of most of the instruments on the market. So I'm wondering what's left to do here before we get to commercialization? Also maybe a word on the initial menu. Certainly, some of their science to-date would suggest they're heavily focused on the viral load space. And then lastly, just some color on the U.S. TB testing trends. Just kind of excluding the whole questionnaires that has (00:48:48). Thanks.

[Peer Michael Schatz, QIAGEN NV]

Sure. Well, the latter, I'll start with that first. I saw a commentary on that. The interesting thing is the U.S. is growing very rapidly in QuantiFERON. We are seeing north of 20% growth in QuantiFERON North America. We are aggressively expanding also our channel in this space and then pushing very hard into this market. The 2019 DiaSorin option is very attractive. The front end Hamilton systems, I'm here in Maryland, we had several accountants yesterday looking at the complete workflow automation. And it's a real game changer in terms of what we had previously and, now, the new level of automation. So that is the – that's a trajectory that we expect also to continue into 2019 and thereafter.

So the $300 million target that we have for 2020, while it sounded like a pretty bold statement a few – a couple of years ago when we put it out. If you look at where we are today, we're getting – and it's getting – it's very likely that we will be able to make that target.

In terms of the NeuMoDx technology, just as a note, the system is already FDA cleared. So it's not in a research stage or a lot of hurdles. It's already being applied in laboratories and first customers are already using it. You will see some customer presentations also at AMP and the system will be available for visits, and we are already taking orders for the system in Europe. So this is not a development stage technology.

We've been minority investor for quite a few years just like in QIAstat and when we saw the technology then past certain hurdles, we acquired it. The reason why the development timelines are shorter is because the core technology is really a shoe box size module that integrates all the microfluidic processing and that is placed on standard liquid handling instruments that have the robustness of systems, of which thousands have already been placed. So you actually have a significantly easier development timeline. This is why two systems are now launched concurrently with very good meantime before failure rates systems that are extremely reliable and have been tested for years in the market.

So, the menu is going to expand all across what you would expect in this area. And obviously, the viral load is part of that plan also going forward, but the first assays that are on the market are in the area of women's health and we will also see then transplant. And the interesting thing is you can also random access LDTs into it in an unprecedented way, not a separate channel but completely integrated. So it has a very fast pathway to a broader menu including also LDTs.

[Operator]

Next question comes from the line of Doug Schenkel with Cowen. Please go ahead.

[Doug Schenkel, Cowen & Co. LLC]

Hi, good morning, good afternoon, everybody. Just starting on companion diagnostics, you had another really strong quarter with co-development payments. Can you talk about what's driven the strength this year? How are you thinking about Q4? And how we should think about 2019 for co-development payments given the result of your strength this year as a tough comparison?

[Peer Michael Schatz, QIAGEN NV]

Thanks, Doug. Yeah. It's indeed a franchise which is doing very well. We always said that our goal was to keep that number pretty stable. But we've seen a remarkable inflow of new partnerships, in particularly around immuno-oncology. And we hope to be coming forward soon with some next-generation immuno-oncology testing solutions.

So it's difficult for us to model these things. It's milestones-based. And we are running dozens of programs. And – but our goal would be to keep this pretty stable at this level that it is. And we're running somewhere in the – we detailed at one somewhere between $35 million and $40 million. It's a little bit more than that now. But that's about the level that we would be continuing going forward.

This is just reimbursement for research and development expenses. And that's probably our best assumption for now. We're a little bit above that in 2018. But it could very well be that this continues – that this is just very difficult to predict.

[Operator]

Next question comes from the line of Scott Bardo with Berenberg. Please go ahead.

[Scott Bardo]

Yeah. Thanks for taking my question. And obviously, a busy strategic year in molecular, and you've given some explicit targets for QIAstat-Dx. I think you've seen a couple of million thus far and expectations for a major step-up towards $30 million or so next year. So I just wonder if you could give some comfort around achieving this, what needs to happen from a manufacturing, regulatory and commercial perspective. And following-up from this, I think you value the NeuMoDx business some 50% higher than you paid for cost at Dx (00:55:20). So, I wonder if this is a reflection of expectations of even higher revenues and profits. Is it a better growth asset? Perhaps, you can give us some sense of what we should expect from this business from a contribution perspective. Thanks.

[Peer Michael Schatz, QIAGEN NV]

Yeah. Thanks, Scott. Yeah. So, the valuations are also some way a function of what the hurdle is to get into this business. And the investments to develop a platform for the integrated market is very high and especially it's a scalable technology, where we're really acquiring distribution rights now in the first phase to two systems. And there, obviously, it could scale even further than that. But the module development was indeed quite expensive to do and that was now achieved successfully. And so, that is also partly reflected in that.

But the market size is also large. As we all know the syndromic testing market is about $800 million in size. We're looking at it substantially, three times the size more than that in the integrated segment. And so from that perspective, I think we do have expectations. But this is not an easy – a fast cycle like we would have with the QIAstat, where we literally have trade shows customers who basically purchase it pretty much. There, we're definitely going to look at six-month cycle there and increasing also validation required, also third-party validation.

In terms of the QIAstat ramp-up, yeah, definitely, the manufacturing, the menu expansion, phasing these all into the QIAGEN processes is a big challenge, but we kind of like this model of going in, in a stepwise approach and actually having had a good piece of equity and also a discussion years before we entered into the transaction with QIAstat was a benefit. We also have a good stake in NeuMoDx today. And, if we trigger the acquisition, then that would be a very similar process to what we saw with QIAstat.

[Operator]

The next question comes from the line of Daniel Wendorff with Commerzbank. Please go ahead.

[Daniel Wendorff, Commerzbank AG]

Yes, good afternoon and thanks for taking my questions. Two if I may, the first one is on your actually quite good adjusted EBIT margin expansion we have observed to fund (00:57:03) the first nine months of 2018. And if you think of what has contributed to that, has there been some kind of pull-forward effect already? So the question underlying this is I mean, do we have to worry about further margin expansion also first nine months.

And the second question would be a follow-up question on the QuantiFERON-TB test and your 2020 targets. How important is China in your projections going into 2020 with the targets? Thank you.

[Peer Michael Schatz, QIAGEN NV]

Roland, do you want to take the margin question first?

[Roland Sackers, QIAGEN NV]

Yes. Sure. I think Daniel, you're absolutely right. I think we have seen a very strong margin improvement this year. And we are clearly also a little bit ahead of what we thought we are. Nevertheless, I think this is a very good news in general, because I think all the drivers and all the leverage we were able to achieve over the last few months are also drivers we believe are going to stay and continue also going forward. And again, I'm not going to repeat what I said before. So overall, I think it's a sustainable profitability, and we do have a mid-term goal out to an overall EPS growth, and that is something where we're aiming to.

[Peer Michael Schatz, QIAGEN NV]

Good. And the first question was around QuantiFERON in China. So it's a little bit of wildcard. It obviously represents a very large market opportunity. There are rumors of several dozen million skin tests being performed in China. And just to remind you, we see the global market, it's somewhere in the range of 80 million skin tests at the moment or latent TB tests of which by far the majority of skin tests still. So – but obviously, the system is a little bit more tiered in China and so we are currently already approved in China where our product is being widely used. And we are, however, primarily targeting centralized screening centers and some of the Tier 3 hospitals that are at higher levels of healthcare standards and quality.

And so it will be important to see the importance of TB eradication move up. And with that, we would then scale stronger into the broader healthcare market in China, and this is obviously what we're working with Chinese agencies towards.

So it represents a little bit of wildcard. It's not a yes/no for us to be able to make our target market. If you look at where we are today and the momentum we're showing, the trajectory clearly points to the $300 million and China would be a nice wildcard, but it's not a necessary big bang that is required there.

[Operator]

And the next question comes from the line of Steve Beuchaw with Morgan Stanley. Please go ahead.

[Steve Beuchaw, Morgan Stanley & Co. LLC]

Hi. Good afternoon to you guys and thanks for the time here. One quick one for Roland and one quick one for Peer. Roland, you gave currency guidance top line, bottom line for the fourth quarter. Is that a reasonable barometer for what we should expect for the first two or three quarters of 2019? And then, Peer, I wonder if you could speak just about prospectively your expectations for the moving parts in the applied business? I know human ID and forensics has been very strong. It seems like you're gaining share there in the U.S. Then there are a couple of other parts of the business that have been growing as quickly. And I wonder if you can just help us understand the puts and takes there and how are you thinking about that going forward. Thank you.

[Roland Sackers, QIAGEN NV]

Yeah. Let me kick it off. And we said for the fourth quarter it's about 4 percentage points of effect in terms of net sales and about $0.01 for EPS. Again, as you know, a lot of the impacts are going reverse next year because it kicked in over more or less in the mid of this year, sometimes even in the second quarter particularly Turkey. So clearly we will have some time next year (01:01:09). So I don't think that is what you see in the next quarter, it's something what you see 4 times next year lower than that on a full-year basis.

[Unknown Speaker]

In Applied Testing, it's a – the big piece of those 9% of our sales is indeed human ID, as we call it, or forensics. And we are taking share there in that segment, in particular on the assays that we launched a few years ago and that are doing very well.

But we're also seeing now GeneReader placements with some of the protocols that we also discussed in previous calls, the ICMP and other protocols, we're seeing the first placements there. So what we are really doing here as a company, we're focusing on areas where we can create the highest degree of synergy and scale. And this is also why, an example for the NeuMoDx and QIAstat transactions (01:02:03) these laboratories, those same laboratories already there with footprints and we are now able to scale into this channel. In Applied Testing, it's a little bit different, if you're talking about food, if you're talking about environmental testing, you're very often talking about very, very fragmented small markets.

And so while we have offerings in those, they are in our priority A segments. The I think the best example for that was that we divested our veterinary testing assays last year, simply because while it is an attractive market and growing, we just didn't want to afford a dedicated sales channel into that market which would really have been required. And so this is a sign of the focus that we are currently taking and HID clearly has focused resources and also dedicated channels.

[Operator]

The next question comes from the line of Jack Meehan with Barclays. Please go ahead.

[Peer Michael Schatz, QIAGEN NV]

Hello, Jack?

[Jack Meehan, Barclays Capital, Inc.]

Portfolio additions you've had, how do you feel about the durability of the QIAsymphony placements and consumables growth from here? And then for Roland, on the margin front, as you think about balancing some of those investments in molecular against the cost initiatives you have underway, do you think 75 to 100 basis points of margin expansion is still a good run rate from here? Thank you.

[Peer Michael Schatz, QIAGEN NV]

So the first question is on QIAsymphony, which as we said before will probably break through its target now in the fourth quarter. We feel pretty good about that. Placements are expanding. There are two applications of QIAsymphony. One is, as the portal through which samples move into molecular testing, so we can – with hundreds of protocols on the QIAsymphony, we can process any type of primary sample for any type of downstream testing pretty much, that in a very high quality and that is something that is increasingly growing and liquid biopsy is one such example but many other such segments exist. That will lead to continued growth of QIAsymphony also in the future. It's a – there's still tremendous opportunity out there as customers are today using smaller systems and they're scaling up the entire throughputs.

The European market had much more focus on the integrated workflows where people were doing HIV and hepatitis, and that was very little visible in the U.S., so people went to the U.S. labs only, they didn't see that. But if you went to European labs, that's where you saw very large laboratories doing (01:04:54), doing chlamydia, HPV and other things actually on the QIAsymphony workflows and we (01:05:01) national screening programs in blood (01:05:02) and everything going on.

The symphony (sic) [QIAsymphony] (01:05:09) will continue to have a real place there as a modular system, as many customers actually want to have modularity and many countries actually want to have two-room strategies where detection is separated from preparation. It's a different approach and different standards that you see in different markets.

Part of that might be a benefit of going integrated over time, but we don't necessarily see that influencing the position of QIAsymphony as a very strong pillar and also growth contributor over the next few years. We clearly are positioning these two as I showed on that one pie chart as being in two different segments. One is the more modular testing segment. The other one is the very locked down integrated segment.

[Roland Sackers, QIAGEN NV]

In terms of margin expansion for the rollout costs, we are very pleased with the performance we have on margins now since more or less couple of quarters. In the same time, I think we also feel very comfortable looking forward that there's still a lot of things which we believe we can improve which are already kicked off but for no ways we have reaped in the all the benefits.

So I have less doubt that we are able to expand our margins also going forward, particularly on a constant exchange rate basis. And that I think it's also an opportunity we're having right now is that – as Peer said before, we have a couple of incremental growth drivers for 2019 and 2020, which is really QIAstat-Dx on the short term and the mid-term, and in incrementally NeuMoDx is kicking in. So, yes, there is some investments to make. Nevertheless, I think the direction is straightforward for us.

[Operator]

And the next question comes from the line of Dan Arias with Citigroup. Please go ahead.

[Carolina Ibanez Ventoso, Citigroup Global Markets]

Hello. This is Carolina Ibanez Ventoso on for Dan. Thank you for the question. What is the status of the development of the – of a liquid biopsy assay for the GeneReader?

[Peer Michael Schatz, QIAGEN NV]

Yeah. Thanks, Carolina, I think what is unique is that all of our assays have – on GeneReader have two uses, they can be used with solid tumors or they can also be used with liquid biopsies. We made sure that the – there's panel compatibility and informatics compatibility for the two different uses. So as such, all of the panels that you see here already are prepped and are being used for liquid biopsy in addition to solid tumors.

[Carolina Ibanez Ventoso, Citigroup Global Markets]

Okay.

[Peer Michael Schatz, QIAGEN NV]

Thanks.

[Operator]

The final question is from the line of Derik de Bruin with Bank of America. Please go ahead.

[Derik de Bruin, Bank of America Merrill Lynch]

Hi. Good morning and good afternoon, everyone. A lot of my questions have been answered but let me ask the following. On the consumables business in Academe and Pharma, up modest single digits in Academe, mid-single digits in Pharma. A little bit lower than some of the peers. I'm just wondering can you sort of talk about some of the trends going on there in the research markets. Is there – I mean, I know you've seen some pickup in your academic business. I'm just very curious, can you talk about any incremental headwinds or anything that you're seeing that's different? Thanks.

[Peer Michael Schatz, QIAGEN NV]

Yeah. Derik, indeed, we are on an upward path in terms of growth in the Academia and Pharma areas. As we detailed in earlier this year is we made significant shifts in the commercial channels, created dedicated sales channels into Academia and Pharma. We, for instance, created also hotspot coverage, for instance, at NIH where we're now growing well in the double digits following these changes.

And we're also supporting these initiatives with strong digital firepower in terms of preparation follow-up and also marketing support. So the performance, as I outlined in a few conference calls already, between 2015 and 2017 in Academia and Pharma was okay, but it was not really where we would like to see it, where we think we deserve to be and where we put in place a number of initiatives and a lot of focus. There was also leadership change in this space and we are now starting to see this move up again. And hopefully at 2019, we'll start seeing this – put this more to numbers.

[John Gilardi, QIAGEN NV]

Okay, thank you, Peer, and thank you, Roland. And with that, I'd like to close out the call and I appreciate all of you and your time. If you have any questions please do not hesitate to contact us. Bye-bye.

[Peer Michael Schatz, QIAGEN NV]

Thank you.

[Operator]

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