Q3 2021 Qiagen NV Earnings Call
Presentation with details on our performance and financial information is available in the IR section of our website along with the third quarter release, we will not be showing the slides during this call, but you have them as a reference material.
Before we begin let me cover as usual our Safe Harbor statement. This conference call discussion and responses to your questions reflect management's views as of today November four 2021.
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 under the private Securities Litigation Reform Act of 1995.
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 SEC, which are also available on our website.
We will also be referring to certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP. Additionally, all the references to earnings per share refer to diluted EPS. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure is available on our press release as well as in.
The presentation I would like to now handover the call to Terry.
Thank you Joan and welcome to our conference call today, Thank you to everyone for joining.
Before I begin allow me please to first acknowledge the efforts our teams are continuing to make around the world.
The balance the volatile demand for COVID-19 testing solution with <unk>.
Our retailing have reviewed our business.
Our teams around the world have done an excellent job of effectively managing their shifting demand as the pandemic has progressed and they have responded quickly.
Ever changing needs of the market.
It is through the ongoing dedication of all our caveat to note that we have delivered another very strong and clean Q3 quarter.
Now onto our key messages for the first and foremost we have delivered a solid quarter with strong sales growth and adjusted EPS.
As you have seen in our release net sales grew 10% at constant exchange rates to $535 million Mdc's winnable, our outlook for sales to be at the same level as in the first quarter of 2020.
Our results were driven by better than expected sales in COVID-19 product groups, but also very strong trends in non COVID-19 demand.
In the past we have seen these product groups inversely related as Covid testing increased demand from products.
Using the regular research and testing was decreasing however in the third quarter of this year, we saw strong demand for qiagen solution across both areas volume surges and diverse flavor of vaccinations have contributed to uneven recovery trends across the globe and we are seeing mixed.
Demand coming from the various regions.
As we move through the pandemic and <unk> demand remains volatile we are focused on executing on the sustainable growth of sales in our non core product groups. So we are extremely pleased with the 17% CER growth delivered by these groups in the third quarter.
Those results are again, proving that qiagen remains relevant but not dependent on COVID-19 testing.
Adjusted earnings per share were unchanged in the third quarter compared to the year ago period at 58 at both CER and actual rates.
<unk> waveform outlook for $52 53 per share CER.
If we look at the first nine months of 2021 sales grew 25% at CER.
Our sales were up 28% at actual rates to 167 billion due to positive currency movement over around three percentage points against the us dollar.
Non Kobe product group sales grew 27% CER as demand continued to grow steadily throughout the year.
Adjusted EPS for the first nine months of 2021 came at $1 88 per share.
Our gain and $1 91.
At actual rates.
Our second message our five pillars of growth continue to perform well as we made good progress on our 'twenty one ambitions in central Tech first substantial demand for non Covid sample preparation consumables delivered mid single digit CER growth in the third quarter.
This builds on our longstanding leadership in this important first step in molecular.
Molecular biology lab process, we continue to expand our portfolio of consumer board and we continue to launch new instrument to drive sustainable sales in.
In central take the best examples this year is easy to connect connectivity fully automated sample preparation platform that we are planning to launch this year.
On cash equity digital Pcr.
Our system continue to be used in a growing number of application or an example related to Covid. For example is waste water testing in <unk>.
<unk> to the COVID-19 pandemic customer response for the system remains extremely high as we work to further expand our application.
Quantify I won't give you a few doses.
Our leading test for modern latent tuberculosis testing led our five pillar growth with 48% CER over the same quarter of the prior year. We are therefore extremely confident to at least reach our target of $2 $55 million.
$2 $55 million to $155 million for the year of 2021.
As you have seen we continue to complete our portfolio and quantified when with the launch of our carrier reached quantity on TB test.
This is a breakthrough test, which will enable modern latent TB testing in low resources areas with very high build them, allowing expansion.
Quantify on TB to those markets.
In quarter, three demand for carriers that syndromic testing system and for numerous core.
Core lab PCR platform remains high, especially for respiratory testing as multiplex tests are being increasingly utilized for diagnosing influenza like illnesses as we move into the flu season.
As an example in response to a rising demand for low Plex testing. We have just released the chaos that diagnostic respiratory fourplex CE IBD test to add.
Identification of the common seasonal respiratory infections.
<unk> and <unk>.
<unk> combined with Susquehanna.
For <unk>, we have just received a U S government grant to increase production of COVID-19 test consumables in our Michigan site.
All of our five pillars of growth delivered solid sales in the third quarter and we are on track to deliver on our sales target for 2021.
They are all positioned for future growth, albeit not only serve.
The continuous need for COVID-19 research.
But also <unk>.
Anybody important non COVID-19 related discoveries and diagnostics.
We continue to execute on our robust pipeline of menu expansion and new product launches.
Put us on a very strong trajectory to build additional value in our portfolio.
Our third message.
We maintain a very solid level of profitability in the third quarter and strong cash flow growth during the first nine months of 2021.
We are moving forward with investment to accelerate our pillars of growth that are strengthening of course our growth prospects.
Our final key message for today.
Our final key message for today includes our upgraded outlook for the full year, we have upgraded the 2021 sales outlook to reflect the stronger than expected results for the third quarter.
This is very consistent with what we said in July when we remove the volatility of Covid testing demand from our 2021 sales outlook. We are increasingly confident in our full year target for over 20% CER growth in non covered product group and preparing.
For solid growth beyond the pandemic with that I would like to hand over to Olaf.
Thank you Tony.
Hello, and thank you as well from me for joining this call. Let me begin by walking you through our sales in more detail.
As Tiger mentioned non Covid product group sales grew strongly at 17% CER to see another $76 million.
Sales were supported by improving customer demand across all regions, especially for quantifying TB <unk> technologies and <unk>.
<unk> genomics products.
COVID-19 product group sales declined 4% CER to 159 million U S dollar.
A year ago period.
Novel, Nonetheless saw strong sales from ongoing demand for respiratory testing in Europe.
Areas outside the U S.
This was supported by solid core.
Embryo transfer and labs as well as a kayak Papa absolution.
In the third quarter double digit CER gains in consumables and related revenues more than offset a modest decline in instrument sales, which faced a challenging comparison for 2020 quarter that include a significant demand for COVID-19 testing instrument.
And now to give more detail by product calls.
South technologies declined 6% CER.
So first our third quarter in 2020.
Mid single digit CER growth.
Non corporate products offset lower year over year sales, our COVID-19 testing.
Diagnostic solutions had another quarter of excellent sales growing 35% CER for the same quarter of 2020.
This was led by quantity ourselves, which grew 48%.
Oh.
Diagnostic solutions sales were also supported by continued demand for the kind of starts and <unk> solutions.
Ongoing expansion of <unk> systems for core lab Pcr testing.
We saw continued recovery in the regular testing activities in the third quarter and that includes our oncology business.
Sales of precision medicine, assess and revenues for Com opinion diagnostics core development projects.
Did you see all right.
And the PCR nucleic acid amplification product group sales grew 2% CER of a pandemic driven third quarter of 2020.
Higher sales of consumables and placements of connectivity digital PCR more than absorbed the decline in other instrument sales in this call.
Genomics and <unk> at 44% CER and driven by robust sales of our Universal next generation sequencing consumables for both life science and molecular diagnostics application.
Qiagen digital insights to deliver sales growth of more than 20% CER for our bioinformatics solutions, notably with a double digit CER gains in clinical applications.
On a regional basis, the Americas delivered 9% CER growth.
Results were driven by 19% CER growth into the U S.
Which was led by quantifying TB and more than 30% CER growth in the PCR nucleic acid amplification, and genomics and <unk> product groups.
In the EMEA region sales grew 6% CER influenced by ongoing demand for COVID-19 testing solution golf in this region was led by double digit CER gains in the United Kingdom, Italy and Switzerland.
The Asia Pacific, Japan region experienced strong demand with regional sales core of 20% CER over the third quarter of 2020, a period when we saw lockdowns in many of these areas.
And China was 16% CER based on improving trends for non Covid product, Japan, Australia, and South Korea also contributed higher sales.
Moving down the income statement the adjusted gross margin declined to 66, 6% or about three percentage points below the third quarter of 2020.
This decline included an inventory markdown of $6 2 million U S dollars for COVID-19 antigen test we.
We did not adjust for this market on <unk>.
As such on development expenses close to 9% of sales from approximately 7% of sales in the prior year as we continue to make significant investments into the test menu for chaos that normally eggs and kind of acuity instrument.
Across all of our five pillars of growth.
They had some marketing expenses as well as general administration expenses, largely unchanged as a percentage of sales compared to the year ago quarter.
I would also like to note that while we have experienced some FX of global supply chain disruption our teams have secured safety stock and secondary suppliers where needed.
So we have not seen any significant constraints up to this point, but are closely monitoring the situation.
Operating income was two one on Australia 2 billion U S dollar from the third quarter of 21.
$45 million in the prior year.
Keep in mind that in 2020 results included one out of $4 million of expenses was a discontinued tender offer.
Adjusted operating income declined 3% to $165 million from $170 million after a loss in the third quarter of 2020.
This was due to the increase in research and development expenses during the third quarter of 'twenty. One S. These focused efforts on test menu expansion.
As a result of these efforts we saw a decline in adjusted operating income margin for 38% of sales of 35, 2% the year ago period.
Reported EPS was <unk> 58 cents per chassis I, just shot quarter of 'twenty, one and just included Saudi.
Million dollar gain on the sale of milestone related shares received from <unk> Corporation as part of their purchase of our minority investment in our strategy.
This entire gain is excluded from adjusted results.
Adjusted EPS was also unchanged at 58 cents per share I want to note. These results included an adverse impact of about <unk> <unk> per share related to the inventory markdown.
Turning to cash flow trends for 'twenty, one we saw dynamic performance in both operating and free cash flow in the first nine months of 'twenty one.
I think cash flow increased 34% to $441 million from $188 million in 2020.
This reflects higher net income and adjustments for noncash items operating cash flow included a decrease in operating assets and liabilities, primarily due to increased inventory to meet the increasing demand and decreases in accrued and other liabilities and accounts payable.
Cause that in 'twenty. One also included cash paid for income taxes of $97 million compared to $32 million a year ago period.
Also the 30th.
Prior year period included a cash payment of 190 million U S dollars for costs related to the discontinued tender offer and $50 million of cash payments for restructuring activities that were initiated in late 2019.
As for free cash flow, we saw 198% increase to <unk> 2 million U S dollars in 'twenty, one from $1 1 billion you asked us the same.
Period, one year ago.
This increase absorbed higher investments in purchases of property plant and equipment in 'twenty, one primarily to expand production capacity for our pillars approvals at sites in Europe, and the United States.
The solid cash flow will enable us to further invest into our pillars of growth, but also seeking to increase returns to shareholders and on this point, we just completed the $100 billion share repurchase program at the end of October.
As discussed earlier, we are upgrading our full year outlook to reflect the higher than expected sales for the third quarter for COVID-19 product groups, coupled with an increase in ongoing strong demand for non COVID-19 solution.
For the full year net sales are now expected to grow at least 15% CER.
And adjusted EPS to reach at least $2.48 per share also at CER.
And exchange rates as of November 1st 21 currency movements against the U S. Dollar I expect it to create a positive impact of about two percentage points of net sales call and about two cents per share on adjusted EPS.
These expectations take into account continued investments into our five pillars of growth during the remainder of 'twenty one to further accelerate profitable growth.
Answer pandemic.
In the coming years I.
I would like to now hand back to tell you.
Thank you all and as John said in the introduction I think we are on track to a shorter coach or a little more time to your question. So let me provide you with a quick summary, before we move into the Q&A.
As we said I work J knows all over the world delivered another very.
Very solid quarter with strong sales growth and adjusted EPS.
This was due to better than expected of course sales and COVID-19 related program, but which is our focus with very strong trends in non COVID-19 demand our teams all over the world continue to execute and deliver on our commitments.
Second our five pillars of growth.
Filming well and we are on track to achieve our 2021 sales target.
Many of our pillars of growth are in still early phases of their life cycle, which proves that we seem to have a solid runway of sustainable growth ahead.
Jen.
Very strong level of profitability and a healthy cash flow in 2021.
And do you see as providing resources to invest in our business while at the same time, increasing return to shareholders. We are looking for investments that will create value and are relying obviously with our strategy and as a last point, we have upgraded the full year 2021 sales outlook to reflect this.
I don't go than expected first quarter reserves and are moving ahead with convictions about the strength of our portfolio.
With that I'd like to hand back to John and the operator for the Q&A session. Thanks a lot.
Ladies and gentlemen at this time, we will begin the question and answer session.
Anyone who wishes to ask a question press star followed by one on your Touchtone telephone.
If you wish to withdraw your question you May press Star followed by Q2.
To ensure we can accommodate as many people as possible. Please limit yourself to only one question and if necessary one follow up.
<unk> will also be muted after finishing asking the first question.
Anyone who has a question you May press the star followed by the one at this time.
One moment. So my first question please.
And our first question will come from Taco Friedrichs with Deutsche Bank.
Thank you very much.
Good afternoon, everyone.
So I would try my luck with this question so over the past few days that they have obviously been a lot of rumors in the press about potentially take a look at them not just et cetera. So any way you can comment on anything and then related to that question can you just confirm that.
That you are still fully confident to your new strategy pillars, you laid out in this room, but no way related to two less confident in your strategy from your side and therefore.
And youll potentially engagement and any suitors merger talks with it. Thank you.
Thanks for the question, it's a fair one and I think hold on.
And I can take.
Ticket with our two perspectives.
Oh by the way clearly airline.
First and foremost.
Yeah.
As we have said many times.
<unk> is and will always.
Remain very open to strategic tools.
Always.
I was wrong.
Is it obviously.
Create value.
For our shareholders first but not only our shareholders.
Create value for our K edginess.
Value for the brand that this company has been creating.
For the last 30 years.
And $40, obviously continuous development.
And as usual, we're obviously not only the managing board Arnaud and myself, but also our board.
We have proven this in the past we'd always exist.
Fiduciary responsibility if there is something that could create once again with boards.
<unk> answer to those criteria.
<unk>.
What I can tell you is that.
As of today.
Those rumors I'll just rumors they have no more value is that what was said some months ago around.
We did also competent and we remain focused.
On the execution on the five pillars growth strategy. This has no change and we still have the same confidence I think that today in these scores. We have shown you that not only does <unk> are developing well.
Good day create obviously potential growth for the future first.
Sector.
Obviously from a capital deployment standpoint.
We remain.
Our next question comes from Tycho Peterson of J P. Morgan. Please go ahead.
Hey, thanks.
Terry if I can ask two quick ones first on <unk>. Just curious if you can give us any kind of update on.
Customer mix, how many of these placements are capital versus reagent rental how youre thinking about the respiratory rollout how meaningful that four plex panel could be and then second on supply chain I understand youre not seeing constraints now obviously theres been a lot written about customers having issues pipette tips consumables et cetera are you starting to see any improvements there and you are.
Are you also able to pass on some of the higher resin costs shipping costs things like that in terms of your question. Thank you.
Yeah. Thanks, Tycho so on the first question for kind of stuck.
Obviously her.
Yes.
Seeing says that are heavily driven by.
The COVID-19, and therefore, the risk periodically permanent.
These create a favorable trend too much more capital sales than placement opinion. This is one of the main listen this COVID-19 pandemic has boosted cacciatore phase.
Instead of.
First of all at the same time and especially in Europe. We are pleased when we see the development of our conversion of customers to also financial available and especially to guests through unfavorable permanent.
Sure.
Topic of satisfaction for us.
We are on track as we speak with the submission of the guest opening in the U S. By the end of the year and the launch of Dominion's spending.
In Europe towards the end of the year.
On the full flex you need to understand the strategy.
<unk> flex is not to answer.
Demand from the current chaos that in store base.
The four plex on carrier staff.
Is to make sure that if there is a combination.
The strong flu season.
Together with a constant COVID-19.
That we will offer a solution to customers.
That will not want to do a large flex, but just focus on the traditional respiratory winter Petro James fluid AMB and Covid in this case.
So it's to extend the chaos.
Rich.
And not to replace existing consumption over last click customers reserve Opex piece has to be clear understood. This is the way you should see.
I hope that answered the first part of your question Tycho.
Yes, yes.
On the supply chain.
Hello are you need to eat.
In his part.
The situation is quite simple for qiagen.
Last year, we were very transparent.
On some bottlenecks that we encountered and we give you timelines on when they would be sort of we spoke about bottlenecks on some raw materials.
Specifically for example.
Proteinase K oar Gwen.
We sold it.
Around the third quarter of last year.
Then we told you that we experienced some issues in plastic supplier like the rest of the.
The market by the way and we always told you that we believe we would solve the plastic supply by the end of Q1 of this year. This has been achieved as well.
Two our effort.
And the efforts of our purchasing team by either adding suppliers or renegotiating some of our contracts.
So of course, we are not 100% immune to all the disruption we see.
In the supply chain all over the world, but we are well protected at the moment and we followed that with extreme attention.
It has happened for example in July that we were like all user companies.
Impacted slightly by the fact that the Pudong airport in China.
For a couple of days, but it had no magnitude and meaningful impact on our Q3, So I would say supply chain under.
Clear monitoring, but also clear control at the moment.
Does it answer your question on pricing.
Yes.
Yes, yes.
Right. So thanks for reminding that Youll know that we have always been very clear on R&D over the last call to say that qiagen as a very.
True for DC as regard to price increase this is a mechanism that happens every year.
And this year. Obviously, we are also paying specific attention of making sure that we are passing.
Part of the Fright increased cost that we are seeing on our own P&L also to our customers.
Sure.
We are extremely monitoring this we will continue in 2022 and it should double policy Tycho, it's not only making sure that you are facing passing price increase but it is also monitoring the discounts that you are doing during the rest of the year because discount happen, let's be very clear, but you have to clearly when you told that to make sure that your net.
Net price impact remains obviously positive overall.
How long would you like to add something to that.
Well I would say of course, we expect also for next year was a compared to this year given.
It was a larger.
Inflation environment, but also our pricing increases are probably to a large extent reflecting that.
Okay. Thank you.
Our.
Next question comes from Daniel Wendorff of <unk> BHF.
Yes, good afternoon, or good morning, and thanks for taking my question.
Is it related to your genomics portfolio.
<unk>.
As far as I understood.
Major support.
From one offs.
In Q3 now achieved quite a strong performance in my view can you talk a bit more about what's driving this and specific products.
Any specific movement, so so that would be helpful and maybe.
Sure.
That would be onset.
<unk>.
At the top top here that your margin was down on adjusted EBITDA.
Rather more than I would have expected quarter on quarter can you explain this please thank you.
Okay, then I propose to take the genomic question and then how long will continue as the margin as we have very clear data on this as well.
You have to remember Danielle that our genomics portfolio is comprised of mainly two main activities. What one is what we call our universal engineers Universal NGL <unk> III. These are partners.
Our regulated financial system partners that we are.
Selling on many kind of instrument beat them.
Lumina instrument sale.
Sequencers pgi sequences.
This is mainly.
Driven by the recovery of oncology testing demand because most of our application are in oncology in that field and we see is indeed oncology testing demand coming back not yet to a fully pre COVID-19 pandemic level, but recovering quite strongly and so we are well positioned.
To answer <unk>.
Thicker.
Those sales are also.
Including our cities and what we call our <unk> digital insight portfolio.
Our bioinformatics and once again those sales are mainly directed to.
Next generation sequencing consumables and mainly also directed to.
<unk>.
Oncology application in 2020, clearly this wasn't activity at Qiagen and we disclosed that that was impacted by the current allocation of resources. This year is recovering and recovering, especially in the Q3, because we have posted more than 20% growth for our <unk> sales. So it's a.
Healthy pipeline and saw healthy activity, it's not.
Our only.
Dependent on Covid of course, we have a cookie civilians NGL solution, but this is not the main part of our portfolio here.
Does it answer your question yes.
Yes. Thank you. Thank you.
Paul on the margin.
Yeah, absolutely thanks Ralph.
Asking the question because I think.
A couple of components to be quite specific on.
I would say overall actually.
The margin impact this quarter clearly comes from a gross margin side and we are let's say 210 bps down compared to the quarter before.
And as I tried to explain that.
30 bps of the 210.
Comes from the.
Knockdown of antigen inventory and I would consider that this is kelly.
It sounds like what I would call it probably.
Probably quite unusual, but so far our expanded quite well.
The remaining 80 bps comes actually.
Of what I would call almost a.
Covid environment and has to do with two factors first of all I would say in the third quarter compared also towards our prior quarters, we have seen probably somewhat higher contributions within the corporate product revenues.
From.
PCR solutions as well as from our customers by Qiagen, meaning our enzyme businesses why as we always have a certain level.
The prepared remarks, <unk> was a bit lower than that so I think that was also something.
Portfolio.
The difference was in the corporate.
The portfolio was in the third quarter. So overall this is quite obvious that and behind that is.
As I apologize a shot reasons, but well let does that you'll recall is that we clearly heavily invested into automated and scalable solution for a class that businesses.
As we had.
Last year Oh, that's just.
Yes, Phil.
As you know much more demand or supply are we believe going forward with now having lot Shah.
Opportunities more automated solutions that shouldnt be the case, but therefore of course, we had investments and of course that is not the one in Ghana.
On a reasonable utilization right now so I would say that is the impact to NIM.
And having an impact on the gross margin for the quarter.
Alright, great. Thank you.
Our next question comes from Derik de Bruin with.
Bank of America. Please go ahead.
Yes.
Hi, apologies I joined late so apologies if I if.
Someone already asked this but what are you embedding for.
Your COVID-19 expectations in Q4 and right now for 2022.
I mean, obviously, it's been a bit better recently, but just would love to know your go forward thoughts.
Derek I mean, thanks for the questions and no worries.
We have not changed what we said early July this year.
So we are not taking any assumptions.
For Q4.
For 2022.
That are related to how you a surge of co video game.
So we keep the same assumption that we gave you early July.
And the way I would propose you to seat.
Is that we will always make sure that we will adjust our output capacity. So that we can answer any new served so it will always come as with boom, but we don't want to.
However, our members depending on that volatile.
Number so no change for Q4 assumption no change for 2020 to assumption if there is something it will come as our bodies.
Got it and in terms of your pharma and academic customers and particularly as it relates to instrumentation are you seeing any sort of signs of that.
A pickup in fourth quarter demand in the typical year end budget flush.
Unusual spending dynamics as we sort of head in there I mean, obviously a lot of these customers are flushed with cash in.
Just wondering if you're sort of seeing an incremental pickup in some of these markets. Thank you.
We have seen because.
There are two ways to see first of all on companion diagnostics you have seen the razor good results that we have posted in the.
In Q.
Q3 was a good double digit growth.
Interesting reserved we are also.
<unk> bye.
A new trend that we see in companion diagnostic which is the rising demand of pharma.
Towards our digital PCR solution.
So the way you should see Qiagen now in companion diagnostic is probably the only company able to offer.
Solid PCR solution for companion diagnostic.
NGL solutions, thanks to our partnership.
Illumina and our <unk> portfolio, but also in our digital PCR. So this is promising for the coming year.
For the coming year.
Among 10 years obviously.
Joseph kind of.
Dimension of use fees, the direct life science sales to pharma.
We have not seen any specific push it depends on the geography I would say in Q3 on the contrary, we have seen Europe a bit.
Lower than expected why because labs, and even pharma orders were a bit slower than expected we see it recovering now in Q4, so no major disruption to our normal trends here.
Thank you very much.
Our next question comes from Scott Bardo of Baring Bank. Please go ahead.
Yes, thanks for taking my questions.
The first question please.
CRE you alluded to it a little bit, but M&A chatter has accompanied the qiagen case for many years now.
So.
Question is.
It is disruptive or distracting intently and how do you keep your employees and leading managers focused and committed to execute to the best ability inside the organization amid all of this roadmap.
The second question may be pulling Roland please.
Historically, we've been accustomed to our mid term guidance framework for Qiagen.
Is it something the organization is working on and perhaps you can highlight if so when we might have that delivered to the capital markets.
So I propose that once again, thanks scope, we can take this.
How we keep focus on our employees focus.
Through those rumors I believe because our hosts first.
First of all are extremely mature.
They know.
The governance of our company.
No the perfect perfect alignment between the board and the managing board on those question they know that.
Strategic comms and that makes sense for the Criterias.
Before okay.
Okay that could be possible, but they know that that's not the priority at the moment.
If we continue to deliver and deliver and deliver on many dimension was 30 sales obviously, but also development of LNG portfolio than we have every opportunity to remain an independent company and they know that so basically.
Pink refocusing the company.
Onto the <unk> group also hope helped too.
<unk> increased that sense of focus and basically we are extremely open in our communication with them. So I don't see any clear problem of execution here and again.
As we have said in the call and in the first answers. We are just talking about rumors here. So on the midterm guidance remember in the in our.
Qiagen day.
December eight we gave you some some pretty precise.
Also midterm guidance on many dimension.
So I think we have given you some clearer indication, but how long you might want to chime in here.
Thanks for that tenure and yeah, I would say.
A couple of observations here.
First of all just don't want everybody on our call.
But.
On the non covered side.
Since 2019.
Nothing has changed in terms of guidance or forecast.
Our midterm planning.
Other than that from time to time, we actually upgraded our forecast.
This is what we have seen volatility unfortunately and therefore.
<unk> to our guidance last quarter.
The Covid impact and I would say, we all agree that COVID-19 remains volatile so I would say our focus right now is.
Driving on what we know to since nine quarters quite successful our non COVID-19 business.
Eddie if corbett.
Creates more demand to deliver that I think that a set of Australia, a high priority for us and is still.
But creating a better forecast and visibility.
Just within the Qiagen is not an easy target. So we have to find a solution for that is the ongoing discussion Scott we're having actually entirely how we can do so and then the way to reasonably present that is outside.
Thanks, guys.
Our next question comes from Jack Meehan of Maffei.
Thank you good morning, good afternoon.
Terry was hoping to get your thoughts on the China region, there's been a lot more noise in the diagnostics world related to.
A more centralized purchasing and also efforts to promote local manufacturers in the region and was curious what you're seeing and how you feel like Qiagen is positioned.
If that becomes a bigger deal.
Yeah.
So first of all we.
Sure.
Highlights.
The magnitude of numbers.
Okay, Yeah, Jen has been in China for long and we want to stay in China, It's a very important market, it's a growing market.
However, our exposure.
To China.
Means limited.
That doesn't mean that we are belittling the importance of this market, but we are talking about an overall revenue of slightly below $100 million.
Compared to our competitors, which is now surpassing $2 billion that set the stage.
Sicker.
You probably are aware that they have been working and living in China for years.
And the trend towards growing nationalization of healthcare in China is knocking it has started many years ago.
True.
Is becoming now.
More and more let's say pressuring flooring company.
A different lever.
Pressure towards local manufacturing and development its not just our core manufacturing anymore.
You have alluded to.
Some purchasing decision is what we call the GBP.
Volume based procurement system.
Which is trying to push pricing down and you have seen. The example of what has happened recently in the <unk>.
Proteins in China.
So what are the assets of <unk> in front of such.
Brent.
First of all you probably know that we have low corn costs.
CDT.
For local development and manufacturing it in Shenzen shall.
So we can also localized products.
Second.
We probably are one of the few if not the only company in China.
To have a second brand.
Not only we have <unk> in China, which we have a second brand, which is fully Chinese <unk>.
<unk> Tianjin.
And there are clear firewall between our activities on carriers in China headquartered in Shanghai.
And Tianjin headquartered in between.
And I think it's the right strategy.
There is no question.
That for the coming weeks and months this trend will accelerate and therefore questions such as <unk>.
<unk> solutions to local Chinese partner.
Doing more development locally.
Will become critical.
And we are already.
Reshuffling dose question into our Chinese strategy for the coming.
So we are clearly on it at the same time again.
Yes.
We need to see also what is our real exposure to this market in revenues at that moment.
Great. Thank you.
Also wanted to probe you a little bit on the trajectory for new modem and highest stat for here or any preliminary thoughts around what the 2022 contribution could look like.
And as we.
Just look at the third quarter numbers for both products revenue was pretty stable sequentially. I think every other molecular competitor Thats reported showed sequential growth.
No.
Just curious about the utilization youre seeing for those instruments and why it might have been more constrained versus what peers have reported.
Yeah. Thanks for the question.
I think the way you should look at it is first of all considering.
The overall demand for Covid.
Those two solutions that annuities.
Very clearly and as we disclosed in 2020 and 21.
We're still heavily impacted and driven by COVID-19 respiratory usage.
And so the context.
If you look just at the U S.
In January at the peak of the contamination in the pandemic.
The overall companies active in molecular biology, we're shipping one 5 million tests per day.
PCR test in the U S.
When you go to end of June.
This number came down.
Q3 hundred 50000, PCR test ship per day in the U S and Thats the same trend in the rest of the world.
So we obviously had to adjust our output for both system.
And then.
Starting mid July.
We are faced with a surge of demand.
The first decision of USD was to pull back some of our contractors and I remind you that not sure.
Load qiagen with fixed cost that will not be sustainable in a post pandemic, we are massively using.
Contractor. So first was to call back contractor to basically phase the demand again with the second criteria was to make sure that we were delivering on the existing store base not to create custom refrigeration rather than extending first the installed base and I think that was the right choice.
And now that we are coming into Q4, we can again looking at extending the installed base.
For the prospect for the future we keep the same message.
It is a menu play of both our revenue plan.
They will not depending before the pandemic on COVID-19.
And there will be an qiagen portfolio for many years and as you know and as you have seen we have delivered on our commitment for 2021, we said today again that will be submitted for the U S forecasts that before the end of the year that mainland <unk>.
Will be delivered in Europe before the end of the year.
So this is what we continue to execute the same for pneumonia. We said that we would have <unk>. For example that just turned to GBS and our LTC portfolio registered this year in the U S. We are on track to do that.
In the U S as well as you have seen we received a grant from the U S government to continue to expand the manufacturing.
Capacity of new <unk>.
Following his presentation said that we have just opened in heat has done what we call the large scale line.
Okay, Yes that so now we are going to have obviously, a better automation to delivered higher volumes.
Last but not least on carrier that we said to you that we would deliver in each one of next year.
Reader, we are perfectly on track to launch it.
So basically.
We said that <unk>.
Excluding obviously the headwind.
Over COVID-19, those two pillars of growth are on track for double digit.
The growth rate and we maintain that assumption.
Thanks.
We will take our last question from Dan Brennan with Cowen. Please go ahead.
Great. Thank you thanks for taking the questions maybe just a two parter.
One just short term I don't know if you disclosed for the fourth quarter, what can we be thinking about for the base business kind of ex Covid and Covid in <unk> and then I have a follow up.
Yes Africa takes that's hi, Dan.
You laid out in his remarks, we use the same assumptions.
For the fourth quarter guidance in terms of corporate business.
Wish we were using in July when we have given.
Our guide for the third quarter to what <unk> was.
While as I expect.
Based on that.
Assumption, probably kind of a 30% drop in corporate revenues compared to the fourth quarter of 2020.
If you then calculate that back and look into our guide that probably at Gibson and overall non.
Non covered business lets say it.
Mid to high single digit.
Great Roland Thank you for that and then.
Maybe like looking at the underlying trend on like a two year basis isn't appropriate.
In your business or maybe COVID-19.
Makes sense.
You have to look back more than your average, but if we look at what your base business.
I've done the last couple of quarters, you grew 17% this quarter, you're thinking about mid to high single next quarter.
The lack of Europe against pretty easy comps.
Like when you average it out it looks like you are.
You're kind of implying like a low single digit average growth on the base business in <unk> and.
And this quarter you go back four so I'm just wondering like is.
Is the base slowing down is that math right.
Appropriate given that you're expecting kind of double digit growth in the next year to kind of understand that thank you.
Yeah first of all having a mild winter if you look at the growth numbers for the fourth quarter for non Covid, just given having mindset as our fourth quarter last year was extremely strong for us.
Our non Covid business.
The jump from the start to the fourth quarter last year for an on about $50 million on a non COVID-19 side. So again that is something what you asked because there was a lot of like Callaway impacts in the fourth quarter last year non COVID-19. So I think that actually is a comparable for non COVID-19 are difficult in the fourth quarter.
I think.
Looking forward and again guidance.
All of this gives us probably early next year it has to do with.
The strength of our five core pillars of office space that we feel quite strong about all five of them. We hope that trend continues.
Mr menu expansion, which we are clearly planning also even beyond that some of them are quite early in the lifecycle. So I would say we are optimistic of onset. So one thing we don't know.
We are seeing sweating all are getting normalized is that in the past if call. It was up mark Colby for somewhat down we see that now.
Everybody in particular has elapsed trying to go back to normal.
Corporate costs stronger and sometimes even COVID-19 adds to that.
Nobody knows what the new trend will be next year.
Certain assumptions.
I think right now we do not want to lean out the window. So much while the deliver on what we set before we have now nine quarters in a row, where we again that quite developed non COVID-19 side that is continuous.
Great. Thanks, Ron.
Thank you Dan.
I think with that we're going to end the call right on the hour and thank you again for your participation. If you have any questions or comments. Please don't hesitate to reach out to Phoebe me and we're always available and can get Pterion Roland.
You as well quickly thank you very much.
Thank you.
Ladies and gentlemen, this concludes the conference call. Thank you for joining and have a pleasant day Goodbye.
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