Q4 2022 Qiagen NV Earnings Call
Repaired remarks will be followed by a question and answer session. If you would like to ask a question you May Press Star followed by one on your Touchtone telephone. Please press the star key followed by zero for operator assistance.
At this time I'd like to introduce your host John Goll Rd, Vice President head of corporate Communications and Investor Relations at Qiagen. Please go ahead.
Thank you Katie and welcome all of you for and thank you for joining our call today. The speakers are Terry Bernard or Chief Executive Officer, and Roland Packers, Our Chief Financial Officer also joining us today is Phoebe loh from the IR team. Please note that this call is being webcast life and will be archived on the investors section of our website at www.
<unk> Dot com.
Today, we will first have some remarks from Terry enrolling their move into the Q&A session.
Presentation with details on our performance is available on the IR section of our website along with the quarterly release, we will not be showing the slides during this call, but we encourage you to review those flights in conjunction with the discussion.
Before we begin let me cover as usual our safe Harbor statement. This call discussion and responses to your questions reflect the views of management as of today February eight 2023, we will be making statements providing responses to your questions that state or intentions beliefs expectations or predictions of the future. These constitute forward looking statements for the purpose of it.
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 U S Securities and Exchange Commission and these 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.
All references to EPS refer to diluted EPS, a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in our press release and the presentation.
That I'd like to now turn over the call to Terry.
Thank you John and obviously, a welcome everyone and a big Thank you all for joining us.
We are pleased to report a solid close to the year with our performance in the fourth quarter of 2022 that again exceeded our outlook. Our teams at Qiagen are doing a great job ensuring their capabilities to proactively respond to new development with agility and to execute successfully in a volatile.
Environment.
It's a very important point before we move on our quarterly report, including the news that re bright has been appointed as a new member of the scientific Advisory Board of Qiagen.
As many of you may know reaches an American immunologist, who is an expert in vaccine drugs and diagnostic development with a significant public health track record. We are pleased to add these deep expertise to our team of advisors.
No let me go through the top messages for today.
We exceeded our outlook for net sales growth and adjusted EPS.
For the fourth quarter and for the full year 2020.
Once again the primary driver was double digit CER sales growth in our non COVID-19 product groups and 75, I 75 plus percent of the outlook.
For both the fourth quarter and full year of two focal in 'twenty two came from sales in non coated product groups.
While the sales force product using Covid testing decline as expected for both the fourth quarter and the full year or go to 2021 periods net sales for the fourth quarter were $551 million I'd see E R and exceeded our outlook for that piece.
$520 million.
Our non COVID-19 product groups delivered 15% growth over the fourth quarter of 'twenty, one and represented 87% of our total sales.
For the full year to 410 and 22, we also exceeded our outlook for net sales.
As a result of $226 billion I E. R. This was above our outlook for the boat to $25 billion.
Our non COVID-19 business performed well throughout the year with 14% CER growth for Q4 going into 'twenty two.
Sales of products used in Kobe testing as expected declined significantly and finished the year at $498 million C. E R compared to 794 million daus in Q4 going into 'twenty one.
Adjusted earnings per share for the fourth quarter were 55 cents, she or he bought what's the outlook for at least 50 Science C E O.
Well, the 40 or two for going on 22, adjusted EPS was $2.46 C. E. R. And this was also above the outlook for about $2 40 per share at C. P. R.
Wrote on religion, Colorado resorts at actual rates and as you saw in the press release these impacted by significant currency headwinds.
Our second key message our teams executed on key goals in 2022 to advance our same board sample to insight portfolio.
We are very pleased to report that all five pillars of growth exceeded their respective state it's Gordon.
We're free new platforms, Okay, yes that diagnostic pneumonia extend cash equity or achieved the goals. We set for instrument placements. We also saw solid demand trends for consumer board and instruments in our central technology bought for Ya.
Our quality film franchise continued to grow and broke through the might've stores or $300 million of annual sales and exceeded the 2022 target as well.
I will let you walk you through an update on the 2022 achievement later.
As a third key takeaway message our cash flow continued at a high level for the year, allowing us to invest into the business to increase shareholder value.
Operating cash flow for 2022 rose, 12% to $715 million, while free cash flow increased 30% over 2000 $21 million to $586 million.
Those results highlight our ability to generate strong cash flow, while investing to support our growth ambitions as part of a very disciplined capital allocation strategy.
A Prime example is the recent acquisition of Virgin.
Okay. Yeah, Jen as you know has been very active in human identification for the last 20 years, primarily thanks to our sample technologies portfolio.
I think Virgin means that we are creating the most complete workflow.
From sample prep to genomic analyses for human identification and forensics based on next generation sequencing.
This is really the type of merger and acquisition that we are focusing on deals that are extremely synergistic with our portfolio and enhance our growth profile.
Lastly.
We have taken a prudent approach to our outlook for 2023.
Given the macroeconomic trends, while continuing to expect double digit CER sales growth in the non covered portfolio.
Four to 423, we expect sales of at least $2.05 billion at constant exchange rates and for adjusted EPS of at least $2.10 C E. R.
We continue to feel confident in achieving the double digit CER growth target for our non core product groups.
New year of 2023.
While also planning for a significant decline in COVID-19 says.
We also recognize the volatility of the current environment and the impact it can have on some parts of our business.
So why do we recognize these ongoing volatility in the market. We are confident in this outlook for the full year 2020.
Our teams all over the world are ready to again deliver on our full year goals with a great portfolio.
Our solid pipeline of instruments and customer knowledge to support our growth our growth ambitions I would like now to hand over to ward off for a review of our financial performance for the year of 2022.
Thank you Teri Hello, everyone and thank you for me as well for joining us today, let.
Let me start with a review of our results for the fourth quarter and the full year 'twenty two and then move on to the outlook later in the call.
Fourth quarter net sales were 498 million U S dollars at extra weights.
What was the year ago period represented a 40% decline at extra weights due to the expected currency headwinds of about five percentage points.
In the fourth quarter, we again saw better than expected growth at our adult COVID-19 product groups with these sales up 15% see a what was a year ago period.
For the full year 'twenty two non COVID-19 sets were up 14% CER and in line with our outlook for double digit C alcohols.
As expected sales from the Cobot product group declined was 60% CER for the first quarter of 'twenty, one and were also down about 30% for the full year to 470 million U S dollars at extra weights.
Consumables and related revenues fell 11% C. At the fourth quarter, what was the year ago period, showing the impact of the decline in COVID-19 product sets.
Instrument sales were much stronger out of the fourth quarter of 'twenty. Two why is it 6% CER. This show subtraction of our new systems again. This shows the traction our new systems are gaining in the post pandemic environment.
In terms of sales among the four product groups, let's start with <unk> technologies.
This product group represents the heart of our portfolio contributes about one sort of towards since.
This product group continued to trend of solid growth in non covered sales throughout 'twenty two and this sets forth at high single digit CR rate in the fourth quarter or was it a year ago up here yet.
For 'twenty two non COVID-19 sits at just product coupons or the mid single digit CR rate and represented a large majority of full year results.
This result exceeded the 22 overall sales target for at least $7 $50 million at C. L.
D agnostic solutions, it's our second product called it represented about one sort of sales in 'twenty two.
The key driver of this group was a quanta fear on franchise. Please.
These sales was 15% see out in the fourth quarter in all regions and supported a 21% CER for the full year or 'twenty one.
This led to all this led to our teams exceeding the full year sales school for at least 310 million U S dollars at C. L.
We also reached a milestone for Qantas filling in 'twenty, two surpassing $2 billion of cumulative sales since acquisition in 'twenty.
Sure.
Forecast statistics, we continue to see increasing demand for system placements and growing consumer usage of wants abroad more than half of the chaos that excels in 'twenty. Two came from they have healthy non COVID-19 demand full year sales forecast start to X exceed.
That's the target.
For at least $85 million, let's see yeah.
But nobody X. It's a decline in sales for 'twenty to reflect its effect set about to sort of sales came from COVID-19 testing.
However, my body aches, yet still exceeded the 'twenty two targets for at least $80 million at CER.
And driven by six ventures quarterly golf and nonwoven applications from the third quarter to the fourth quarter of 'twenty two.
In the PCR nucleic acid amplification product group, which represents more than 50% of total non covered product group sales force about 20% CER compared to a significant decline as the COVID-19 product groups.
Kai accurately is our entry into digital Pcr.
And is it truly just product group sales grew at a strong double digit CER pace for both the fourth quarter and full year as full year sales exceeded the 22 target for over $55 million at C. L.
A key driver was the ongoing solid placement trends set reached over 1300 total placements at the end of 'twenty two.
We also saw increasing consumer goods, which was supported by the recent launch of U S. S. Four by our Biopharma customers.
Cause the genomics and yes product called which represents more than 10% of total non covered product groups sales were also high out what was the fourth quarter of 'twenty Rob.
Performance was led by our Qiagen digital insight bioinformatics business and the expansion of our offering and jobs of Universal N. G. S for use with any sick themselves.
Looking at sales on a geographic basis, all three regions had lower sales in the fourth quarter of 'twenty two over the year ago period and also in most regions on a full year basis for 'twenty two.
This was due to the significant decline in COVID-19 sets. However.
However, all three regions had solid non COVID-19 sales growth trends at constant exchange rates.
Is that Americas Nonwoven product group sales for the fourth quarter horse more than 10% CER, what was a year ago period and led by solid gains in the U S.
Europe Middle East Africa region. It was a similar situation with non core product groups. That's why is it over 20% CER to top performing countries in terms of non corporate sales include a Germany, France, Spain, the United Kingdom.
In the Asia Pacific, Japan region see ads as a non core product groups was about 7% C. I the fourth quarter and were also up 8% CER for the full year over 21.
That's in China was in 'twenty, two and this is a big achievement by our teams given that the country was essentially in lockdown enjoying most of C E O.
It was driven by sales of sample preparation.
Yeah.
Yeah.
Yeah.
Right.
Yes.
Yes.
Yes.
Okay.
Oh, Okay, now lets things, but again, okay. Okay sets in China also in 'twenty two and this is a big achievement power teams given that the country was essentially in lockdown. During most of the year. This was driven by sales of sample preparation kits and enzymes to the first half of the year related to the Covid evolves.
And we continue to closely monitor the situation as a local market landscape evolves.
Because the rest of the income statement.
I'd like to focus on our results for the full year of 'twenty two.
The adjusted operating income margin plus 36% upsets in 'twenty, two compared to 33, 5% in 'twenty. One. So this was mainly due to our decision to exit a weighted investments into the business to support so I was like wharf opportune at this time.
Turning to the components adjusted gross margin was 67, 7% of sales from 22 down slightly from 67, 9% in 'twenty one.
The transfer 22 included favorable margin developments for kind of start to X due to high argue utilization and improvements in cartilage production at the same time, we have opportunities to improve gross margin in particular about driving better utilization of production capacity.
Do your investments close to eight 9% of sales from eight 4% in 'twenty one as we continue our investments during 'twenty, two especially into new tests for our systems.
It's in marketing expenses was <unk> 22, which is 22, 1% of sales compared to 23% in 'twenty one.
Turning to results with with all its effect at a higher level of commercialization activities. After the slow slow down during the pandemic as well as incremental investment into the five pillars of growth in light of strong non COVID-19 sales trends.
In terms of General administration.
<unk> expenses. These are all slightly to six 1% of sales from about five 7% in 'twenty. One as we are seeking efficiency gains, while making significant investments into all our I T infrastructure and cyber security.
Adjusted EPS for 22 was $2 46 at CER and.
The buses the outlook for at least $2 and 40 sets C E O.
Cause that extra words, what to dollar in Saudi Saudi it sense due to the strong currency headwinds suggested Texas for 22 was 18% and at the same level as in 'twenty one.
Turning to cash flow for full year 'twenty true operating cash flow was 12% or about 21 to 750 million U S dollars. Thanks to the solid business expansion.
Free cash flow was at a faster, 30% pace to 586 million U S dollars.
This was due to a combination of the higher operating cash flow along with a reduction of the level of purchases of property plant and equipment. After a period of higher levels in 'twenty to 'twenty and 2021.
These investments fell to 6% of sales at 22 from eight 4% in 'twenty one.
In terms of our balance sheet, our total causes that the net debt stood at $4 $43 billion at the end of 'twenty 'twenty compared to 876 million you asked us at the end of 'twenty one.
This reflects the solid cash flow trends, while that's the same time, we pegged that at maturity.
As a result, our leverage ratio stood at five times net debt to adjusted EBITDA at the end of 'twenty two compatible pod nine times at the end of 'twenty one.
In terms of capital deployment, we continue to take a disciplined approach that has served us well.
He wasn't going to have a healthy balance sheet to strengthen our business through investments and targeted M&A. While also considering ways to increase returns so share repurchase programs in terms of M&A activities. We have completed two bolt on acquisitions recently she is involved the purchase of blood in 'twenty two to further develop.
Our ends up production capabilities.
Actually the acquisition of <unk> in January of this year to advance our human identification and forensic capabilities.
We continue to review additional acquisition opportunities with a keen focus on strategic fit and financial discipline in terms of classes.
We also review ways to increase their trucks with shell approaches programs. They really consider these options as the year progresses.
I'd now like to hand back to tell you.
Thank you all and I would like now to provide you with some more details on the progress of our teams in 2022 undergoes faulty program in 'twenty.
First of all let's talk about Central Tech as you may have seen we recently launched another instrument upgrade with the release of the new easy to go naked molecular diagnostic jeez, there shouldn't you specifically registered for use in diagnostic laboratories in Europe , and all the areas accepting the C E.
IBD Mark these launch expense the easy to connect line of instrumentation, which was first released in 2021 and two whether it's research and forensics customers.
Even in light of the instrument placement during the pandemic, we continued to see good trends during 2022.
This is a very positive signal about the value of our portfolio and should support future consumable trends.
As an example at the end of 2020 jewelry reached a new milestone with over 3200 cumulative placement of the flagship carrier it seems when your system to catch up.
Q family. These past 14000 cumulative placements, while easy to one and easing to family reached over 5000 cumulative placement.
And the strong instrument placement trends, we're also seeing among our clinical testing platform.
Talking for example about carriers that they use.
We feel best 3005 under a cumulative placements at the end of Q4 going into 'twenty two.
We saw good demand for respiratory testing at the end of the year driven by the need to distinguish between influenza and areas being fixtures as well as further south coast South Dakota virus.
Just really once again shows the value of Syndromic testing beyond Kobe.
Core lab testing, new Moody's is also making progress transitioning to a non COVID-19 youth, especially outside of the U S.
Where we have one of the broadest menus with 16 CE IBD test.
About 300 platforms I've been cumulatively placed in laboratories worldwide.
We see as already are about more than 10% of the market share of the leading competitor who reserve that qiagen achieved after only two years of active launch of a new Moody's.
Our last focus on instrument placements in Bulgaria quickly.
Our solution for digital PCR.
G system are making solid market share gains based on achieving over 1300 cumulative placements.
In just over two years since launch.
This is a very strong base for future consumables growth as we focus on extension with research and Biopharma customers. As you know we are also preparing for important regulatory submission by the end of 2020 free to bring the power of carriage equity two clinical customer.
Yes.
Of course, our strategy around our five pillars of growth does not exclude the fact that we are also seeing good growth trends in our core business.
Pivotal advancement in those portfolios are worth mentioning as well.
For example.
Our companion diagnostic program. The FDA has approved a new favorite screen I'd say for non small cell lung cancer to identify patients eligible for treatment with the drug from Murad T. He rapidly ex U.
This adds to the portfolio of more than a dozen F. D. A approved oncology assays that qiagen is developed with a range of pharma partners.
In this business of companion diagnostic we are expanding beyond oncology with a new partnership with ethics, which was announced at the start of 2023.
We want to advance companion diagnostic for use in improving outcomes for patients with hereditary diseases.
This comes on the heels of a new partnership for example, with new round, two and 23 signed in 2022 for the development of a companion diagnostic for Pakistan disease.
As a reminder, okay you didn't guarantee as more than 50 master collaboration agreements with global pharma and biotech companies in fact.
Yeah, Dan is probably the only company in precision medicine, offering technologies and solutions ranging from Ngls to PCR.
Digital Pcr.
In our genomics.
N G S product group.
Our decision to offer a platform agnostic consumables and bio informatics is still being Earth and I went in ges customers quite well.
For example in.
Okay agenda digital insights, which is our bioinformatics business, we have announced a partnership with a T. C. C to launch a new database to lose Biopharma researchers to select relevant say lines for drug development.
Both the union sort of N G S consumable encouraging digital insight bioinformatics portfolio has historically grown at double digit C. E. A race and we continue to believe in their capacity to generate ongoing solid growth.
So as you can see our teams have been working hard to build value in our portfolio and execute on our overall strategy.
To progress not only our five pillars of growth, but also labor rates our core expertise.
And now back to Orlando, Florida, we're too far gone in 'twenty three outlook.
Thank you Terry.
Let me provide more perspectives on our outlook for 'twenty three and also for the first quarter.
We have initiated our full year sales outlook for 'twenty suite for at least two part or 5 billion U S dollars at constant exchange rates.
As noted earlier, we are planning for double digit CER sales growth for the full year and the non COVID-19 product groups and this represented 167 billion U S dollars in 'twenty two.
It's the same time, we expect COVID-19 product group sales to decrease to about 200 to 210 million U S dollars at sea or in 'twenty suite from the 22 level of 470 million U S dollars.
As a reminder in 2019.
But how about 50 million U S dollars upsells from various product groups that got redeployed for COVID-19 testing. So this forms a baseline to consider for the future.
Our strengths is that we have a resilient portfolio, particularly with the high shelf Victorian cultural goods that will help us to have heaps of double digit CER target.
<unk> also recognized the short term so that we are facing a more volatile environment.
Some areas of support such a sign off and also some areas of our portfolio such as our OEM business.
However, we are not seeing any signs that life science research funding is decreasing noise. That's a clinical reimbursement environment is more challenging than usual.
Why are we foresee a sad exploration during the year.
In terms of profitability, we have initiated an outlook for adjusted EPS to be about $2.10 at constant exchange rates.
This includes the three central Lucian forms of Realogy acquisition.
We are intensifying our initiatives to drive our adjusted operating income margin adopts a pre pandemic levels.
Our teams are focusing on continuous operational improvements shots ex expanding our digital customer engagement, while also investing in the business and supporting our employees and the current inflationary environment.
In light of these factors, we have set an outlook for the first quarter of 'twenty three for net sales of at least 490 million U S dollars at constant exchange rates.
Adjusted EPS is expected to be at least 47 cents per share.
At constant exchange rate.
As for currency movements, because they expect adverse trend against you asked a lot for at least the first half of the year, but to become more positive in the second half.
Based on this expectation.
Using exchange rates as of February Frost twenty-three currency movements against the U S. Dollar I expect it to have a neutral impact on both net sales and adjusted diluted EPS on a full year basis.
The first quarter, we expect currency headwinds to have an adverse impact of about two percentage points on sales and about one cent one adjusted EPS.
<unk> now had back to Teri.
Thank you went on as we are coming to the end of our call. Let me provide you with a quick recap of our key messages before we move into the Q&A session.
Our results for both the fourth quarter and full year 2022 exceeded the outlook for sales driven by double digit CER gains in the non Covid group of Qiagen product.
We also exceeded our outlook for adjusted earnings per share and delivered another year of strong cash flow.
Second.
Our team has made excellent progress this year on advancing our sample to inside portfolio, especially but not only in our five pillars of growth.
All of the five pillars exceeded their two fold and then 'twenty two targets in terms of sales and so solid gains in instrument placements.
Sure.
We are continuing our disciplined capital allocation policy that has served us well for many years.
We have a healthy balance sheet that will enable us to continue investing our business, while considering ways to increase returns and create greater value.
And last we have announced an outlook for 2020 free that continues the trend from 2022 in terms of double digit C. E O nonwoven sales growth for the full year, while taking a prudent view on the current macro trends.
Oh purely again today.
We have conveyed to you our determination to continue to execute.
And deliver on our commitments as usual.
With humility.
With a clear determination.
So while we recognize the ongoing volatility in the market. We are confident in our outlook for the full year I will teams are ready to again deliver on our two fold in in 'twenty three full year goods with a great portfolio.
The solid pipeline of instruments.
So deep customer knowledge to support our growth ambitions with that I'd like to hand back to Joan and European retail for the Q&A session. Thanks a lot.
Thank you 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 Q to ensure we can accommodate as many people as possible. Please limit yourself to only one question and if necessary one follow up your microphone will be muted after you finish asking the questions.
Anyone who has a question May press star followed by one at this time one moment for the first question. Please.
Yeah.
The first question comes from Patrick Donnelly.
Citi. Please go ahead Sir.
Hey, guys. Thank you for taking the questions.
CRE, maybe one for you I'm sure I'm sure Roland can jump in as well just in terms of the cadence throughout the year for 2023, it sounds like <unk> going to be the low point for growth and margins, but then you got to ramp from there obviously the count dynamic.
Can you explain some of that but can you just talk through some of the near term headwinds, obviously, China sounds like its piece the OEM side maybe.
Maybe the impact there and then just your visibility into the growth and margin improvement as the year progresses, what are the key drivers there. It sounds like the end market health is right, where you want it just navigating through some of these near term.
Headwinds in comp dynamics, but I would love a little more perspective there.
Thanks, Patrick and as you said, obviously or Don can chime in.
So first of all talking Q1, there I think what our night both of you did you the rational behind our.
Guidance for Q1.
First of all obviously, we are a very proactively look and consider and recognize our economic and financial environment. That's number one second as you know there is a significant base.
<unk> Q1, 2023, compared to Q1 2022, where by the way in Q1 two program in 'twenty two COVID-19 testing was extremely extremely strong.
Oh, I'm, sorry, we highlighted.
To elements Crystal ball or.
We take a prudent look at the Chinese market for many reason because over the last three years, we have constantly.
A huge some Chinese company with components for their own a.
Coffee tasting D C disappearing its particular resells around enzymes and those are components.
And we know that the.
Current market in China is impacted by different factors post obviously COVID-19 recovery.
Still effects in some regions of locked down so it's better and I think for you and for us to take a prudent we still consider China is an important market, but we are cautious seeking and nothing surprising because we have kept saying that in the past we are see a more volatile OEM a b.
In Q1. This is not surprised this is the nature of our.
OEM business, which has always had those are volatile a feature.
Over the rest of the year, we see as Warner highlighted a constant acceleration of our business first of all because as you have seen last year.
Starting Q2.
Most of the beats.
Quarter after quarter, we're coming from non Covid.
So this is also obviously go into helpers in the rest of the quarter the impact of Covid itself will decline. So the comp is going to be a better second as we said we have a clear vision of our pipeline of instrument.
Therefore, we have also some vision on the potential recurring consumption on consumer board onto the instruments.
Last but not least.
Do not forget what we have given us a number for Q4 more than 75% of the beat of Q4 east coming from the non covered portfolio. So DSO losers as were to believe that there will be this acceleration quarter after quarter.
On the gross margin and <unk> margin I think Oh, what also is you need to do that in the presentation today.
We continue to believe that we have to get over efficiency, especially around our investment around.
Digital sick.
Second as you know part of our portfolio, especially in the five pillars he's made over.
Very new products, who have not that have not achieved the optimum ratio between cost of good in volumes, we have seen a chaos that really improving well.
In 2022, we need to continue there and so this is why this is why we are also confident that we can improve those two dimension both on the gross margin and the EBIT margin.
How long do you want to add something.
No I think we're all set.
Thank you we'll take our next question from H&R, whereas more of Morgan Stanley . Please go ahead.
I hope, it's not only me, but I do not hear the question.
Hello.
Okay.
Operator, let's move to the next person.
We can okay. Thank you can't Asia.
Thanks, Hi, Tony.
Yeah, we can thank you so much great excellent yes.
Just one on around the bioinformatics news last week could you confirm that.
And what would be a mistake sale or outright sale of the business.
It'd be a means to free up some capital towards other investment priorities could you talk to that.
Thank you.
Your voice was breaking up so I breaking out so I hope that I captured the question I believe that you asked around the news.
That we were potentially considering alternative for our bio informatics bioinformatics portfolio so clear.
Clearly what we can say today is that.
It's not just about value informatics for every part of our portfolio.
We constantly look at I've done it cheap.
To offer better potential of growth better return on investment better optimization of this portfolio and so that include as well bioinformatics.
The market, where clearly Qiagen is a leader we're the market, but also a market where we believe that significant investments are needed to fully a break the code. If I may say, so oh the value of those bio informatic solution, both in diagnostics and research in oncology or hereditary.
So we are open.
For many scenarios.
It indoors potentially.
Different options. What is sure is that we want to basically continued to develop and contribute to the growth of that market, but we are open to different solution. It would be premature to say, which one we'd be retained but thats the situation as of today.
Yes.
Well go next to other SaaS minute may notice with Bahrenburg.
Okay.
Hi, there thanks for taking my questions. One on your molecular instrument installed base, obviously had a strong year in terms of placements despite COVID-19 related weakness here could.
Could you give us some color on how you expect your installed missed expand of our 2023, particularly for Humidex Sky I Stat, and <unk> I mean would it make sense to expect installed base grew up and sort of normalize to a lower level compared to 23 or would it make more sense to assume that.
Growth will be led by higher utilization and then how does mobile app.
Sure.
This management or long myself. So we have no change here, we continue to have a what we call realistic ambition and that includes obviously here.
The growth of our installed base.
We see no reason.
Not to continue to take market shares.
Our forecast out for cash equity and four new Moody's.
For a different reason.
First of all because our photos free instrument, it's a menu play it's not a cookie play two menu play. So we have added biopharma application for cash equity. It will help the growth of the installed base in 2020 free we continue to add new registration for pneumonia, especially in Europe , we are going to see new ones in the U S as well this year.
It's going to help also the growth of the installed base and get you a stat.
As I read the meningitis in Europe last year, we expect we hope to have G. I registered in the U S. This year, so that would then as well.
What we always say to your question is that you're right.
One of the changes post COVID-19 for probably a year or two on the market is that duration you capital sales. The best display placement will evolve much more in favor of place of placement in the coming years.
But we are used to that we are used to that because once again, we are used to sell is three months.
Where we plan on selling consumables. So we are used to place instruments as well.
Last but not least you have also this morning that we expect.
The evolution of <unk>, our digital platform solution from life science to clinical diagnostics to happen at the end of 2020 free so that would help as well because we opened a new market, which is the clinical market in oncology for the digital plus.
Platform.
We'll take our next question from Derik de Bruin with Bank of America.
Hi, Good morning, Thank you for taking my questions. So two one is a housekeeping question.
ROE and what's the assumptions for interest income and interest expense your assumptions there on overall net interest expense for fiscal 'twenty three and on your companion diagnostic business, what was that in <unk> and your assumptions in 'twenty three and I'm trying to also just sort of think about what percentage of the pipeline is P. C. R. N G S versus digital P C.
Or just trying to get a sense on how the companion diagnostic technology landscape is evolving.
And sort of are you starting to see tailwind from your switching or your other NGF strategies and some of those products that were delayed coming back on thank you.
What else do you want to take the first part of the pressure off yeah, no happy to do it through hi, Derek Yeah.
Interest.
The net interest income side I think the delta between 'twenty, two and 'twenty three.
It would take somewhere I would say, probably an additional 30 million compared to last year, depending on the cash flow and also the interest development. So I would say that's probably the delta between 'twenty to 'twenty three.
Again, a tool for both in terms of.
Our reported interest, but also on as adjusted results with another site in jobs.
On the companion diagnostic to you.
Yeah, I mean, thanks for the question I mean, we are and we want to remain a clear leader in that market.
First of all.
As we highlighted today, we leverage a unique.
Network of more than 50.
Agreement with pharma companies. So you can imagine that any time, we come up with a new technology E beta.
Yes, thanks to our partnership with Illumina or be digital PCR of youth E triggered interest in constant discussion.
So far our portfolio is mostly.
PCR base, we are clearly a leader we are not only a leader on numbers of companion diagnostic but numbers of companion diagnostic that out regulatory approved especially at the FDA.
But what is very interesting is that we are perfectly aligned to deliver what we told you.
Three years ago on companion, but companion diagnostic Engie is based.
And obviously for the last year under health, we see a significant traction with pharma of companion diagnostic digital PCR base.
One thing, which is also very important for us and gives US continued confidence to maintain this leadership is the agreement signed with Alex because.
If you look at our portfolio of companion diagnostic up to now.
Now it is mostly oncology driven and with this partnership with Salix, we all feel pharma companion with very interesting set of solutions for hereditary diseases. We started to implement that we stuck in some disease. We have was a project.
Sure.
Little sheep, we want to maintain in and this is why we invest in user solution like Ngls and digital Pcr.
And so it comes in.
That number is $40 million four for last year.
Constant exchange rate.
Yeah.
Yeah.
Thank you. The next question comes from Matt <unk> with Goldman Sachs.
Thanks for taking my questions.
I just got two quick ones asking both upfront first one sample technologies looking at that 23 guidance of 685 I'm sure. There's some COVID-19 still in there could we could.
Could you kind of help provide more color on the non COVID-19 Dell technologies' growth that you see a need at high single digits.
Last year is that kind of the trend that we should be expecting per sample attack and then.
Just secondly.
On margins for twenty-three shall.
Should we be thinking more about sort of the pre COVID-19 27, 28 on the EBIT margin side going forward and then expanding from there.
<unk>.
Thank you, Matt and I will as all onto our answer on the gross margin and confirm what we have been saying for some time on the sample taken on Covid, Yes, obviously 2020 to prove the relevance of this portfolio and our leadership because you have seen extremely healthy numbers.
Growth numbers for the non core is a.
Part of the portfolio.
Four to 423, we come back to what we have said as early.
In December 2020, which was we expect the central Tech portfolio overall to have a growth between basically are around mid single digits and this is what we want to deliver on the market year after year.
Well on the gross margin around the EBIT margin, yeah, no I'm happy to throw out is that the gross margin side I think as we said before.
All we have seen nice improvements Ah was in 'twenty two actually are on some of the areas, where we expected improvements as well, which is K I'll start with our large scale production line now.
Uh huh.
Initiated here in Hilton you clearly have seen a nice improvement in terms of cartage costs and again, even future inquiries on volume will be very helpful. Save is expected over time for normal X. As we said before nobody is clearly a business, where we do expect a double digit sequential growth.
Corporate side at the same time, clearly we have still a good number of corporate revenues in that business in 'twenty.
Two which has to be novel lives. So I would say there is an impact which would be probably the season in 'twenty, four and helping us overall utilization of our production environment.
I think the other topic, where we're going is.
Any company has to work on is clearly also a on what we see on the inflationary side I'd say it looks like right now is at stake is getting a bit easier.
But who knows how it looks in six months, so that clearly has an impact as well.
Thank you we'll go next to Andrew Brachman with William Blair.
Yes. Good afternoon. Thanks for taking the question maybe just to go back to the sample technologies business. There can you maybe just give us a state of the Union answer where things stand with the automation upgrades to that portfolio and then I guess just related to that how should we think about the impact of instrument automate automation on growth just sort of what youre seeing in terms of utilization.
Station posted up great. Thanks.
Thank you for the question Andrew I think as you have seen over the last three years.
It's not that we're going to say that Qiagen is the company that is launched potentially the most ambitious a program of updates.
And I worried instrumentation, UFC que becoming and care team connect.
Is it becoming easier.
And any time.
We launched your lifestyle ingestion and after and indeed, we are showing the clinical progression.
So obviously this is helping the growth because customers in my view, However, average five years rolling peer yard, where they start to reviewing and renewing potentially their platform and is that it hasn't.
Second anytime we have greater platform they come with a new features will be them, Iran. Baidu informatics connection or a new opening of a business. For example is it too is a bit of a platform for example for forensic.
So we opened new Sigma.
We now want to focus on the upgrade of our flexi system Symphony.
We expect these to come out probably in the second half of 2024.
And it's obviously.
So of course for us clear that if we want to remain a leader in central tick, which is once again the key first step for any kind of biologic or run we need to continue to invest both in application.
But also in instrumentation.
And this is why it's definitely one of our five pillars of growth.
Okay.
Thank you we'll take our next question from Falko Friedrichs with Deutsche Bank.
Okay.
Hey, good afternoon. Thanks for taking my question. So my question is whether you expect any potential softness and demand for equipment. This yet and I'm just asking because one of the larger that changed in Europe sounded a bit more cautious on this this week and then my follow up is if you can confirm that everything is signed so the funding environment perspective. Thank you.
Sure. Once again this is a question whether or not they're also give us a view what I can say oh.
Again, he is highlighting that hold all myself or John filling in for the last three years, we talk about realistic ambition.
Sure.
We really believe in the guidance we gave you for this year.
One of the evolution I say on the market is that probably for the coming two years, we will see more placement of instruments and pure capital sale and this is clearly an impact of the Covid time, but we are used to do that you see are we basically make sure that we contract with customers.
Based on the volume of consumables and we need to execute on those contracts we are used to do it.
Funding wise as Ron said in his own comments, if we look at the main healthcare system in the World for Research U S.
Germany U K, France, we don't see any signal that they are budgeted we'd be decrease we continue to plan for example for a 3% increase over the year and our years of CDC budget in the U S. So sure. This is factored in our numbers.
And that's what I'll say to himself as well we have not seen any more challenging.
Reimbursement.
Decision than usual and that reimbursement are something that we factor also in our in our forecast. So this is what I can say at this stage.
We want to be humble course shirts, there is a difficult environment, but we believe in our guidance and we believe in our portfolio.
Thank you we'll take our next question from John <unk> with UBS.
Alright, Thanks for taking the question actually just to part of your one would you.
Provide a revenue number on where you see the bioinformatics business I appreciate that double digit growth, but would you just frame that from a revenue perspective, and then second when you look across the five pillars of growth and in the guidance. You provided this year, you know, which one of those do you think has the most potential upside versus your guidance in 2023 and y.
<unk>.
So going first with the first pillar I think I'd like to say first let's execute on what we tell you, especially in context with some of those five pillars, namely chaos that new modem.
Simply take Uh huh.
Have a coffee plays in their in their 2022 numbers, so let's execute on what we have.
I think that as we said for the last two years.
Reschedule equity, we have really an exceptional solution for digital PCR because you have seen the growth compared to 2022 is quite significant so let's execute on that for bioinformatics I'm pleased to report that for the year 2022, or this is an activity that does achieved around $100 million.
Which makes because clearly the number one on the market I mean twice as big as our immediate number two and five time is when you get the number of feet on the market. So that gives you a magnitude of this activity.
Yeah.
Thank you well go next to Casey Woodring of J P. Morgan.
I. Thank you for taking my question. So just maybe I'll coded the guidance calls for Covid revenues between 202 hundred 10 million, that's slightly below the $220 million you plan to do at a conference last month and below the $250 million give or take a you've been pointing to prior to that I think you called so just curious as to how.
Much that called that number is de risked now in your view.
Great. Thanks.
I mean with all due respect I mean being accurate to the million on coffee, the ease or kind of crystal ball.
We have seen that in 'twenty, one we have seen that 122 and this is why I remind you all that was really the first company.
July 2021 to fully decouple, our P&L from the Covid volatility.
And yes, I mean, we believe that are all alluded to that slightly over a 200 million for the full COVID-19 taking into account our pre COVID-19 number over 100 150 million, which is a number which is growing probably between 2% to 3% per year.
Gives you a.
It gives you around EUR 60 million.
Or a bit less.
Is it fully derisk, we believe that it's appropriate view of what could be it could be this year.
It's less we would have to compensate elsewhere. If it more we would have to be relevant and continue to provide customers with coffee solution. This is the way we cede but once again the real priority in the obsession of this management is on the non covered portfolio.
Yeah.
The catheter to allude to is that a bit more.
I think the way we look at it on a quarterly perspective as it's clearly that Q1 is probably.
A larger number of corporate side and it really then costar to what to use to describe it was a.
Our normalized level, so I would say over the course of the year, you've probably approach what you were asking for.
Thank you all.
We'll take our next question from Hugo Chavez with V M P.
The question I have one on crunchy federal RTD, which I will speak in two parts. So maybe can you talk to the contribution of market share gains in Niagara testing are two concerns to be sales growth I know it evolved over the past few years and cyclones are when you're trying to deal with your partner or bucket.
2017, we were left under the impression that the extra D. D key west for a specific period of time could you. Please give us some details around that and options that you have at the moment.
On market sales or Hugo. Thanks for the questions are you you know the numbers those are numbers that we have given many times are we.
With the growth that we are showing to the market or once again above double digits. It's clear that we have taken market, we're taking market share.
We are taking market shares against what mostly against skin test.
And I remind you all that there is still a significant market to convert here probably around 60 million a six zero.
Skin test all over the World. If you just focus on the U S. It's 16 million, one 6 million skin tests in the U S. So this is where we need to put the priority we obviously.
Take market shares obviously are from competitions, but the main focus is is on the skin test.
We have a tremendous respect in this company for the partnership with <unk> that you saw in <unk>.
It has helped quantity of them I think it has helped that you saw in that as well.
And you are perfectly right in 2020 free we need to discuss exclusivity.
And he is very open and we have no dogma here, we need to start with discussion with Oh, sorry in considering their perspective their gross perspective, the investment that they agreed to put in that product and evolution of the market. This is what we can say at this stage.
Nothing is a dogmatic everything is open but we respect tremendously the partnership with Oh, sorry.
Would you add to a would you like to add something to that.
So I think it's very clear that a quantify what is there is a great success story.
For Qiagen in to be clearly still sees that the overall.
The conversion from skin test is quite low was the overall market is critical and so it's clearly a market where we stand alone but of course, all sorts of set in combination with di styles or we had great success at converting it from skin test away and I think that's that's a big thing for us.
The last question comes from Ed Ridley day of Redburn.
Okay.
Good afternoon. Thank you.
Another.
As discussed today.
Just a bit from what you estimate the addressable market was in 'twenty, two and last year.
And also.
Oh for what the underlying growth of that market was at.
And also can you remind us.
The timeline for approval of the EIA in many types of penalties.
Thanks, I hope I captured all the question because once again the line was not very good so the addressable market for us so.
We confirm that we believe that this is already a market.
What might be wrong.
One three to $1 $5 billion.
It's growing in our statistic.
Well above double digit probably between the two.
13% to 15% per year.
And.
This is how we see our the market for the years to come.
It is clear that the key success factor for chaos that.
He's going to as we said before to bring on a regular basis pneumonia in Europe vacation.
We have now the freaky assays or syndrome.
That allows us to participate in any kind of tenders in Europe respiratory Gi meningitis, we need to build this in the U S.
And our numbers for 2023.
We expect our Gi to be approved for the second half of the year.
And we will submit.
Meningitis in the U S. Before the end of 2023, so that means that we have no numbers meningitis. Because then you will have obviously a good time for approval.
And for the user use we need to continue to bring new pneumonia you that are in our R&D portfolio.
Namely a direct identification of a positive blood culture.
And our unique development, which is around the <unk>.
During a retract in fiction complicated urinary tract infection that we are expecting for those two developments you've come in the coming two years. So this is how we see it it's a menu play.
The current situation the respiratory.
Between the flu <unk> and Covid is proving their relevance in our portfolio to be able to offer or.
Not only for multiplex solution your Moody's.
Sure Blake solution for analyte, numerous MKS that and the large plate syndromic solution, Okay, yes that.
Okay. Terry Thank you very much and with that I'd like to end the call and Sue just remind you. If you have any questions or comments or follow ups issues to resolve please give me a call. We're always available. Thank you very much bye bye. Thank you.
Okay.
Ladies and gentlemen, this concludes the conference call. Thank you for joining and have a pleasant day Goodbye.
Okay.
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