Conference Transcript - QGEN 2026-09-15

Robbie Bamberger, Analyst — Baird

Alright, good afternoon everyone. I'm Robbie Bamberger, Senior Research Analyst covering life sciences and diagnostics here at Baird. We're pleased to welcome Kyogen this afternoon. Especially pleased to welcome John Pratt, who became Kyogen's CEO on September 1st. So we're catching him right at the two-week mark. We also have Roland Sackers, Kyogen's CFO in Dominica, from IR with us as well. Thank you guys for all making the trip. John, just before we get into the business, I wanted to start with you. You stepped into the CEO seat September 1st, so we're catching you two weeks in. What was it about Kyogen that made you want this job? And in your conversation with the supervisory board, what were they telling you they wanted most for the next CEO of Kyogen?

John Pratt, CEO

Yeah, thank you again. Good to be here. I guess I knew Kyogen. I've been involved in the space through Paul and through Beckman Calder and through Waters for a long time. I knew Kyogen from an undergrad perspective. Almost every customer I touched was the blue boxes, so to speak. And so I kind of knew the brand, did a bit of research on the brand. And, you know, in terms of the customer intimacy and the quality of the people employed in Kyogen, it was a pretty exciting place to come. So I was intrigued to join. It took a long time because I was in the business of selling Filtration Group to Parker Hannafin. So there was a long transition period. So it gave me a chance to understand the company a lot. Supervirus Report, they really felt that they obviously wanted the industry experience, allied experience. In no particular order, they were pleased that I'd lived and worked in the U.S. and U.K. As you can tell from my accent, I was not exactly born in Brooklyn. So that fitted well. They wanted somebody that could bring some simplicity, shall we say, to some complexity. you know strategic focus very much execution driven you know my experience with waters and others was an execution kind of game in many many ways so all the things aligned well there somebody that would fit with the culture you know so lots and lots of things and you spent most of your career in businesses that looked a lot like kaijin you know president beckman coulter life sciences inside danaher senior roles at paul and then the waters division at waters corp so what What are the maybe one or two things from those seats that you think could travel best to Kyogen? I think the two things I'd highlight is R&D effectiveness, choice, prioritization, link to strategy. They're very much part of the Waters and Paul journey. And then the other one is, I would say, commercial execution in all its forms. Beckman and Waters in particular, we benefited from upgrading the commercial capabilities. The depth of technical capability is always there, but commercial execution in all its forms is something I would say that was important.

Robbie Bamberger, Analyst — Baird

And then now how are you spending your first 90 days, and then when should investors expect to hear your view on the strategy and medium-term framework for Kyogen?

John Pratt, CEO

Yeah, obviously, listen, learn phase, right? Diving deep. Add quite a bit of time pre-appointment to dive deep, but building on that, getting to know the enterprise, the people, the places that are traveling to all of our facilities. is really trying to understand how we win in each of our growth pillars and what the mid-term outlook is of that and, frankly, where we probably should double down on and where we should manage differently. So, you know, classic onboarding process, really.

Robbie Bamberger, Analyst — Baird

Yep. And, Roland, I'll include you on this one. You know, the strategic review of the company framed it as a continuous process with three paths, continuous organically, strategic partner, or financially driven partner. So can you maybe walk through all of those three options from your seat now?

Roland Sackers, CFO

I don't think that I want to distinguish between the different parts of it, but I do think it's very fair to say, and John, I think I was alluding to that right now, there's clearly a path A and there's a path of plan B. And again, one thing is also very clear. We want to have a clear direction rather sooner than later. There's nothing what we want to decide end of this year or whatever. Of course, we need a clear path going forward, and I think we are all very much committed to that and delivering on that. Again, right now, by definition, I can't give you much more update other than that we're working hard to get rather in weeks than in months to clear decision.

Robbie Bamberger, Analyst — Baird

That makes sense. Thank you. And maybe diving into specific segments, starting with diagnostics, which is your in vitro diagnostic test you sell into hospital and labs, the segment was down 2% constant currency in Q2, improving from 4% last quarter, not 4%. The big piece inside of it is quantiferon, 25% of revenue, the blood test for latent TB. Given lower immigration testing expectations, you took out $35 million from revenue, which is essentially all of your U.S. exposure. So maybe two quarters into that impact, where do we stand on immigration volumes? And you took that essentially 100% of U.S. immigration testing exposure out. Does that still look like the right call, or is some of that coming back? How are you thinking about that?

Roland Sackers, CFO

Good question. Just a slight adjustment. So we took out $35 million. with 30 million U.S., five million Middle East, where I do believe that the five million, or we do believe the five million Middle East over time will come back because I'm quite sure that that is an area where we probably will see either the war stops or they find a way to go back into routine work. As you know, it's particularly about construction workers coming from some countries and work in this environment. In ES, I do believe, or we do believe, the 30 million probably will be out for quite some time because the legal immigration laws in this country have changed and i don't think there's any indication that any indication that they change any quite too uh quite soon nevertheless i think it's also uh important to recognize that that is going to uh annualize more or less february next year so we should see that that is fading away as a quite significant headwind.

Robbie Bamberger, Analyst — Baird

And then maybe taking out aside immigration, what did the remaining 90% piece of Quantiferon grow this quarter, and what are the drivers, and essentially is that the right jumping point for 2027 as we look forward?

Roland Sackers, CFO

Again, if you do the math and just adjust for that, apples to apples, that clearly leaves you in a kind of somewhere between 5% and 7% growth rate. So I think that is probably also compared to the market growth, which is four to five percent uh probably a good assumption so i would say uh overall uh over time that is also the way we look at the business um as i said immigration most likely will not come back if it comes back we are ready yeah i don't think that's going to happen at the same time that is the most important uh message about quantiferon it is still a 50 to 60 percent skin test market, so 120-year-old skin test, which still has the majority of the overall share, and the overall market is growing 4% to 5%. So there's a lot of room for us to expand in the market. We're clearly the number one player in that market, and therefore we continue to gain share.

Robbie Bamberger, Analyst — Baird

And just confirming, the immigration comp should essentially be end of Q4, so then Q1 should to be a clean quarter?

Roland Sackers, CFO

I would say February is the first month which is clean.

Robbie Bamberger, Analyst — Baird

Okay, thank you. And then for competition, for Quantiferon, who are the new entrants that you're competing against there and in which geographies? Have you had a chance to change price or contract terms to defend any of your accounts or is it pretty much still a leader there?

Roland Sackers, CFO

The one thing we always have to remind the market on is Quantiferum was always competitive, but again, while we have significant market share, there was always players and there was always a gravity, there was always a BMR, there's always a handful of Asian players, so it's not always, yes, we are clearly the leading player, but we are not the only player. Now, of course, there's another player, most likely over time, entering the European market. Again, there's no sign right now that that is happening to the US. might happen again as they're saying beyond 27 if that is 28 or 29 time will tell but we of course we haven't stand still right we clearly were very actively in working with our customers in long-term contract we have now close to 60 percent of our contracts of our customers in long-term multi-year contracts again we did a lot and you have seen that around automation the impactful solution will come end of 27 to the market, which is the only one fully walk away of workflow automation available in the market. So I do think we have a very strong setup. And of course, we can talk about some details of the competitive environment in terms of testing, but we feel quite comfortable.

Robbie Bamberger, Analyst — Baird

And you've been building out new patient populations just beyond traditional healthcare worker screening, immunocompromised patients, diabetics, now dialysis.

Speaker 2

So can you maybe just frame how large Those new populations are and how much of them are actually in numbers today and which are still you know left to grow So it's a smaller part compared to the rest of testing groups like health care workers and so on But it's the fastest growing piece of the target groups that we're looking at Yeah, so that's that's basically what we're working on also to get more patient groups into the quantiferon tests and Just to enhance that a bit, what about 10% of our overall IGOT quantiferon test is immunocompromised

Roland Sackers, CFO

patients. That is also by far the fastest growing patient group. It is also, again, there's a lot of talk about incoming competition. This is actually one of the areas where they're struggling because to address that perfectly right, you have to have a CD4, CD8 test. We do have that. Others don't have that.

Robbie Bamberger, Analyst — Baird

So would you say the biggest of those other populations would be the immunocompromised patients?

Roland Sackers, CFO

Right now, yes. Over time, of course, diabetes, as you know, is an attractive market opportunity because there's clearly a lot of patients around that and a lot of potentials. There's a clear correlation between them. And again, getting into latent TB, it's probably a bit more out, but it's clearly on the watch list of some of the healthcare standard setters.

Robbie Bamberger, Analyst — Baird

The fully automated Impeco workflow and the AI risk scoring tool, those land in the second half of 2027. When do those actually become revenue for you, and then how do you expect to monetize them?

Roland Sackers, CFO

The monetization starts more or less as early as in 2027 because at the end of the day, it is a huge opportunity, particularly for mid-size to larger labs, to have walk-away solution. Have in mind, Quantiferon is also for our customers, one of the largest revenue generators they have in the lab. And having that in a work, and again, the walk-away solution is a significant step up. It's one of the limitation factors they're all having. And so we are looking forward to that, as our customers are.

Robbie Bamberger, Analyst — Baird

And maybe let's move to KajostatDX, your syndromic testing platform. Growth was 7% in Q2 after down 1% constant effects in Q1. You got into low double digits in the second half of the year. I guess what's driving that recovery in H2 versus H1 besides a little bit of easing comps?

Roland Sackers, CFO

In all fairness, H1 was untypical for KayaStat because we were clearly, actually also the whole industry, fighting very strong respiratory cells in H1 last year. So on a more normalized basis for the second part of the year, we also expect that it returns to significant growth rate, most likely even double-digit. On top of that, we were able to continue our portfolio expansion. We have seen that we brought BCID to the market. The next one is critical urine infections. So I would say both is still going quite well. Placements of new instruments, but also portfolio build out. Again, that we had a strong respiratory season last year. It was good news for last year, but you know it is, right? It doesn't make your life easier the following year.

Robbie Bamberger, Analyst — Baird

And is there any assumptions that you embed in for the flu season for the second half of the year?

Roland Sackers, CFO

As you know, we like that you all do these big conferences because it is very helpful for us. But joking aside, I do think right now the tendency looking into Australia and the U.S. is probably more regular or softer environment.

Robbie Bamberger, Analyst — Baird

Got it. And the blood culture panels are, you know, the most interesting new menu addition that you have. You said you're confident of FDA approval by year end. Can you maybe frame the size of that opportunity, what the realistic 2027 contribution looks like there?

Roland Sackers, CFO

It's a bit early to size it, but, of course, there are important factors to the portfolio. Again, respiratory is and will be always the leading panel. Nevertheless, it makes it unique, and it makes a reason why customers choose your platform. And I do think that is important. As you know, my favorite term is always a bit like an espresso machine, right? We all like to have an espresso machine, and we all like that they have 20 different flavors. It's the end of the day. We all typically buy the two or three we use the most, but having the choice is what differentiates it. And I think that's exactly the case here as well.

Robbie Bamberger, Analyst — Baird

Great, and kind of moving on to sample technologies, which is your front end of every molecular test, the instruments and kits that essentially pull DNA and RNA out of the blood before anything gets analyzed. Sample technologies, it grew 9% this past quarter, and Q1 as well. Organic was about 3%, excluding parse. And you got it to double-digit growth in H2 on a reported basis. So can you maybe just walk us, walk through what gets us to that, you know, low double-digit from 9% the last couple quarters?

Roland Sackers, CFO

Yeah.

John Pratt, CEO

Yeah, I mean, I have the privilege of walking into an instrument replacement cycle. We've got three new instruments from the highest throughput, which we typically didn't compete in a very, very high throughput, right through now to the mini, which is a benchtop instrument for individual scientists. Think price points south of $10,000. Simplify an individual scientist workflow. There's a hundred thousand of all those opportunities to install that and enjoy the revenue from that as well. So those launches are here and Now, the mini's launching pretty much as we sit here. So that's creating some momentum in the back half as well.

Robbie Bamberger, Analyst — Baird

Yep, and then automated consumables, that grew high teens. How much of that base is automated versus manual now? And then how should we think about that conversion from just manual to automated over time?

Roland Sackers, CFO

Majority is clearly still manual, but as you know, we on purpose drive conversion to automation because at the end of the day, it is the trend. In every lab, you have an increase in volume, but you have less people available in front of to do the work. So I do think automation is a significant part of the solution. And second, of course, there's only very few companies like Kyogen, and we are clearly by far the leading player in providing this different automation level, as John was referring to it, on the low level and the mid-sroport level, but also the high-sroport level, which is quite new for Kyogen. So we do believe there's a significant automation opportunity, and you have seen that, right? If you go back to the last three quarters, we have seen already a step up in underlying growth for sample prep, and we're still in the early days. So I do think there's more opportunities for us going forward.

Robbie Bamberger, Analyst — Baird

And you now have two of the three new sample prep systems in the market with Kaimini still to launch. You sized them at about $20 million of incremental H2 revenue. Does that still seem about right, and how is the placement funnel building there?

Roland Sackers, CFO

The good news is today is September 15, and MinCmini is launched as well, so we have all three machines. Yeah, we have all three machines in the market, which is great news. So there is no launch worth. Actually, but you're right. We are a couple of weeks early, so your numbers were right. It's good that we are early, which is also good. No, we feel comfortable. Again, clearly, I think it's also fair to say we are not living in the easiest capital expenditure environment, particularly in the U.S. So we always have to balance that, and we have to see what the next couple of weeks and months are bringing. Some people are talking about budget flushes or not. That is a discussion we can have. Some people are saying, okay, let's see what the results are in the midterms. That might ease up a bit of the confidence issues some people are having. So I do think overall there's opportunities for us which might add on.

Robbie Bamberger, Analyst — Baird

And then how many Kyosprint Connect systems have been placed, and then how is the initial feedback that you're getting so far?

Roland Sackers, CFO

By definition, I'm not going to tell you how many we placed so far, but I think it's fair to say that our goal for this year is that we have around 150 systems in the market and we feel good about that.

John Pratt, CEO

Yeah, the other thing I'd add to that is I talked very briefly about commercial execution and building that muscle in KIAGEN. It's a perfect time to do that with three new instruments into the core of the business in sample prep. you know a complete portfolio there and you know a hundred thousand new opportunities for the mini it fits really well into our commercial execution program so no comment on the 150 but you can guess where I think that should go yep that's helpful and you know what's the consumable pull through per placement when you have that Kaya sprint connect and how long until a new box is you know pulling through at that mature rate again it's a bit early days but I I think we clearly said that this is a high throughput market opportunity, and that is a big market opportunity.

Roland Sackers, CFO

And as you know, while we are for sure, and nobody will disagree, we said it's the leading player in sample preparation. We have never had, for certain reasons, play in the high throughput area. There's an area where, for example, there's 10,000 Kingfisher machines in the market, right? Most of them are 5, 10 years old. So there's a significant opportunity for replacements. KaioSprint is a new generation, is a generational shift machine in terms of pull-through, in terms of time to result, one force, all the new features you have to have, continuous load and random access, load, fully automated and integrated into your LIMS system. So we do believe that machine will make a difference and therefore should generate quite significant pull-through.

John Pratt, CEO

I mean, we're sizing it. It's critical to commercial execution because that total cost of ownership as you have it. But I would say this, these are the kind of instruments that generate kind of their own revenue value in a full year when they're fully operational. So it's very much a revenue stream. That's why placements are absolutely critical. And if you think about the price of a unit, when it's fully operational, fully running, it's delivering that in annuities plus service, so consumables plus service as you go forward.

Robbie Bamberger, Analyst — Baird

And then sample tech instrument revenue growth was up mid-single digits in Q2. How much of the sample prep instrument strength is new launches versus underlying replacement demand?

Roland Sackers, CFO

It's a mix. Again, we're just still very, all of this new placement, as you said before, Mini is just starting more or less this week. So, again, we do believe there is clearly more contribution coming over time from the new ones. Nevertheless, overall sample prep automation also had a good start into the year, right? You know, we have different types of machines, cubes, and so on. So all again, we're quite happy with the environment again. Could the academic market being a bit more stable? Absolutely.

Robbie Bamberger, Analyst — Baird

Yep, and John, is there anything you're bringing in in terms of like the sales motion to sell new instruments at all from your past, you know?

John Pratt, CEO

Yeah, it reminds me very similarly of journeys at Beckman and Waters. You know instrument placement, instrument replacement cycle being very structured in the way you approach your placement cycles. When you talk about a new launch there's three possibilities. You displace a competitor, you upgrade your instrument upon cycle, and that cycle we're working through, but think five years-ish, you're thinking about new instrument cycle and then there's Greenfield if you like, new placements. The Mini very much a new placement. The others have those other opportunities as well. That's all part of the, right from demand generation to sale that's all something that we installed in those enterprises. It's the exact parallel with the Razor, Razor Blade here at Cargill.

Robbie Bamberger, Analyst — Baird

In Parse, good acquisitions, tracking above $40 million you set for the year. I guess what's driving that upside versus your initial $40 million expectation?

Roland Sackers, CFO

As you said, it's going quite well. Starting here with $40 million, probably more now than $45 million. I think there's two main reasons right now. One is, as you know, we have compared to others in the field an automation instrumentation-free solution, which, again, given what we discussed on CapEx environment, is clearly a plus. And second, which is as meaningful as we clearly have a different, and that's the reason why you do acquisitions, right? We have a significant footprint also with biopharma customers, and therefore I think bringing just parts much closer into this kind of environment helped us to secure quite a good number of contracts.

Robbie Bamberger, Analyst — Baird

And then the liquid biopsy prep, that grew more than 30 percent in 2025. You noted Natera, Garden, Neogenomics as key customers. So how large is that piece now? How does volume growth at those customers then flows straight to you guys?

Speaker 2

So it's a smaller part of our sample tag, but it's an important part. You can also see it with the launch of the CHI-Symphony Connect that is specifically optimized for liquid biopsy customers dealing with different volumes that they're handling and liquid biopsy samples are very tricky so you need to have the highest quality possible and that's what we provide with our kits and with our automation so it's for us a focus and whenever our customers and keep in mind that those customers are relying on a good sample preparation without the sample preparation you can forget about the rest and this is basically what we offer and when they're are growing nicely then it's it's also good for us and we're happy about that

Robbie Bamberger, Analyst — Baird

That's great. And moving to PCR nucleic acid amplification, you described the shift from being a PCR company to being a digital PCR company. How far through that transition are you?

Roland Sackers, CFO

I'm not referring to American sports because I'm so young, but you would probably say we're not even in the first inning, or we're just very early. It's early days. QPCI, as we all know, is a $2.7 billion market opportunity. the digital PCI, if you look at all players in the market are probably around, I don't know, five, six hundred million. So there's a lot of way to go. And both markets, of course, growing quite nicely. Just to reiterate what I said before, we had a great start into this year, more or less close to 20% in Q1, close to 20% in Q2. I don't think the second half will be much different. And that in an environment where capital expenditures is still quite difficult right so pull through is adding nicely up i think we did a great job in really expanding menu we always had the outstanding machines i think nobody's questioned that but for quite some time we were a bit under par in terms of portfolio that has changed more or less with last year so we still continue to expand menu i think it's paying off quite nicely and then how does the margin profile differ between digital PCR versus traditional PCR? both are good. No question. Again both are I would say CFO's darling and actually it's true for both. It is for instrumentation and consumables where sometimes instrumentation it can be a bit more challenging but here we have both instruments with very healthy margins.

Robbie Bamberger, Analyst — Baird

That's great. Maybe moving just to end markets. Academic and government you've said research funding improves in Q2 versus Q1, what are you assuming for academic growth into the second half, flat or continued improvement there?

Roland Sackers, CFO

I would say our assumption is right now that we have, I would say, an underlying positive impression of the market development, but we do not believe there's any significant uplift. I would really defer that to 27, and then we have more insight how stable the NIH budget, in particular the discussions around it. But have in mind, we're in a quite, I wouldn't say unique situation because it happens from time to time. But the money is actually being distributed. It's about does the money get spent? And that is the confidence, which is much more emotional and where we need stability. And I do think that is something that it's hard to influence for a company. It is really something that happens on a larger scale.

Robbie Bamberger, Analyst — Baird

Yep. And then pharma biotech, how is overall pharma biotech showing up in your order book, and is there a way to sort of parse out between early stage and later stage pharma biotech?

Roland Sackers, CFO

It's clearly an area where a lot of things are happening, right? And AI, for example, is a big topic in that environment right now, and you have seen some of our announcement in general. I think it's also here, it's moving in the right direction. It's not the single biggest It's part of our business, but clearly with some momentum.

Robbie Bamberger, Analyst — Baird

And then regionally, America's turned positive this last quarter. EMEA was negative. I guess what drove that reversal, and what are you guys assuming also for China from here going on?

Roland Sackers, CFO

Let's start with the latest one. China for us is around 4% of total, so compared to other companies, I would say it's not as meaningful. We also see a slight improvement in China, but slight improvement means less negative, in all fairness. So the good news for us here is we have a quite strong second brand in China. You might recall that's quite unique to Kaigen, that in China we have not only the global Kaigen brand, but 2005 we actually acquired our single largest copycat and always kept it separate, own management, own production. And we clearly can see the difference between the Chinese brand in China and the global brand. And I do think that helps us to hedge some of the impacts, particularly also U.S. companies seeing.

Robbie Bamberger, Analyst — Baird

And then on financials, you know, tariff refund, you know, a $0.02 EPS benefit for the year is already in Outlook with anything more being incremental. Can you maybe walk through the mechanics and timing of those tariff refunds?

Roland Sackers, CFO

Third of all, the two cents is net of customer refunds, so that's one thing. We'll see how quickly the U.S. Treasury Department pays us, but we are quite sure that happens this year, and if it will be a bit more, even better. Let's see how it goes.

Robbie Bamberger, Analyst — Baird

And then maybe just thinking about the pace of guidance through Q3 and Q4. Q3 is expected to grow 1% to 2% cost in FX, and then growth is expected to accelerate into Q4. Can you maybe just size that step up? How much of that acceleration is the compound government shutdown and then also just overall sequential demand?

Roland Sackers, CFO

Very good question. Thanks for that. It's an important question as well. And again, you gave part of the answer already by yourself. Have in mind, the difference is actually not too much between Q3 and Q4, apples to apples, because last year, two of the three months was a shutdown literally in the US. So there is clearly a certain impact from the prior year. The second is also what we discussed, and I think John was alluding to, we feel quite comfortable on the new product launches right now. Again, it's not only sample prep, it's also sample prep. We have the same thing what we discussed on Kaya Acuity, the same thing what we discussed on Kaya Start, and we have still a lot of other business where we launch new products. So we do believe the new product, particularly also the instrumentation placements, goes quite well. That will more or less close the gap of $5 million to $10 million to the step up. I'm quite sure that is not a big idea for us.

Robbie Bamberger, Analyst — Baird

We have about a minute left. Would you maybe just cap off what are your two biggest opportunities for the next year? Two or three, whatever.

John Pratt, CEO

Yeah, I mean, I think I alluded to it right. Organic growth focus, commercial excellence in all its forms. I think there's a pricing opportunity that we haven't talked much about that's very real. I think our sample prep, instrumentation renewal, similarly on Acuity as well, and then our menu expansion on Kyostat. At the end of the day, that's about executing on those products that we're all introduced this year. So that's priority A as we go into the new year. And, of course, we've got to refine the strategy a little bit of the company. We're going through a process. We'll probably have a market stay at some point, think spring, summertime, when we refine that. So those would be my two focuses for now. Do you want to add anything to that?

Robbie Bamberger, Analyst — Baird

Perfectly said. Awesome. That's about all the time we have. So with that, please thank John, Roland, Dominica for the conversation. and I appreciate you guys for coming. Thank you very much.

Roland Sackers, CFO

Thanks, Calvin.