Earnings Call Transcript
QIAGEN N.V. (QGEN)
Earnings Call Transcript - QGEN Q4 2025
Operator, Operator
Ladies and gentlemen, thank you for standing by. I am Katie, your call operator. Welcome, and thank you for joining QIAGEN's Fourth Quarter 2025 Earnings Conference Call Webcast. Please be advised this call is being recorded at QIAGEN's request and will be made available on their Internet site. At this time, I'd like to introduce your host, Daniel Wendorff, Vice President and Head of Relations at QIAGEN. Please go ahead.
Daniel Wendorff, Vice President and Head of Relations
Thank you, operator, and welcome to our call for the fourth quarter of 2025. We appreciate your time and interest in QIAGEN. Joining the call today are Thierry Bernard, our Chief Executive Officer; and Roland Sackers, our Chief Financial Officer. Also joining us is Dr. Domenica Martorana from our Investor Relations team. As always, today's call is being webcast live and will be archived in the IR section of our website at www.qiagen.com, where you can find the press release and presentation accompanying this call. Please also note that this call will include forward-looking statements. Actual results may differ materially from those projected due to a number of factors outlined in our most recent Form 20-F and other filings with the U.S. Securities and Exchange Commission. We will also refer to certain financial measures not prepared in accordance with U.S. generally accepted accounting principles or GAAP, that provide additional insights into our performance. Reconciliations to the most directly comparable GAAP figures are in the release and presentation. All references to earnings per share refer to adjusted diluted EPS. With that, let me hand the call over to Thierry.
Thierry Bernard, CEO
Thanks a lot, Daniel. Hello, and good morning, good afternoon or good evening, depending on where you are in the world, and thank you once again for joining us. I am very pleased today to confirm that QIAGEN continued to perform and delivered a solid finish to '25 with results in the fourth quarter, again above outlook. We exceeded our targets for both sales and adjusted earnings, once again placing QIAGEN among the fastest-growing companies in our industry. This reflects continued execution across the business and the trust our customers place in us even in a challenging environment. I also want to recognize the dedication of our teams around the world. Their work has been essential in delivering those results. So let me walk you through our key messages for today. First, we exceeded our outlook for the fourth quarter, and we also delivered solid full-year 2025 results at the high end of our expectation with adjusted earnings again above our guidance. Net sales were $540 million in the fourth quarter, growing 1% at constant exchange rate and exceeding our outlook for flat sales development against the fourth quarter of '24. Adjusted diluted EPS was $0.62 at constant exchange rate, exceeding our outlook of about $0.60 at constant exchange rate again. For the full year of 2025, net sales were $2.09 billion, up 5% at constant exchange rate and at the upper end of our outlook of about 4% to 5% growth. Adjusted diluted EPS increased to $2.40 at constant exchange rate. This was above our outlook, which we increased twice during the year and reflects our ability to deliver in a challenging environment. Second key message, we reached important milestones across our portfolio. We want to highlight here that across our growth pillars, Sample technologies, QuantiFERON, QIAstat, QIAcuity, and QIAGEN Digital Insights, they achieved combined sales of $1.49 billion at constant exchange rate in '25, delivering 8% growth at constant exchange rate again. The current trajectory keeps us on track for at least $2 billion in combined sales from our growth pillars by 2028. This reflects continued demand across our portfolio and the increasing relevance from areas where we have decided to invest for the long-term growth. Sample technologies continued to grow with sales up 5% at constant exchange rate in the fourth quarter and 2% at constant exchange rate again for the full year. This is an indication of the demand for automated consumables as laboratories continue to push for automated sample prep. In addition, during the year, we completed the acquisition of Parse Biosciences, extending sample technologies into single cell analysis and adding exposure to this very rapidly scaling field. QuantiFERON delivered continued growth with sales up 5% at constant exchange rate in the fourth quarter and 10% at constant exchange rate again for the full year, supported by ongoing conversion and a large and still underpenetrated latent TB testing market. We are executing here on a clear strategy to drive further conversion. QIAcuity, our digital PCR solution delivered double-digit growth in consumables and an installed base that exceeded 3,200 instruments globally since we launched it as digital PCR continues to gain relevance in applications requiring high precision and reproducibility. QIAstat grew 15% at constant exchange rate in the fourth quarter and 24% at constant exchange rate for the full year 2025. Growth was supported by menu expansion and the growing installed base that exceeded 5,200 instruments. Last, our bioinformatics business, QIAGEN Digital Insights, delivered continued growth in 2025, supported by demand across both discovery, research, and academia and clinical customers and the integration of Genoox, which further strengthened our clinical interpretation offering. Third message for today. We made further progress on profitability and cash flow while continuing to execute on disciplined capital allocation. For 2025, our adjusted operating income margin increased 80 basis points to 29.5%, reflecting continued efficiency gains across the business. Those improvements more than offset headwinds from tariffs or adverse currency movements and the previously disclosed dilutive impact from recent acquisitions. We also generated solid free cash flow of $453 million in 2025. This supported investment into the business, including the rollout of our upgraded ERP programs. At the same time, we continue to return capital to shareholders. Since 2024, QIAGEN has returned more than $1.1 billion to shareholders to date and introduced an annual dividend payment while pursuing selective bolt-on acquisitions to support our future growth. So as we are heading into 2026, we clearly remain focused on execution, disciplined cost management, and continued investment into our growth pillars. Before handing over to Roland, I would also like to briefly acknowledge a change in our Supervisory Board. We are very pleased to welcome Mark Stevenson, who joined our Supervisory Board in January. Mark brings deep operational and global life sciences experience, and we really look forward to working with him. At the same time, I would like to sincerely thank Ross Levine for his many years of contribution to QIAGEN. Ross stepped down from the Supervisory Board after taking on a new leadership role at Memorial Sloan Kettering in New York, but we are grateful that he will continue to serve QIAGEN as Chair of our Scientific Advisory Board. With that, I'll hand it over to Roland for more details on the financials.
Roland Sackers, CFO
Thank you, Thierry. Hello, everyone. Thank you as well from me for joining our call. We are pleased with our performance in the fourth quarter and full year '25 as we delivered results above our outlook for the fourth quarter on both sales and adjusted diluted EPS at constant exchange rates. 2025 was overall another solid year for QIAGEN in terms of execution and delivering on our commitments. Let me frame our performance around 3 key messages. First, we delivered solid results with sales for '25 at the high end of our outlook with continued strength in consumables and our growth pillars amid a cautious funding and capital spending environment. Second, we improved profitability, expanding the adjusted operating income margin by 80 basis points over '24 on efficiency gains and operational discipline. These actions more than offset material headwinds from tariffs and currency movements. And third, we continue to deploy capital in a disciplined manner. We are investing to support future growth while increasing returns to shareholders. Our strong free cash flow enabled us to make investments into bolt-on deals like Parse and Genoox, while also returning over USD 1.1 billion to shareholders since 2024. With that context, let me focus on the financial drivers behind our results. For the fourth quarter, net sales grew 1% at constant exchange rates and exceeded our outlook for flat sales development against the same period in '24. Adjusted diluted EPS was $0.62 at constant exchange rates and above our outlook for about $0.60. For the full year, sales increased 5% at constant exchange rates, and this was at the high end of our outlook. Our growth pillars delivered 8% at constant exchange rate growth for the year and reached our goal for $1.49 billion of combined sales at constant exchange rate. So we are on track to achieve our '28 goal for at least $2 billion of combined sales from these products. Adjusted diluted EPS for the full year were $2.40 at constant exchange rate for '25, which was $0.12 above our initial outlook for the year and compares with $2.18 in '24. Let me now provide some additional insights into sales trends for the fourth quarter and for '25. Among our product groups, Sample technologies delivered mid-single-digit constant exchange rate growth for the fourth quarter, complemented by low single-digit growth in Diagnostic Solutions and Genomics, while sales in our PCR product group declined at a single-digit rate. In Sample technologies, sales growth in the fourth quarter was driven by higher demand for automated consumables used on our instruments and results included first-time contributions from the Parse acquisition that was completed in December. For the full year, Sample Technologies delivered 2% constant exchange rate growth, in line with our expectations as trends improved over the course of the year. In Diagnostic Solutions, sales increased 1% at constant exchange rates in the fourth quarter. QIAstat-Dx sales were up 15% at constant exchange rates, driven by double-digit growth in consumables as we continue to benefit from the full core menu in the U.S. QuantiFERON delivered 5% constant exchange rate growth and was supported by continued conversion from the skin test. In the PCR product group, sales declined 9% at constant exchange rates in the fourth quarter. Consumables for use on the QIAcuity digital PCR system continued to deliver double-digit growth as we continue to place over 100 instruments per quarter in a challenging capital spending environment. Sales of other PCR consumables, however, declined due to factors that included the challenging funding environment and lower OEM contributions compared to the '24 period. In the genomics and NGS product group, sales grew 2% at constant exchange rates in the fourth quarter, driven by double-digit growth in the QIAGEN Digital Insight bioinformatics business. At the same time, sales of NGS consumables were under pressure. Turning to the regions. Sales in the Europe, Middle East, Africa region led the performance and were up 5% at constant exchange rates for the fourth quarter. Top-performing countries included Belgium, the Netherlands, Spain, and the United Kingdom. In the Americas, sales declined 1% at constant exchange rates with results in the United States being flat at constant exchange rates. A factor reflecting this was the U.S. government shutdown. In the Asia Pacific, Japan region, sales were flat in the fourth quarter. Results in China declined at a low teens constant exchange rate rate for the fourth quarter over the year-ago period. But keep in mind that this country represents only about 4% of total sales in '25. Turning to the full year results. For '25, the adjusted operating income margin rose 80 basis points to 29.5% compared to '24. And this was achieved despite facing about 120 basis points of combined headwinds from tariffs and adverse currency movements. In other words, the underlying profitability strengthened meaningfully during '25. Excluding these external headwinds, the margin expanded by roughly 200 basis points in '25, and this was well above our initial target for at least 150 basis points of improvement, and this was before the tariffs were announced. This performance reinforced our confidence in exceeding our '28 target for a margin of at least 31%, and we are reviewing this target with plans to provide an update. For the full year, we raised our adjusted EPS outlook twice during '25 and ultimately delivered results of $2.38 on a reported basis and results at constant exchange rate of $2.40. Turning to cash flow. Operating cash flow in '25 was $654 million compared with $674 million in '24, reflecting strong earnings generation. The results for '25 also absorbed about $54 million of cash payments for the efficiency initiatives. Free cash flow was $453 million for '25, reflecting higher capital expenditures related primarily to IT investments that include the SAP system upgrade. We continue to deploy capital in a disciplined manner, balancing investment in the business with returns to shareholders. As you know, we completed the purchase of Parse in December, while in January, we returned USD 500 million to shareholders through a synthetic share repurchase. On a pro forma basis, net leverage stood at about 1.3 times net debt to adjusted EBITDA in January '26 as our leverage improves. We have financial flexibility to support continued investment in organic growth and targeted bolt-on acquisitions while also increasing returns to shareholders. And that also includes our annual dividend payments planned again from mid-'26. Taken together, our '25 performance reflects solid execution on sales growth, margin expansion and disciplined capital deployment as we look for another year of solid profitable growth in 2026. With that, let me hand the call back to Thierry.
Thierry Bernard, CEO
Thanks a lot, Roland. And let me share with you a bit of perspective on our product portfolio. Starting with sample technologies, as you know, a key focus for QIAGEN. In December, we completed the acquisition of Parse Biosciences, extending our sample technologies portfolio into single cell analysis. Parse has a scalable, differentiated chemistry that strengthens our Sample to Insight workflows and opens a long-term growth opportunity. Recent launches such as Evercode Whole Blood Fixation enable immediate fixation at collection and extend Parse's reach into translational and clinical research workflows. Alongside this expansion and acquisition, we execute on our next-generation automation roadmap. In 2025, we successfully launched QIAsymphony Connect, took initial orders for QIAsprint Connect, and remain on track for the launch of QIAmini. Within Sample technologies, strategic high-value applications continue to gain traction. One example is our liquid biopsy sample preparation portfolio, which grew by more than 30%, reflecting this increasing relevance in Sample technologies. Despite cautious capital spending, our sample technologies installed base grew to around 31,400 cumulative placements. Looking ahead to 2026, we will launch QIAsprint Connect and QIAmini together with additional kits, supporting automation across more than 30 applications for QIAsprint Connect and more than 15 applications for QIAmini. Over time, this will increase instrument use and recurring consumables. Full IVDR launch for QIAsymphony Connect remains on track for mid-2026. QIAsprint Connect is planned for February and QIAmini for fall of 2026. Moving to QuantiFERON, where we continue to invest, enabling laboratories to manage rising testing volumes with higher throughput and more efficient workflows. A key step here is the next generation of QuantiFERON TB Gold Plus second assay developed in collaboration with Diasorin. Last year, we completed the European launch of this high-throughput assay. This new generation of chemistry enables laboratories to test up to 75% more patients per hour while reducing turnaround time by around 25%. Building on this European launch, we are planning a U.S. launch of this higher throughput chemistry in 2026. In parallel, we are also exploring how AI-based approaches can support clinical decision-making in latent TB infection, particularly in the context of increasing testing volumes and the need to guide preventive treatment. Turning to QIAstat, where we expanded the menu and the installed base over the year. In '25, we submitted our first blood culture identification panels for clearance in the U.S. and Europe. These submissions extend QIAstat diagnostic into bloodstream infections and sepsis-related applications, building on panels across respiratory, gastrointestinal, and meningitis testing. We also expanded the installed base with cumulative QIAstat placements exceeding 5,200 instruments worldwide in 2025. We continue to invest in new panels, particularly a panel for complicated urinary tract infections where QIAGEN will be the first with a comprehensive syndromic solution. At the same time, we are also advancing our work on the pneumonia panel. In parallel, we continue to develop companion diagnostics with our pharma partners on QIAstat. Next, QIAcuity, digital PCR continues to see steady adoption as customers convert from qPCR and NGS to digital PCR. In '25, cumulative QIAcuity placements exceeded 3,200 systems worldwide. This reflects continued uptake of digital PCR where higher precision, absolute quantification, and more standardized results are required. Our focus remains on expanding the assay portfolio and improving workflows. Gene expression remains an important use case for QIAcuity alongside applications such as cell and gene therapy. Automation is another key focus with the launch of a nanoplate handling solution co-developed with Hamilton on the Microlab Star platform, enabling walkaway automation and more standardized workflows for regulated environments. Last, QIAGEN Digital Insights, where we continue to develop the bioinformatics portfolio to support both research and clinical use. This includes progress with Franklin, following the Genoox acquisition, which integrated QIAGEN's curated knowledge with AI-enhanced workflows to support genetic interpretation and clinical reporting. AI has been embedded across QDI, and we are continuing to support research, data science, and commercial solutions by improving workflows, consistency, and the use of high-quality genomic content. For the next 2 years, our focus is to continue developing at least 14 AI-enabled software solutions within QDI. We are also preparing to integrate large-scale single-cell datasets from Parse Biosciences into the QDI portfolio, connecting single-cell data with downstream analysis to support predictive modeling across research and translational studies. And now back to Roland for the outlook.
Roland Sackers, CFO
Thank you, Thierry. Let me now provide some additional perspectives on our outlook for '26 and for the first quarter. Our ambition remains to deliver solid profitable growth as we continue to navigate a challenging macroeconomic environment. Against this backdrop, we remain on track toward our '28 ambitions of around 7% core sales CAGR from '24 to '28 and adjusted operating income margin of at least 31%, at least $2 billion of sales from our growth pillars, and sustained shareholder returns, having already delivered more than $1 billion since '24. For the full year '26, we are initiating an outlook for sales growth of at least 5 percentage points at constant exchange rates and adjusted earnings per share of at least $2.50 at constant exchange rates. Turning to the first quarter. We expect net sales growth of at least 1% at constant exchange rates compared with sales of $483 million of the first quarter of '25. The growth rate for the first quarter compared to the full-year target reflects 3 temporary factors. First, we are absorbing the year-over-year impact from the discontinuation of NeuMoDx and Dialunox, which represents a headwind of about $10 million or about 2 percentage points in the first quarter. We will see the same impact in the second quarter of '26, but then it rolls off since these products were discontinued in June '25. Second, and like others in our industry, we continue to see cautious life science customer spending trends carrying over from '25 into the beginning of '26. We have reflected an estimated impact of about $10 million in the first quarter or about 2 percentage points of growth. At the same time, we continue to expect an improvement in the funding environment over the course of the year. And third, QuantiFERON faces a strong comparison to results in the first quarter of '25 when sales rose 16% at constant exchange rates and were supported by tender activity in the Middle East and Latin America. As a result, we expect QuantiFERON to grow at a low single-digit constant exchange rate rate in the first quarter of '26, representing a headwind of about $6 million to $7 million or about 1 percentage point of headwind to a normalized full-year run rate for '26 of about 6% constant exchange rate growth. Turning to earnings. Our outlook for the first quarter is for adjusted earnings per share of at least $0.54 at constant exchange rates compared to $0.55 in the first quarter of '25. Operational efficiency remains a priority in '26 and continues to support profitability. At the same time, earnings for the first quarter of '26 are expected to absorb the $0.02 dilutive impact of the Parse acquisition as well as an adverse impact of about $0.02 from U.S. tariffs that were implemented later in '25. For the first half of '26, we currently anticipate sales growth of about $0.02 to $0.03 at constant exchange rates, followed by an acceleration in the second half of the year. The acceleration in the second half reflects various factors, and let me provide a bridge to our full-year outlook. As a first point, the comparison impact from the roll-off headwinds from NeuMoDx and Dialunox contributes about 2 percentage points of incremental growth. New product launches, including the 3 new sample prep instruments as well as new offerings for QIAstat-Dx and QIAcuity are expected to add an additional 2 percentage points of growth. As a next point, acceleration year-over-year growth from QuantiFERON starting in the second quarter of '26 is expected to provide about 0.5 percentage point of incremental growth and improving U.S. academic and governmental funding trends, together with a higher contribution from Parse in the second half is expected to add approximately another 0.5 percentage point. Taken together, these factors fully explain the bridge from approximately 1% growth in the first quarter to at least 5% growth for the full year. Turning to margins. We expect the adjusted operating income margin in '26 to remain at about 29.5% of sales as efficiency gains and broad-based growth are expected to offset margin headwinds of about 160 basis points from the Parse acquisition, adverse currency movements, and tariffs. This underpins our full-year '26 target for adjusted EPS of at least $2.50 at constant exchange rates and a step up from our '25 results. Let me also provide some perspectives on the currency trends against the U.S. dollar. For the full year, we expect a tailwind of about 1 percentage point on sales and a neutral effect on adjusted EPS results. For the first quarter, we currently expect a tailwind of about 2 to 3 percentage points on sales and a neutral impact on adjusted EPS results. Overall, we have taken a prudent approach in setting our outlook, reflecting current market conditions and known headwinds while positioning QIAGEN to continue to rank among the fastest-growing companies in our sector. I would like to now hand back to Thierry.
Thierry Bernard, CEO
Thank you, Roland. And before we go to the Q&A, let me quickly summarize our key messages for today. First, looking back on 2025, QIAGEN delivered another solid quarter and closed the year with consistent execution across the business. The growth pillars grew at 8% at constant exchange rate, and this is among the fastest in our industry. This once again reflects the strength and balance of our portfolio across Life Sciences and Diagnostics. At the same time, we remain obviously mindful of our environment. We continue to operate amid macroeconomic uncertainty, cautious capital spending, and ongoing volatility, which requires discipline and focus in how we manage the business. Looking ahead, our growth pillars are positioned to continue growing in 2026, supported by a very strong pipeline of new product launches and portfolio additions. While we continue to see a cautious life sciences funding environment and softer capital spending, we expect conditions to improve gradually over the course of the year. Keep in mind, that our outlook for the first half of 2026 is clearly impacted by many base effects from last year, and we are relentless about the contributions ahead from the upcoming new product launches. We expect our growth pillars combined to step up again in '26, targeting growth of around 9% at constant exchange rates. Sample technologies is targeting sales of around $720 million at constant exchange rate. QuantiFERON around $535 million; QIAstat around $160 million; QIAcuity around $100 million; and QDI around $125 million. As you clearly see, our focus remains on disciplined execution and operational excellence. In 2025, adjusted diluted EPS grew to $2.40 at constant exchange rate, and we continue to return capital to shareholders. With the completion of the $500 million share repurchase at the beginning of 2026, we delivered on our commitment for solid profitable growth. Those results are keeping us on track against our 2028 ambitions of about 7% sales CAGR, at least 31% adjusted operating income margin, at least $2 billion of sales from our growth pillars, and the shareholder returns of at least $1 billion, which, as I just said, we already exceeded. With that, I'd like to thank you again for your attention and hand back to Daniel and the operator for the Q&A session. Thank you.
Daniel Wendorff, Vice President and Head of Relations
Thank you very much, Thierry. Operator, I think we can now go into the Q&A session.
Operator, Operator
We'll take our first question from Tycho Peterson with Jefferies.
Tycho Peterson, Analyst
I want to start out on some of the new product launches. QIAcuity, QIAstat adding 200 basis points to growth in the back half of the year. Maybe just give us a little more color on the products. Is this about new markets or deeper penetration? And what gives you confidence they'll contribute to growth out of the gate? And then on QIAcuity, help us bridge to the $250 million target by 2028 because you have missed your targets there in the last couple of years. So talk about what you think really gets you to that target by 2028. And then just one follow-up on QuantiFERON on the assumptions for the back half of the year bridge. I think you previously said growth targets would include competitive entry. Is that still baked in and by how much?
Thierry Bernard, CEO
Thank you, Tycho. I will do my best to address all your questions. Regarding the new products and their contribution to at least an additional 2% growth from the second half to the first half of 2026, it’s important to note that at least three of the new launches are creating entirely new markets for QIAGEN. The new panel of QIAstat, specifically the blood carrier panel, is targeting a new segment of customers with distinct needs. This is an additive opportunity. In Sample Tech, QIAsprint represents QIAGEN's entry into very high-throughput sample technologies, which we currently do not operate in, thus creating a new market. QIAmini will automate processes for low-throughput labs or very small volume research, tapping into yet another new market. Therefore, we can realistically anticipate growth in the latter half of the year due to these developments. QIAsymphony Connect, apart from being an upgraded version, is expected to persuade additional customers to adopt this technology, reinforcing our confidence in this projection. As for QIAcuity, you are correct. In the past two years, because our digital PCR sales have primarily focused on research and academia, we’ve experienced some delays due to a slower environment for capital expenses in these sectors. This has affected revenue expectations from our Digital PCR instruments. While consumables have consistently grown in double digits over the past three years, instrument sales have not met our forecast. Nevertheless, to put this in perspective, in 2025 alone, we still introduced more than 500 new QIAcuity systems. In the fourth quarter, we installed over 100 new systems, which will contribute to future consumables revenue. We have set a target of $250 million in revenues for digital PCR by 2028. While we may experience slight delays due to the current capital expense climate, our focus remains on growing our market share and achieving double-digit growth in consumables, alongside placing a substantial number of instruments each year. Regarding QuantiFERON, we outlined the growth profile for 2026. The first half is affected by base effects due to tenders and significant contracts from the fourth quarter of 2024 and the first quarter of 2025. We expect QuantiFERON to gain momentum in the second quarter, and these base effects will gradually diminish, allowing QuantiFERON to potentially achieve growth between 6% and 7% in 2026, which aligns with the targets we set during our Capital Market Day in June 2024, aiming for $600 million in revenues from QuantiFERON by 2028.
Jack Meehan, Analyst
Thierry, I wanted to get your thoughts. There were headlines a few weeks ago around QIAGEN as a potential deal target again. I was wondering what comments, if any, you can share on that?
Thierry Bernard, CEO
Thanks for the question, Jack, and I was expecting a question on this. I mean, it's fair to say that our market is still and will still go through consolidation. That's point number one. At the same time, QIAGEN is delivering and focusing on delivering on our solid plan for the coming years, the plan that we disclosed in New York in June '24, 7% CAGR on the top line, at least 31% EBIT margin, $2 billion from our pillars of growth. So this is where we are focusing. At the same time, we do not comment on rumors. We are always open for discussions that could create value for shareholders, and I cannot say more at this stage.
Jack Meehan, Analyst
Understood. And I appreciate the execution has been really solid, and you still have your hand firmly on the wheel, but also did want to ask about the CEO succession search. Just was wondering when you think we might have an update on that?
Thierry Bernard, CEO
What is important for the Board and for the company is to find the best person for the job. So we have a search ongoing. As we said in Q4 of '25, this is both an external and internal search. It's advancing very well, but we need to take the necessary time once again to find the best person for the job. In the meantime, we do have the management fully dedicated to QIAGEN. It's not only Thierry, it's the entire executive committee and also 5,700 QIAGENers all over the world. We will obviously update you as we can progress.
Casey Woodring, Analyst
I wanted to ask on the margin expansion piece. The bridge to 2026 didn't seem to include any operating margin improvement this year outside of the efficiency program, which will potentially dilute tariff headwinds, unless I'm misinterpreting your comments there. So maybe just can you walk us through how you're thinking about organic operating leverage across the business and how some of the new product volume is expected to contribute to the bottom line this year?
Roland Sackers, CFO
I believe that 2026 will be another significant year for margin improvement at QIAGEN. We anticipate some headwinds from our acquisition of Parse, where we are increasing our R&D investment. As a result, we expect a dilution of about 100 basis points for this year. Additionally, we face combined headwinds from tariffs and foreign exchange in 2026. However, we expect a net improvement in gross margins of around 160 basis points this year, offset by the challenges from Parse, tariffs, and currency fluctuations. Breaking down this 160 basis points, a substantial portion will come from gross margin improvements, likely around 75 basis points or more in 2026. We expect to see a significant acceleration in growth within the sample preparation product line, which contributes significantly to our gross margins. Furthermore, we continue to observe strong growth trends with QIAstat, and we still have room for better production utilization to enhance gross margins. Lastly, our ongoing QIAefficiency programs are expected to contribute to margin improvement not only this year but also in the years beyond. We expect to see continued margin improvement into 2027 and 2028, with a significant increase beyond the 31% margin projected for 2028.
Aisyah Noor, Analyst
My one question is on China. So can you confirm if you are exposed to VBP or any large tender renewals that we should be aware about? And what's the China growth outlook embedded in your guidance?
Thierry Bernard, CEO
Thanks for the question, Aisyah. We keep the same attitude and consideration towards China. As we have said for the last 3 years, it's not significant in our revenues anymore. Our exposure is 4% to China. It's a large market. It's too large of a market to be ignored. At the same time, it's too specific and too politically driven as a market to make it an investment case. We are not specifically more impacted by VBP because VBP has been implemented across molecular solutions, at least for the last 3 years in China. So it's nothing new for us. Last year was negative. We continue to think that China will be between low single digits to negative to at very best flat. And we do not expect in the current political situation, economic situation and market situation of China to see a return of growth in the visible future. But again, our exposure is very limited, as I said, 4% of sales.
Odysseas Manesiotis, Analyst
Firstly, regarding QIAstat, you now have a complete menu and a high-volume platform at a significant time for replacing such instruments. Can we expect you to perform better than the 600 placements you achieved in 2026 in 2025?
Thierry Bernard, CEO
Well, I appreciate that you always want more, but more than 600 placements in 2025, it's already a good performance. So I prefer to leave it like this. We grew at 25% for Q4. We grew at much more than double digits for '25. We gave you an objective of more than $160 million for '26, which shows, again, a double-digit growth. We are a solid #2 in this market. This is exactly what we wanted to achieve. And if we can beat our objective on new placement, we will do it. But let's execute first on the $160 million. Let's execute on the product launches, on the market penetration, and that will be already good.
Odysseas Manesiotis, Analyst
And a follow-up on QuantiFERON. Could you give us a bit of additional color on the Q1 guidance here? I mean, is there any price component to your conservativeness there? And how exactly were these one-off tenders given the low shelf life of the kit?
Thierry Bernard, CEO
Yes. I think it's not a question of shelf life. It's a fair question, but it's just a comparison quarter-on-quarter on deals that we have been able to include in our sales. It's a base effect. If you look at QIAGEN's recent communication on QuantiFERON, it did include over the last 3 years, some press releases sometimes of significant tenders in Middle East, the contract with Oman was one of them. In Latin America, the contract in Brazil was another one of that. So those are creating a base impact compared to Q1 2026 because of their date of signature or renewal. As Roland explained during his comments, growth of QuantiFERON for Q1 2025 was close to 16%. We need to compare this with a normalized growth of QuantiFERON over the year, which is 10%. In other words, we grew in Q1 of '25, 6 points above the normal growth of QIAGEN. It creates necessarily a base impact. This is not a conservative guidance. It's just a realistic guidance. Regarding prices, we were very clear when we issued the guidance for QuantiFERON early '25. We know that competition will increase on that market. We factored that in our number, $600 million for 2028. And we always said that our plan commercially is to move even more customers to pre-annual contracts. This is good for the business. This is good for the franchise. If this sometimes goes with a bit of pricing flexibility, it's a good thing to do.
Michael Ryskin, Analyst
I want to ask a little bit more in the 1Q outlook outside of QuantiFERON. You talked about some of the moving pieces there in terms of the comps, in terms of the NeuMoDx shutdown, things like that. I want to dive into your expectations for end markets. You had some comments on you expect end market improvement as you go through the year. But maybe if you could just expand on that a little bit of how much of that is built into 1Q specifically, maybe as far as U.S. government shutdown or broader markets in general? And just what the degree of improvement you're embedding as you go through the year to sort of like hit that back half ramp?
Thierry Bernard, CEO
So the first comment, Michael, is that the overall market, if I look at some of our main competitors' recent earnings calls, we see that they are in the same ballpark of guidance for Q1, most of them, not to say all of them. It is clear, and we already said that last year that if we consider the funding environment, especially for research and academia labs and especially in the U.S., we believe that the situation is better now than it was 6 months ago. Why? Because 6 months ago, most of the comments were targeting a significant decrease of budget like NIH, for example. When now we know that we are going to be probably seeing a slight increase in '26 of the NIH budget, let's say, max around 1%. This is good for the business. At the same time, we said today that we believe that many research and academia labs are still in a kind of wait-and-see attitude. Once they get more visibility, we believe and it's embedded partially in our H2 expectation that capital expenses, especially in Research and Academia will improve. Because they will have more visibility. So we think that it's fair to assume that progressively throughout 2026, the total market can come back to a growth of mid-single digit.
Michael Ryskin, Analyst
Okay. That's helpful. And then maybe I can dig into Sample tech a little bit. In the slides, I think you called out a $720 million target for 2026. Just to confirm, that includes Parse contribution in it of about $40 million. And then just confirming that. And then the second part of that question would be just how much of that do you expect to be contribution from some of those new automation solutions in Sample tech? Is that a meaningful contributor to 2026 in that part of the portfolio? Or is that just going to take a little longer to ramp?
Thierry Bernard, CEO
So you're perfectly right for your numbers. We said $720 million total Sample tech. It includes indeed around $40 million contribution from Parse. And as we discussed you and I yesterday, Parse contribution will be higher. If you compare H1 to H2 for Parse, we are probably at 40% for H1 and 60% for H2 in terms of weight in their revenues. So you're perfectly right on that. Now if you consider the new launches, QIAsymphony Connect, QIAsprint Connect, and QIAmini, they are fully embedded in the 2% extra growth coming from the new products that we are planning H2 to H1.
Kavya Deshpande, Analyst
Just a couple on QIAstat, please. So firstly, on the guidance for 2026, is there anything you might be able to share on what you're assuming in that guide for the U.S. respiratory season in 2026? And then secondly, I think you shared a couple of years ago that at the point of your last CMD, over 50% of QIAstat customers were using more than 2 panels. Would you have any update on this? It would be good to get that just given you've done a lot of menu expansion since then.
Thierry Bernard, CEO
That was our first question. I think we have seen that, again, the respiratory season was significant from December '25 to probably now. We'll see what is going to happen in the coming weeks. You perfectly read, I believe, that there are harsh winter conditions in the U.S. as we speak, but it's too early to say. What I can tell you is that I believe that respiratory issues will remain significant for the years to come. And that's why the respiratory panel on syndromic like QIAstat are so important. I think people are more aware; they are more aware of flu, whether it's A and B, RSV, obviously, COVID, or other respiratory pathogens. So I believe that it's going to become a well-established panel and testing for the years to come. That's why it's key to have this panel. And as you know, in the U.S., not only do we have it in a long format with a large number of pathogens, but we also have it on a short format with a more reduced number of pathogens. So to your second part of your question, what's the proportion of customers using more than one panel? It's clear that the 50% continues to increase because that's the relevance of adding panels consistently year after year. And as you know, those panels are very coherent. They address mostly infectious disease laboratories. So yes, this number is improving as well.
Harry Gillis, Analyst
I have 2 on the midterm guidance. Could you just confirm whether your target for 7% sales growth through to '28 or the $2 billion from your growth pillars stands excluding the contribution of Parse? And then secondly, you've previously talked about being well ahead of your 31% margin target in '28, but I noticed you haven't really talked about that recently. And obviously, you talked about 180 basis points of negative FX impact from tariffs over this year and over '25 and '26. Are you still well ahead of this target despite these headwinds? Or should we now assume that's not the case?
Thierry Bernard, CEO
So we mentioned that, and I will also ask Roland to chime in at a point. So first of all, to your first question, the 7% CAGR. We gave that CAGR in June of 2024 in our CMD, Capital Market Day in New York. You will agree with us that since 2024, the economic environment has become even more volatile, tariffs, volatility in currency evolutions, geopolitical instability, funding difficulties for research and academia. Confronted with those difficult and volatile market conditions, this is the role of management to take the necessary capital allocation to defend our growth profile. And this is perfectly what is behind the acquisition of companies like Genoox and Parse, fully synergistic with our portfolio accretive to our top line and financially accretive in a reasonable time frame. So because our environment has worsened, it's fair to say that the 7% now fully includes also the recent acquisition. If the market improves quicker, we might even beat that. But at the moment, let's focus and execute on the 7% all in. To the second question, Roland alluded to it, and I will also invite him to give his opinion. We believe we can beat the 31%. At the same time, we say the market is still difficult around us. So let's see what could be a new guidance analyzing different factors before we come to the market.
Roland Sackers, CFO
Thank you, Thierry. To elaborate further, we expect significant growth in 2026, primarily driven by our key growth areas. Our main products are projected to grow by 9%. Sample preparation is anticipated to increase in the high single-digit range, while QIAstat is expected to see substantial double-digit growth. QIAcuity and QDI are also forecasted for considerable double-digit increases. These products have high profit margins, which will positively affect us. Looking back at 2025, it serves as evidence of this potential, although we weren’t aware of the U.S. implementing tariffs. Excluding that and adjusting for currency changes, we initially set a target of $150 million and achieved $200 million, showing significant annual improvement. We are actively working to ensure we do not remain stagnant this year, and our 40 operational efficiency initiatives will help us make further progress. It’s all about execution, and I believe we are on track. We expect to see results exceeding 31%. It’s important to note that we will take our time in making announcements due to the ongoing management transition, but this does not mean our guidance or numbers will change. The incoming management deserves the chance to review these figures before we present them to the market.
Daniel Brennan, Analyst
Maybe just first one, just back to QuantiFERON, if you don't mind. Just on the pricing comment, Thierry, has this been consistent with what's been happening in the market over the last couple of years? Or is this kind of more of a newer strategy just to try to lock in some customers, maybe making some price concessions? Just wondering if you can kind of elaborate on that.
Thierry Bernard, CEO
No, it's not a new strategy. We made that clear over a year ago. We're seeing changes in competition, and we need to ensure we transition our existing customers on pre-annual contracts to more customers on those contracts. It's always a negotiation. We mentioned last year that we should be prepared to make some concessions. However, if it secures a deal for another two or three years, those concessions can be worthwhile, as long as they are reasonable. I can assure you that we continue to implement price increases for QuantiFERON every year. The pricing performance for QuantiFERON in 2025 was positive. I was just emphasizing that flexibility is necessary when required. Thank you for the question, Doug, and I was expecting a question on this. I mean, it's fair to say that our market is still and will still go through consolidation. That's point number one. At the same time, QIAGEN is delivering and focusing on delivering on our solid plan for the coming years, the plan that we disclosed in New York in June '24, 7% CAGR on the top line, at least 31% EBIT margin, $2 billion from our pillars of growth. So this is where we are focusing. At the same time, we do not comment on rumors. We are always open for discussions that could create value for shareholders, and I cannot say more at this stage.
Operator, Operator
Thank you. That will conclude our question-and-answer session. At this time, I'd like to turn the call back over to Mr. Wendorff for any additional or closing remarks.
Daniel Wendorff, Vice President and Head of Relations
Thank you very much. I would like to close this conference call and thank you for your participation. If you have any questions or comments, please do not hesitate to contact us. Thank you very much.
Operator, Operator
Ladies and gentlemen, this concludes the conference call. Thank you for joining, and have a pleasant day. Goodbye.