Earnings Call Transcript - QGEN Q4 2021

Operator, Operator

Please standby, we're about to begin. Ladies and gentlemen, thank you for standing by. I am Jessica, your PGI call operator. Welcome and thank you for joining QIAGEN's Q4 2021 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. Please be advised that this call is being recorded at QIAGEN's request and will be made available on their Internet site. The prepared remarks will be followed by a question-and-answer session. At this time, I would like to introduce your host, Mr. John Gilardi, Vice President, Head of Corporate Communications and Investor Relations at QIAGEN. Please go ahead.

John Gilardi, VP, Corporate Communications and Investor Relations

Thank you very much, operator, and welcome all of you to our call. Speakers today are Thierry Bernard, our Chief Executive Officer; and Roland Sackers, our Chief Financial Officer. Also joining us today is Phoebe Loh from the Investor Relations team. Please note that this call is being webcast live and will be archived on the Investors section of our website. Today, we will first have some remarks from Thierry and Roland and then move into the Q&A session. A presentation with the details on our performance is available in the IR section of our website along with the Q4 release. We will not be showing the slides during the call. Before we begin, let me cover the traditional Safe Harbor statement. This conference call's discussions and responses to your questions reflect the views of management as of today, February 9, 2022. We will be making statements and providing responses to your questions that state our intentions, beliefs, expectations, or predictions of the future. These constitute forward-looking statements for the purpose of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause actual results to differ materially from those projected. QIAGEN disclaims any intention or obligations to revise any forward-looking statements. For information, please refer to our filings with the U.S. Securities and Exchange Commission, which are also available on our website. We will also be making reference 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 these non-GAAP financial measures to the most directly comparable GAAP measures is available in our press release as well as the presentation. And again, both of these are on the website. I would like to now turn over the call to Thierry.

Thierry Bernard, CEO

Thank you, John, and good morning, good afternoon, everybody. Welcome to our conference call today and thank you, everyone, for joining. It's always a pleasure to have these regular exchanges and meetings. Our very solid results in the fourth quarter of 2021 capped a tremendous year for QIAGEN. The highlight was clearly the 22% growth at constant exchange rates, or CER, in our non-COVID product portfolio, which really underpins our confidence in double-digit growth for 2022 in these areas of our portfolio. We also achieved a very important milestone with over $2 billion of sales for the year. I would like to take this opportunity to thank our teams for their tireless execution to continue showing, as I've been saying very often, that QIAGEN is COVID-relevant but not COVID dependent. So what are our key messages for today? First, we exceeded the outlook set for net sales growth and adjusted EPS both for the fourth quarter and for the full year. Net sales for the fourth quarter of 2021 grew 4% CER to $582 million over the same period in 2020. This was well above the outlook for a decline of 9% CER. Our non-COVID product sales advanced 10% CER, which was ahead of our expectations. COVID-19 product sales were also better than expected due to the surge in testing related to the Omicron variant. This COVID-19 sales, however, were down 7% CER from the fourth quarter of 2020. For the full year, we also exceeded our outlook with net sales rising 19% CER to $2.25 billion against the outlook for at least 15% CER growth. Our non-COVID business again delivered outstanding results ahead of our goal for 20% CER growth, and those products represented about 70% of our total sales. The strong business expansion led to earnings growing at a faster pace. Adjusted earnings per share for the fourth quarter rose 10% to $0.75 CER, again above the outlook for at least $0.60 CER. For the full year 2021, adjusted EPS grew 22% over 2020 to $2.63 CER and was well above the outlook for at least $2.48 per share at CER. Another very key highlight was that the strong business performance led to a record year of cash flow. Operating cash flow for 2021 rose 40% to $639 million, while free cash flow increased 38% to $449 million over 2020. These results highlight once again our ability to generate strong cash flow from the business while investing to support our growth ambitions as part of a very disciplined capital allocation strategy. This leads to our third message. QIAGEN enters 2022 as a stronger, more focused, and balanced company. The last two years have been a period of implementing our strategy as a new management team. That strategy is focused on helping customers around the world gain access to valuable molecular insights from molecular research to clinical health care. We are targeting segments in the market with promising growth opportunities while making sure we execute quarter after quarter. At the core of this new strategy is a focus on our five pillars of growth. Those pillars are opportunities to maintain and create top-three leadership positions in highly attractive markets. The five pillars built on our absolute leadership in Sample technologies, the first step in any laboratory process. Against this backdrop, our focus translates into two keywords: recurrence and balance. What do I mean by recurrence? Recurrence means our razor blade business model, building up revenues from our highly recurring business involving consumables and associated services. This reached 88% of sales in 2021. This also means building revenue streams from the significant increase of our installed base of instruments. We saw a dramatic acceleration in the installed base for COVID-19 over the last two years. As we move into 2022, we want to focus on transforming this installed base into new sources of growth. For this, we are obviously developing new tests and applications across our portfolio. We made significant progress in 2021 on this front, especially with QIAstat diagnostic for syndromic testing and the QIAcuity digital PCR system. This focus is reflected in the fact that more than 65% of our R&D investment is dedicated to our five pillars of growth. We also continue to step up our manufacturing capacity for consumables essential for the future growth of our systems, which also includes QIAsymphony for automated sample prep and NeuMoDx for integrated PCR clinical health care testing. The second keyword is balance. It means balance in serving customers in both the Life Sciences and Molecular Diagnostics. As a reminder, about half of our sales involve life science customers. These are attractive end markets given the very robust funding environment and our differentiated offering, as well as long-tail customers. Furthermore, balance also across our geographic regions, about half of our sales are in the Americas, about one-third in Europe, and the remaining 20% in the Asia Pacific region. Balance also ensures we operate sustainably and responsibly with commitments towards important ESG goals. For example, reducing our carbon footprint to reach net zero carbon emissions by 2050. We have strengthened our dedication by setting targets in areas such as improving access to health care, increasing diversity and inclusion, and maintaining responsible governance, just to name a few. Our focus in '22 is clearly on continuing those important ESG investments. This is how we become a stronger QIAGEN in 2022 and in the coming years, continuing our clear focus on execution. As a last message, our outlook for 2022 calls for strong growth in sales of our non-COVID portfolio. For the full year, we expect sales of at least $2.07 billion led by double-digit CER growth in our non-COVID portfolio. We also expect at least $2.05 CER for adjusted EPS. We have done this in 2021. We take a conservative view on COVID-19 testing demand trends. Given the volatile trends expected for 2022, we anticipate a significant decline in those sales compared to 2021. Our focus in '22, as I said before, is clearly on the non-COVID portfolio to deliver solid mid-term growth trends while again, remaining ready as ever to support the global response to the pandemic, however it may develop. We will provide more details on the outlook later in this call, but now I would like to hand over to Roland for the financial update.

Roland Sackers, CFO

Thank you, Thierry. I appreciate everyone joining the call. I'll start by giving you a detailed overview of our sales. In the fourth quarter, net sales increased by 4% at constant exchange rates despite facing a tough comparison to the fourth quarter of 2020, which had the highest sales levels of that year. Non-COVID sales also showed strong growth compared to the third quarter of 2021, illustrating positive trends in our core business as we move into 2022. Consumables and related revenues for the fourth quarter increased by 7% at constant exchange rates compared to the same period in 2020, constituting 89% of sales. Meanwhile, instrument sales in the fourth quarter declined by 14% at constant exchange rates compared to the highest quarterly sales of 2020, although there was a sequential rise over the third quarter of 2021. For the entire year, consumable sales rose by 21% at constant exchange rates, driven by consistent growth throughout the year, while instrument sales increased by 2% at constant exchange rates. Focusing on our four product groups, Sample technologies saw a 4% increase at constant exchange rates for the full year, reflecting the variability in COVID-19 demand. These technologies accounted for about 40% of total QIAGEN sales, with most sales in Life Sciences. We were particularly pleased with the double-digit growth in non-COVID product groups for 2021, especially in DNA sample preparation, which benefitted from robust research funding. Sales in Diagnostic Solutions rose significantly by 37% at constant exchange rates for the full year compared to 2020, with QuantiFERON as a key contributor, increasing by 47% to US$281 million for the year, even in the absence of testing levels returning to pre-pandemic demand. Our two PCR clinical testing systems, QIAstat-Dx and NeuMoDx, contributed to incremental growth. Revenues from our Precision Medicine business also increased as many pharmaceutical R&D projects resumed. For the PCR Nucleic acid amplification product group, total sales rose by 18% at constant exchange rates in 2021, driven by the QIAcuity digital PCR system and consumables from other companies. This growth was particularly encouraging as it was largely fueled by double-digit gains in the non-COVID portfolio, which offset significant declines in COVID product group sales. In terms of Genomics/NGS, sales increased by 47% at constant exchange rates over 2020, representing about 10% of total QIAGEN sales. This growth came after weaker trends in 2020 due to the pandemic's impact on customer activities, which reversed throughout 2021 as many labs resumed normal operations. Sales of universal consumables for next-generation sequencing and bioinformatics revenues from QIAGEN Digital Insights both experienced double-digit growth rates. The sales performance across regions in 2021 showcased our geographic balance and presence in key markets. For instance, the Americas achieved a 22% growth at constant exchange rates, benefiting from a 25% increase in the U.S., particularly in QuantiFERON-TB and Life Science sales. The Europe, Middle East, and Africa region grew 17% at constant exchange rates, led by Austria, the United Kingdom, Italy, Turkey, and Switzerland. The Asia Pacific and Japan region also saw double-digit growth of 17% at constant exchange rates over 2020, with more than 20% growth in non-COVID products. China experienced over 20% growth, and Japan, Australia, and South Africa also performed well. Looking at the income statement, the adjusted gross margin declined in 2021 due to various factors, including changes in product mix and investments in consumables production capacity, which are expected to improve our economies of scale as volumes grow. Consequently, the adjusted gross margin for the full year fell to 67.9% from 69.6% in 2020. We continued to invest significantly in R&D for menu expansion and new applications, particularly in our five growth pillars, with investments rising to 8.4% of sales from 8.0% in 2020. At the same time, we successfully reduced other operating expenses. Sales and marketing expenses decreased to 20.3% of sales from 22.1% in 2020, aided by a sizable shift to digital channels for customer engagement. General and administrative expenses also decreased to 5.7% of sales from 6.0% in 2020. The result was a 20% increase in adjusted operating income for 2021 to US$755 million from US$627 million in 2020, with the adjusted operating income margin consistent at 33.5% of sales for both years. Adjusted EPS for 2021 was well above our outlook at $2.63 at constant exchange rates, with actual results being $2.65, which included $0.02 in currency benefits. The tax rate was stable at 18% for both years, and the share count met our expectations at around 232 million shares. The adjusted EPS results for both the full year and the fourth quarter of 2020 excluded the gains from the sale of our minority investment in ArcherDX and shares from Invitae associated with the acquisition. Regarding cash flow for 2021, we experienced remarkable results in both operating cash flow and free cash flow, fueled by strong business expansion. Operating cash flow grew by 40% to US$639 million, which included a payment of US$53 million to settle a patent infringement. We also incurred significantly higher tax payments, over 50% more than in 2020, reaching US$102 million. The results for 2020 also accounted for payments related to a discontinued tender offer. Free cash flow increased by a robust 38% to US$449 million in 2021, which absorbed a 43% rise in capital expenditures as we invested in expanding consumable production capacity at sites in Europe and the U.S. On the balance sheet, our net debt decreased to US$876 million at the end of 2021, down from US$1.2 billion at the end of 2020, due to strong cash flow trends and higher levels of cash, cash equivalents, and short-term investments. The combination of lower net debt and improved EBITDA led to a reduction in the leverage ratio to 0.9x net debt-to-EBITDA at the end of 2021, compared to 1.5x at the end of 2020. We are reaffirming our disciplined capital allocation strategy, which includes organic business investments, pursuing value-creating M&A transactions, and enhancing returns through share buyback programs, like the $100 million program we completed in 2021. As mentioned earlier, we are evaluating various M&A targets to strengthen and complement our portfolio in life sciences and molecular diagnostics while maintaining a disciplined approach to valuation. We are also considering several debt refinancing opportunities due to debt maturities in 2022. Now, I will hand it back to Thierry.

Thierry Bernard, CEO

Thank you, Roland. Let me now give you an update on our key portfolios and in particular, the five pillars of growth. As I said at the JPM conference, in '21, we have ticked the boxes for all the commitments we gave you on further menu development in our five pillars of growth and delivered solid progress on building sales in those portfolios. First, Sample technology. Sales for the full year 2021 reached $851 million, beating our expectation for $750 million at CER. This was driven by strong demand for DNA extraction kits as labs returned to work. We also saw very good sales from our QIAprep and liquid sample prep solution for COVID-19 testing. In terms of portfolio development in Sample tech, we have just launched the EZ2 Connect system as part of our program to upgrade our automated sample preparation instruments. These instruments built on the success of over 4,800 EZ1 systems in the market and are specifically designed for molecular diagnostics and human identification. For 2022, we are expecting the non-COVID products to deliver low single-digit growth in the Sample technology portfolio and for total sales of more than $750 million at CER compared to $851 million in 2020, as we again anticipate headwinds in COVID-19 product group sales. Second, our QuantiFERON franchise sales rose to $281 million in 2021, exceeding the target for at least $255 million at CER. As back-to-school testing and health care screening programs are resuming, demand for TB testing returned strongly across all regions in the world. The QuantiFERON portfolio has seen multiple expansions in 2021. This includes the CE marking of our QuantiFERON SARS-CoV-2 T-cell test, a very useful tool in COVID immunity surveillance. Additionally, QIAreach QFT TB gained CE marking as a new battery-operated device developed specifically for use in high-burden, low-resource countries. It was very recently approved by the Global Fund’s Expert Review Panel for Diagnostics, allowing procurement by public health programs and institutions in more than 100 countries qualifying for global fund or unit-added resources. Moving into 2022, we are expecting over $310 million of sales from our QuantiFERON franchise, so once again, another year of double-digit CER growth. Third, our integrated PCR platform. First, our QIAstat diagnostic syndromic testing platform performed very well last year with a total of $75 million in sales, also exceeding the '21 target for at least $60 million at CER. Cumulative instrument placement for QIAstat rose to about 2,900 placements at the end of January 2022. Important progresses were made this year in bringing new panels into the platform. This included a 4-plex respiratory panel to support the diagnosis of four diseases: Flu A, Flu B, respiratory syncytial virus (RSV), and COVID-19. This is key to distinguish the diagnosis among these common respiratory diseases. As promised, our team successfully completed the CE-IVD marking of the Meningitis panel and submitted the gastrointestinal panel for FDA approval in the U.S. on time. Our teams are also preparing for the 2022 launch of QIAstat Diagnostic Rise, the new high throughput model for large volume laboratories interested in syndromic testing. This system will significantly enhance our scalable offering to labs, featuring random access capacity to hold up to 18 different tests for processing and leading to the ability to do up to 160 tests per day with 8 analytical modules. We have no time today for the video, but you would see as well a key differentiation. It will be the first system of this generation embedding what we will call a smart drawer, a fully automated loading and unloading of the cartridges. Our expectations for the full year 2022 are for over $85 million in sales for QIAstat-Dx, as those new panels and instruments support the transition into the non-COVID world. NeuMoDx sales rose to $105 million in 2021, ahead of our target of $100 million at CER. Cumulative placement for NeuMoDx grew to about 220 platforms as of January 2022. With the addition of the human adenovirus asset, we now have 15 CE-IVD marked assays running on NeuMoDx, making it one of the largest menus of its kind. In the U.S., COVID is currently the driver for consumable pull-through with four FDA-approved tests, and these systems are also leveraging the capability to batch in laboratory-developed tests for 2022. We therefore anticipate over $70 million in sales as we focus on expanding the menu to include the FDA-approved tests. In our fifth pillar of growth, digital PCR, we achieved a placement goal for QIAcuity digital PCR system as we now stand at over 730 placements. We also saw quarter-over-quarter sales growth in 2021. At the same time, however, we did not reach our full year sales goal for more than $45 million at CER. We have now set a new goal for 2022 for more than $55 million at CER for QIAcuity based on plans for more placements and to ramp up consumable utilization on the installed base. To help drive utilization, we are expanding the application into new areas of research and testing. For example, we recently announced that about 70% of all American states in public health are using QIAcuity for wastewater surveillance. In addition, we recently entered into collaboration with Actome and Atila BioSystems to offer new solutions for protein quantification and noninvasive prenatal testing. We are determined to make QIAcuity the number one digital PCR system in terms of placement and drive the conversion of the quantitative PCR market to this new technology standard. Now, let me hand it back over to Roland again.

Roland Sackers, CFO

Thank you, Thierry. Let me now provide some additional perspective on the outlook for '22 and also for the first quarter. Our expectation is for sales of at least US$2.07 billion at CER for the full year '22, driven by double-digit CER growth in non-COVID product groups. As we confirm once again, we do not want to make aggressive assumptions on the course of COVID-19 sales. Our view remains for a significant decline in these sales in '22 from '21 while again, remaining prepared to support the pandemic response. We expect adjusted EPS of at least $2.05 at CER. This takes into consideration continued plans for investments into our portfolio and, in particular, the five pillars of growth for new tests and applications. Based on exchange rates as of January 31, 2022, currency movements against the U.S. dollar are expected to create an adverse impact of about two percentage points on net sales growth and about $0.04 per share on adjusted EPS for the full year '22. For the first quarter, net sales are expected to grow at least 7% CER and adjusted diluted EPS is expected to be at least $0.72 at CER. We also expect currency headwinds in the first quarter against the U.S. dollar, our reporting currency, and for an adverse impact of about three percentage points on sales and about $0.01 on adjusted EPS. I would like to now hand back to Thierry.

Thierry Bernard, CEO

Thank you, Roland. As we have said many times, Roland, John, Phoebe, and myself, we are really committed to a lot more time exchange and discussion. Let me provide you with a very quick summary before we move into the Q&A session. First, our team delivered an outstanding year in 2021 with sales growth and adjusted EPS exceeding outlook. This was driven by sequential growth quarter-over-quarter in 2021 for our non-COVID sales and supported by a volatile demand for COVID-19 testing. Our teams continue to execute and deliver on our commitment. Second, we entered 2022 as a company with a solid business case that combines a recurring stream of revenues with balanced market opportunities. We have made tremendous progress in growing our installed base and have entered the next phase of our growth ambitions after delivering on our 2021 goals. Our five pillars of growth finished the year with strong performance. Third, we maintained a very strong level of profitability as healthy cash flow enabled us to invest in our growth drivers while delivering value to shareholders. Lastly, we are increasingly confident in this stronger QIAGEN, which is reflected in our outlook for 2022, a year to be driven by double-digit CER sales growth for our non-COVID portfolio. We have a motivated team of empowered QIAGENers with a focus on execution, ready to deliver on our commitments. With that, I'd like to hand back to John and the operator for the Q&A session. Thank you.

Operator, Operator

The first question comes from Patrick Donnelly with Citi. Please go ahead.

Patrick Donnelly, Analyst

Hey, good morning, guys. Thanks for taking the questions. Thierry, maybe one for you. Just on that underlying COVID bucket, obviously, really encouraging to see the base business. But on the COVID piece, I think $350 million for this year, how do you think about the durability there because you guys are pretty unique in the fact that you tied COVID revenues even kind of broke it back to 2019 when you had this bucket that essentially touched anything that then became COVID. So how do we think about that going forward? I mean, it feels like a more durable number than others that are really pure COVID. So would love if you could just kind of parse through that, maybe if you could, kind of break out that previous COVID number on that revenue. I think it was $140 million or so. And what that could look like going forward beyond this year?

Thierry Bernard, CEO

Thank you, Patrick. First, I want to emphasize that despite the market's reaction at that time, we were right and bold in July 2021 to separate our QIAGEN sales results on our P&L from COVID fluctuations. Since then, we've consistently stated that we wouldn't make new assumptions regarding COVID developments. Our main focus is to stay relevant amid any surge in demand, so we continuously adjust our manufacturing output, often utilizing contractors for this purpose, while prioritizing non-COVID related production. To address your question directly, we've indicated that for 2022, we expect to achieve COVID results similar to those in 2021, which we estimate at $350 million, primarily occurring in Q1. We do not anticipate making long-term projections for Q2, Q3, or Q4, as we expect a gradual decline. As we mentioned before, we compare our results to 2019, the pre-COVID period, where we indicated that the equivalent testing solution not related to COVID was around $150 million. I believe there is no reason for this figure to drop below the pre-COVID level. We are currently transitioning back to normal non-COVID utilization. The significant difference lies in the remaining portion, which we expect to be largely realized in Q1, mainly in Sample tech, while we aim to focus the rest of the platform on non-COVID growth. Does that answer your question?

Patrick Donnelly, Analyst

Yes. No, that was great. And then a quick one for Roland on the guidance. Obviously, 1Q came in well above consensus. How should we think about the level of conservatism baked in for the rest of the year? Was it that you guys had visibility into a really strong 1Q? And then to Thierry's point there, certainly, COVID gets stripped out but the back half you were a little more conservative with. Can you just talk through the levels there as you look for the full year guide relative to the really strong 1Q?

Roland Sackers, CFO

Yes. And I think it goes hand in hand with what Thierry just described but it is very much driven clearly by two things. But clearly, one is the overall assumptions for COVID. And I think as we said on the call and just reiterate it, we're really focusing on that which is more or less on hand and very visible, that's clearly in Q1. And we don't want to take any larger or even aggressive assumptions for the second half of the year. And again, if you put all the numbers together, you can clearly see that expectations on that are, I would say, quite moderate. Nevertheless, we want to be ready. If the market picks up, we are on standby. We have clearly the production capacity we have shown in Q4, and we can react quickly. In terms of expenses, moving on to the second part of the answer, it's quite obvious that we use some of this as we did in '21. Some of the initial proceeds which we are gaining to invest and probably even to focus on timing here a bit more on R&D projects to get things quicker done. And I guess you know us quite well that we have typically our hands well around the operational expenses. So we clearly try to make also here some use from more or less the incremental opportunities we're seeing short-term while still believing that mid- and long-term we are on track also to improve our margins.

Patrick Donnelly, Analyst

Very helpful. Thank you, guys.

Tycho Peterson, Analyst

Hey, thanks. Question on QIAstat and NeuMoDx. QIAstat grew revenues in the quarter; NeuMoDx declined. They're both COVID beneficiaries. So can you maybe just talk to why NeuMoDx declined? Is that getting replaced by rapid antigen testing or other PCR in the quarter? And why is your NeuMoDx sales target for '22 below what you had laid out for '21?

Thierry Bernard, CEO

There is a clear impact on NeuMoDx, and we have said that Tycho over 2021 already, a clear impact from the year before which was the full integration of NeuMoDx in our portfolio. Second, because previously, the quarter four of 2024 had been very strong also for NeuMoDx because it is when it started to become really relevant in the U.S. as there was a real need for COVID testing. And so we have always been very clear in the second half of 2021 to explain that a very strong part of the NeuMoDx revenue is still COVID-19 driven. We have made no mystery of that. So as we are basically now moving post-COVID and given the importance of COVID testing in the U.S., where we still do not have for NeuMoDx the menu that we have in Europe, it is going to be more difficult for NeuMoDx to quickly catch up with the performance that we achieved in 2021. So this is why we had this ambition of $80 million in revenues for 2022. It's just that differential. And now we need to transfer, obviously, the customers that we have acquired on NeuMoDx to the rest of the menu in Europe and move customers in the U.S. to the LDT capabilities and to the menu that we are going to continue to get FDA approved. That's the only reason. For QIAstat, because you have already more menu available in Europe and now also because we submitted the GI, we expect this to start selling in the second half of 2022. It's a bit easier, basically; guiding on QIAstat at more than 85. QIAstat sales are still heavily driven by COVID at the moment. But both instruments, as we have explained many times, Tycho, are menu driven. They were in our portfolio before the pandemic, and they will be in our portfolio way beyond the pandemic. There is still a phase of catch-up because of the headwind of the COVID. Does it answer your question, Tycho?

Tycho Peterson, Analyst

It did, yes. That's helpful. And then one follow-up on the COVID commentary earlier. Have your profitability assumptions around the COVID business changed for '22, given pricing dynamics in the market? Can you maybe just talk about how you're thinking about drop-through from the revenue contribution this year?

Thierry Bernard, CEO

First of all, I'm going to take this one. Roland, please feel free to chime in. We don't see clear pressure on prices in our COVID portfolio, Tycho, because I believe that PCR testing is much more resistant to significant price reductions compared to home testing or antigens. This situation is not particularly relevant for QIAGEN. We have previously stated that we never took advantage of the COVID situation to adjust prices, so it remains neutral for us.

Daniel Wendorff, Analyst

Yes, thanks for taking my questions. And my main question is looking at the non-COVID-related revenue growth you guided for 2022. Can you talk a bit more about what is driving this? Is it the general very healthy market environment? Is it certain product lines? Any more color you can provide here would be helpful. And then I would have a small follow-up question on the operating and free cash flow development. Maybe one for Roland. How should we think about this going into 2022? Is there any major developments we should take care of?

Thierry Bernard, CEO

If you remember at JPM, we had an interesting slide that described what we consider to be our market environment. First of all, this slide highlighted that for life science, we believe on a rather healthy level of funding from public institutions. I'm referring to the NIH in the U.S. We gave also data on funding in the U.K., for example. So this is obviously reassuring and allowing us to be optimistic. We also gave you some data from expert and independent institutions on diagnostic, showing that in many tests, like oncology, for example, and non-COVID infectious diseases, we were progressively returning to levels that were pre-COVID-19 in any case, way above the level of February 2020. That was mentioned in the slide where we were very hit by the COVID impact. So there is a very good, let's say, positive market environment. Second, even if I don't want to be complacent and I don't want to be over-optimistic here, I believe that COVID-19 has since demonstrated and proven the critical value of diagnostics, both in life science and research or clinical diagnostics in health care. Furthermore, for a company like QIAGEN, more importantly, it has proven the superiority and the value of molecular testing in health care. Sure, at the moment, you have many governments talking about antigen tests, but I have always said the same. First of all, it's not about antigen versus PCR because when you have such a surge in demand for testing, every technology is welcome. However, I am very convinced that when COVID comes back to a level that is more acceptable, more of an endemic phase, PCR will remain, yet again, the gold standard because there will be less need for urgent results, allowing laboratories to test in batches as well. Thus, this secures a smooth future for molecular biology. Then in our own portfolio, as we have said since last year, we committed to double-digit growth for the non-COVID portfolio. We can say that because of what I said in the environment but also because of the trend in some of our key products. As we have mentioned today, we believe QuantiFERON will continue to show double-digit growth. Outside of the non-COVID, the non-COVID part of our Sample tech, we confirm what we said already in December of 2020 during the QIAGEN Day – we can expect mid-single-digit growth rates and also that the non-COVID part of the menu added for NeuMoDx and QIAstat will also fuel that double-digit growth. So it's a combination of a favorable environment, plus the commitments we have been making over the last two years, which gives us confidence for our five pillars of growth and enables us to target double-digit growth for 2022 and potentially 2023.

Roland Sackers, CFO

Daniel, you had a question about cash flow as well. Again, very much, of course, depending on how we see the full year developing, in particular, given the volatility around COVID. If you look at our guidance right now, I would assume that we'd probably be around or above our 2020 cash flow development. I think that is probably the ballpark we feel comfortable around right now.

Jack Meehan, Analyst

Thank you. Hi, guys. I wanted to start and ask about the QIAstat utilization, just reflecting on the numbers you put up in 2021. So you did $75 million of sales. If I assume that's all consumables, which probably isn't accurate, but just roll with it, I think that it implies about $30,000 of average utilization per box, which is about one test per day. So my question is, does that math check out? How do you think about it? And then question two, can you just talk about the range of utilization you're seeing in the field? What’s like the max, what's the min? How are you seeing customers use these in the field?

Thierry Bernard, CEO

That's a very good question, Jack. First of all, we had given data on that in the last few months, stating that 1 to 1.5 tests a day is accurate when you only refer to one assay which is respiratory or, in this case, COVID. The way I see it for a syndromic system, you need to take into account seasonality. During a high flu season in winter, I think expecting 2 to 2.5 tests a day per module is a reasonable average. In normal situations, 1 to 1.5 is a solid number to consider. For the future utilization, it depends on our menu progression; we have always been clear on that. This is why we always said that QIAstat and NeuMoDx, by the way, are menu plays, not just COVID plays. We now have the real position to answer any kind of tender in Europe, which was not completely the case before. You see, the minimal expected menu to be competitive in a syndromic tender is at least respiratory, GI, and meningitis. We have this now in Europe, and with the CE-IVD marking of the Meningitis panel and the submission of other panels for FDA approval in the U.S., we will further solidify our competitive stance.

Jack Meehan, Analyst

Great. And then as an unrelated question, I wanted to talk about digital PCR. Was curious if you could give some color on how much the U.S. wastewater contract contributes as a percentage of the sales you generated in 2021 for the business? And 70% of U.S. states sound pretty broad. Can you just give us a sense for what you think your market share is of the opportunity? And what type of tail of revenues this could generate?

Thierry Bernard, CEO

First of all, it was not a big part of the sales in 2021 for QIAcuity for one single reason: we closed that contract at the very end of Q3, and the time to implement the system into the public health lab in the U.S. took most of Q4 2021. So, revenue-wise, the impact was not huge. Why is getting that contract important? First, because public health labs in the U.S. are very significant institutions. Normally, there is one public health lab per state. If we don't have all states with QIAcuity wastewater, it's not because we lost the rest of the labs to a competitor; it's because those remaining states are not engaged in wastewater testing. Therefore, our real market share is essentially 100%. This will develop in 2022. However, I don't expect a massive flow of revenues because it will depend on utilization. This will primarily be surveillance-related. Yet, I am optimistic, as our success here signals to many other governments worldwide that wastewater testing is crucial. Moreover, wastewater testing is relevant not only for COVID but also for several other infectious diseases such as malaria and tuberculosis. Today, I confirm what we said in 2021 – that barely 10% of our instrument placements are driven by wastewater testing, and we do not expect more than that watch for increased percentages in 2022. Therefore, QIAcuity is genuinely not dependent on COVID-19 at all. Does that answer your question, Jack?

Dan Arias, Analyst

Hey, good morning, guys. Thank you. You've already touched on it with meningitis, but for the other assays for QIAstat and NeuMoDx, are you able to put some revised timelines around them within 2022, just with respect to submittals and launches for those assays, blood culture and gastro for QIAstat and then CT/MG and I believe Strep for NeuMoDx?

Thierry Bernard, CEO

For QIAstat, we have already submitted a GI to the FDA. However, as you are well aware, there is a significant backlog of approval requests at the FDA. So, in all transparency, we are not expecting sales of GI in the U.S. until the second half of the year, and I would say even before Q4. If it comes before, that's perfect. We have completed the commitments we made, which is the submission. Now we depend on the FDA. For meningitis in the U.S., our ambition is to submit at the latest in Q4 of 2022. For Strep and CT/MG, we plan to submit to the FDA in the second half of 2022. For BCID, we want to submit to the CE marking authorities before the end of 2022. This is the current timeline, and we also continue to believe that we should be able to launch on QIAstat our urinary tract infection assays in the second half of 2023 in Europe.

Roland Sackers, CFO

I do think it's a fair assumption for this year and mainly driven by two factors. One is clearly that we invested heavily in production expansion. That's clearly something that also led right now that we are not running on the best economy of scale. So we need increased utilization, which is something we expect to come in over time. The second factor is the margin side in terms of product mix. I would also assume that will be a bit more helpful over time as certain portions become a more significant share. Again, that’s probably why we see the margins as more or less flat this year and then potentially improving going forward.

Dan Arias, Analyst

Okay, very good. Thank you, guys.

Falko Friedrichs, Analyst

Thank you. So my question is a follow-up on Daniel's question earlier for you, Thierry. It's on the growth guidance for the non-COVID business. So if I look at consensus expectations, it looks like the market is expecting high single-digit growth for the non-COVID business post 2022. Now if I listen to your comments correctly, it did sound like this double-digit growth this year could be a bit more sustainable also over the next few years. So can you maybe clarify if I understood that correctly, or if I'm getting carried away, because that would obviously be a very important message.

Thierry Bernard, CEO

I don't think you're being carried away, Falko. Thanks for the question. Two things. In 2021 already, we took that commitment of double-digit growth for the non-COVID. We confirm this in our guidance. What I said today, as we said in the December '20 QIAGEN Day, is that post-COVID and excluding COVID base effects, we think that four of our five pillars of growth have definitely a double-digit profile; that is, QIAstat, NeuMoDx, digital PCR equity, and QuantiFERON. We said that Sample tech would be low- to mid-single-digit growth profiles. There was a slide on that during December, and we confirm that today, clearly.

John Gilardi, VP, Corporate Communications and Investor Relations

Okay. With that, Thierry, I'd like to end the call here and thank you again for your interest in QIAGEN. If you have any questions or comments, please do not hesitate to contact Phoebe and me. Thank you. Bye-bye.

Operator, Operator

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