Earnings Call Transcript
QIAGEN N.V. (QGEN)
Earnings Call Transcript - QGEN Q2 2021
Operator, Operator
Ladies and gentlemen, thank you for standing by. I am Keith, your PGi call operator. Welcome and thank you for joining QIAGEN's Preliminary Q2 2021 Earnings Conference Call Webcast. Please be advised that this call is being recorded at QIAGEN's request and will be made available on their Internet site. The presentation will be followed by a question-and-answer session. At this time, I would like to introduce your host, John Gilardi, Vice President, Head of Corporate Communications and Investor Relations at QIAGEN. Please go ahead.
John Gilardi, Vice President, Head of Corporate Communications and Investor Relations
Thank you, operator, and welcome to our call today. The speakers with us are Thierry Bernard, the CEO of QIAGEN, and Roland Sackers, the Chief Financial Officer. Also joining us is Phoebe Loh, Senior Director of Investor Relations. Please note that this call is being webcast live and will be archived in the Investors section of our website at www.qiagen.com. A copy of the press release is also available in the same section. Before we begin, let me cover our safe harbor statement. This presentation, as well as the discussions and responses to your questions on this call, reflect management's views as of today, July 13, 2021. We will be making statements and providing responses to your questions that state our intentions, beliefs, expectations, or predictions of the future. These constitute forward-looking statements for the purpose of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause actual results to differ materially from those projected. QIAGEN disclaims any intention or obligation to revise any forward-looking statements. For more information, please visit our filings with the U.S. Securities and Exchange Commission, and these are also available on our website. Before moving on, I'd like to remind you that the full results for the second quarter and first half of 2020 are still planned to be published on Thursday, July 29. This will be at the usual time at about 22:05 Frankfurt time, 4:05 p.m. New York time. In light of the call today, we are not planning to hold another conference call with that announcement. I'd like to now turn the call over to Thierry.
Thierry Bernard, CEO
Thank you, John, and welcome to our conference call today and for joining us to discuss the announcement of our preliminary result for the second quarter of this year and our first half of 2021 as well as our perspectives on the second half of the year. Let me get right away to our key messages for this call. First of all, our teams delivered excellent results in the second quarter of 2021. The preliminary results show we exceeded the outlook for sales growth and adjusted EPS. Net sales grew 24% at constant exchange rates over the same quarter of 2020, and at a faster 28% pace at actual rates to $567 million. This clearly beats our outlook for about 20% CER growth. The preliminary results for adjusted earnings per share are for about $0.65 to $0.66 CER, and this is above our outlook for about $0.62 to $0.64 CER. My second message is that we are seeing the benefits in the second quarter of our unwavering focus on the non-COVID product groups of QIAGEN. Those efforts are positioning our company to emerge from the pandemic as a stronger and more differentiated competitor. The performance of those non-COVID product groups was extremely strong in the second quarter, rising 52% CER to $408 million and providing 72% of our total sales. This confirms what you have heard us saying before. The results show that we are really COVID-relevant but not COVID-dependent. We are seeing broad business expansion and using this period to invest in our five pillars of growth. This is our highest priority for execution and positions QIAGEN for growth and differentiation. At the same time, we saw a decline in COVID-19 product group sales in the second quarter as they fell 17% CER to $160 million. This marks a break in the growth trends seen in the most recent quarters. Quite frankly, this was expected to come at some point. We said on our result call for the first quarter of 2021 that we expected a slowdown in the second quarter and in the second half of 2021. But it came faster than we, QIAGEN, along with many experts, had expected. The rollout of vaccination campaigns around the world has been much more successful than anticipated, and this has led to reduced demand for testing, which you are seeing in the data reports from various organizations. While we saw a very strong overall performance for Q2, we noticed a change in sales patterns coming from our COVID testing customers as the quarter progressed and especially at the end of quarter 2. This leads to the next key message, and that is the update for our full-year outlook '21. For the full year, we now expect sales growth of at least 12% CER over $1.87 billion in 2020. This compares to our prior range for about 18% to 20% growth CER. The updated outlook includes ongoing strong sales trends for non-COVID product groups that we expect to be at least 20% for the full year, but also takes an increasingly more cautious view on demand trends for COVID-19 testing in the second half of the year in light of what we are seeing currently with market trends. As for the delta variant and its implications, we are obviously monitoring the evolution of those variants and supporting healthcare providers around the world in the fight against COVID-19. For adjusted EPS, we now expect results for full year 2021 of at least $2.42 at CER. This is at the bottom end of the prior range for about $2.42 to $2.46 CER. As a last point, we have also announced plans for a new $100 million share repurchase program. This is clearly a reaffirmation of our convictions about QIAGEN's growth prospects and a signal of our disciplined capital allocation strategy. And I now would like to hand over to Roland.
Roland Sackers, CFO
Thank you, Thierry, and thank you as well for me for joining this call today. I would like to provide some perspectives on the sales results for the second quarter and first half of '21. You saw the preliminary top line results with 24% CER growth to USD 567 million. As you know, we have implemented an enhanced view on sales by product groups, so let me walk through each one. The first group involves sample technologies, the first of our five pillars of growth. These sales declined 3% CER in the second quarter to USD 203 million. These results overshadow the fact that the sales of non-COVID consumable kits rose about 30% CER over the second quarter of 2020 and represented about two-thirds of sample technology sales in this quarter. Sales of sample technologies from COVID-19 product groups fell at a double-digit CER rate over the second quarter of 2020, which was a quarter in 2020 in which we first saw significant incremental growth as the pandemic gained momentum. As a reminder, our sample technology sales are led by kits sold for use with DNA and are more weighted to our Life Science customers. So we are pleased with the underlying growth. In diagnostic solutions, which involve our product group sold for use in clinical testing, sales advanced 71% CER to USD 154 million. The key driver was the QuantiFERON latent TB test. These sales surged 109% CER to USD 72 million. All regions delivered excellent growth led by the Americas and Europe. Here, we are clearly seeing a resumption of testing and look forward to strong trends in the second half of '21, especially from back-to-school campaigns. Sales of the QIAstat-Dx and NeuMoDx solutions were higher than the second quarter of 2020 in spite of reduced demand for COVID-19 testing. But this was lower than in Q1 '21 and therefore less than we had expected. While COVID has been the major contributor to sales for these two platforms, we see that the sales composition will change as COVID testing demand declines and growth emerges from other applications. We are focusing on developing these platforms for applications beyond COVID testing. The top priority is to expand our test menus as we build up manufacturing capacity to support a growing installed base in the coming years. In terms of that installed base, we are quickly approaching 2,400 total placements of QIAstat-Dx systems and recently reached the milestone of 202 NeuMoDx placements. Other portfolios in these product groups include our precision medicine assays, companion diagnostic co-development revenues, and women's health portfolio, including HPV. These sales grew at a 33% CER pace in the second quarter and included a 31% CER increase in revenues from companion diagnostic co-development projects to USD 10 million as well as double-digit CER growth in precision medicine consumables that are often used to guide cancer treatment decisions. The PCR/Nucleic acid amplification product group involves our portfolio of PCR solutions and components for use in research and applied testing. These sales were up 8% CER in the second quarter to USD 109 million. On one hand, we saw very strong sales of the non-COVID products in this portfolio. The global rollout of the QIAcuity digital PCR instruments is building momentum, and we saw good sequential sales growth from the first quarter of '21. Demand is increasing for a broad range of applications. On the other hand, we saw weaker sales trends for products used in the COVID-19 response, including OEM products used by other diagnostic companies for their own COVID-19 tests. The last product group is Genomics/NGS that includes our universal NGS products and bioinformatics solutions. These sales were up 110% CER to USD 80 million in the second quarter of '21 after facing challenges in 2020 due to sharply reduced customer demand. Sales of universal solutions for next-generation sequencing were up more than 150% as labs ramped up activities. These results were enhanced by variant sequencing for COVID-19 cases and also by sales of technology licenses. Moving to the next slide. I would like to discuss our results in the non-COVID and COVID-19 product groups. We have seen significant year-over-year improvement trends in non-COVID product groups for three consecutive quarters. We have set a goal for sales from non-COVID product groups to grow at least 20% CER over 2020 and represent the majority of our sales. We saw strong non-COVID sales growth trends in the first half of '21 and believe that we will maintain momentum for a double-digit CER growth rate for the second half of the year. And we see this solid growth rate trend for non-COVID sales continuing into 2022. We expect non-COVID sales contributions in the third quarter on an absolute dollar basis at CER rates to be at the level between those seen in the first and second quarters of this year. For the fourth quarter, we expect a non-COVID sales level higher than the CER sales level seen in the second quarter of '21. As for the COVID-19 product portfolio, these sales were down 38% CER to USD 363 million in the first half of '21 and represented about one-third of total sales. Keep in mind that we had total COVID-19 product group sales of USD 680 million in 2020, and this represented USD 475 million of incremental sales over the 2019 levels of about USD 147 million. On the next slide, I would like to review our sales by geographic region. All regions showed growth in the second quarter of '21 over the same period of 2020 and absorbed lower sales for COVID-19 product groups. The Americas region delivered the strongest geographic performance in the second quarter of '21. These sales were up 44% CER at a pace roughly in line with the 40% CER growth in the first quarter of this year and provide about 45% of global sales. The key driver was QuantiFERON-TB, which grew over 50% CER over the year-ago period. The gains in the U.S. more than offset lower sales in Brazil and Mexico. The Europe, Middle East, and Africa region continued the strong trends from 2020 and the first quarter of '21, growing 15% CER and providing about 36% of global sales in the second quarter of '21. The United Kingdom, Italy, Switzerland, and Turkey all grew at double-digit CER rates, while Germany delivered low single-digit CER sales growth. And this came against a double-digit CER decline in France. Sales in the Asia Pacific and Japan region rose 4% CER over the second quarter of 2020 and represented 90% of global sales. China generated the most growth in this region with sales up 17% CER on broad product portfolio gains. Sales in the region, excluding China, however, were down 2% CER and included a single-digit CER decline in Japan and a double-digit CER drop in India. I would like to now hand back to Thierry.
Thierry Bernard, CEO
Thank you, Roland. And as we have updated our full-year outlook, we would also like to provide an update on our expectation for our five pillars of growth. At our deep dive in December, we gave you full-year sales expectations for each of our growth pillars. And now, obviously, we would like to give an update on how we see them developing given our views for the second half of the year. First of all, the sales trend for sample tech and QIAcuity are perfectly on track with our previous expectations. We are seeing solid non-COVID sales trends in those pillars. In terms of instruments, for example, we are on track for over 200 new placements of QIAsymphony systems, building on the more than 2,900 cumulative placements at the end of 2020. As Roland alluded to it, QIAstat diagnostics have seen solid placement trends and are driven by use for respiratory and COVID-19 testing. And we continue to be optimistic about converting those instruments for use beyond the pandemic. At the same time, keep in mind that for the next few quarters, we anticipate a period before consumable sales fully represent the transition to non-COVID testing applications. The updated sales expectation for QIAstat diagnostics is now for over $60 million for 2021. As we have said before, we obviously do not judge our growth drivers on the basis of one quarter or even one year. This is especially the case early in the life of a product. We still expect QIAstat diagnostic to deliver sustainable double-digit CER growth after working through the pandemic effects. We are, for example, already seeing growth picking up for sales for the gastrointestinal panel in Europe, and we are right on track in our plan to submit this panel to the FDA this year. We are also on track with the CE-IVD submission for the meningitis panel on QIAstat. Our production capacity expansion plans are also on track to enable us to provide consumables to support future growth. NeuMoDx will also enter a phase of transition to post-pandemic testing. Here, as we have said before, we are building on the extensive menu in Europe now with 15 CE-IVD Mark tests and one of the broadest available to customers. We are working on the menu expansion plans for the U.S. and greater utilization of their laboratory-developed test capabilities for those systems. For 2021, we are now expecting $100 million in sales for the full year in light of the new COVID testing trends. And finally, for QuantiFERON, which has been delivering robust growth for the last few quarters, we have increased our expectation for sales of this product group to over $255 million for 2021. Building on the very strong growth of Q2 of 100% CER, we will also be launching QIAreach-QST tuberculosis in the second half of the year, which will further boost sales in addition to the return of immigration programs, and as Roland said, the back-to-school testing. A key point is that we are reaffirming the midterm growth ambition that we announced at our Investor Day in December. Each of our five pillars of growth are well differentiated, and they are set to deliver sustainable growth in a post-pandemic market. And I would now like to hand over again to Roland.
Roland Sackers, CFO
Thank you, Thierry. The next slide provides you with a bridge on what has changed in the sales outlook for '21. On the left side, we took the low end of the previous outlook for '21, which was for 18% to 20% CER sales growth. As we noted earlier, we are now expecting the COVID-19 product group sales to be down about USD 200 million, while the non-COVID product groups are doing better than expected, and this is by an amount of approximately USD 90 million. This leads to the new outlook for at least 12% CER sales growth for '21, where the non-COVID performance is helping us to offset a significant part of the rebalancing of our portfolio. As noted earlier, we have updated our full-year outlook for net sales to be at least 12% CER growth and for adjusted EPS of at least $2.42 at constant exchange rates. This reflects our plans to invest in our five pillars of growth and strengthen our competitive profile to drive sustainable growth. We are using this period to change the way we work, in particular, stepping up digital engagement with customers and enhance our profitability growth in the coming years. As for currencies, based on rates as of June 30, '21, we now expect a currency tailwind on full-year results at actual rates of about 2 to 3 percentage points. For adjusted EPS, a currency tailwind of about $0.02 to $0.03 per share is expected for the year. For the third quarter, we anticipate CER sales to be at the same level of USD 483.8 million in the same period of 2020 and adjusted EPS of about $0.52 to $0.53 CER, and this compares to results of $0.58 in Q3 2020. In terms of the adjusted tax rate, we expect a rate of about 16% in the third quarter and of about 17% to 18% for the full year of '21. The average number of shares outstanding is around 231 million for Q3, while the level for the full year is about 232 million. With that, I would like to hand back to Thierry.
Thierry Bernard, CEO
Thank you, Roland. We are coming to the end of our call, so let me provide you with a quick summary before we move into the Q&A session. First, and I'd like to repeat this, we had excellent results in the second quarter of 2021, and also for the first half of the year. Our results beat the outlook set for sales and adjusted earnings per share and were driven by the dynamic growth from our non-COVID product group. This is the seventh quarter in a row where we are beating expectations both on sales and EPS. This leads to the second message, and that is the laser focus of our teams on driving further growth from those non-COVID product groups. As a reminder, those groups represented nearly 70% of total sales in the first half of 2021, and they grew 33% CER. And as Roland said, we have a goal of at least 20% CER growth for the full year for the non-COVID-related product. Those efforts will pay off to position QIAGEN for further strong growth beyond the pandemic driven by our five pillars of growth. Third point, we have decided to take a more cautious view on COVID-19 testing trends. This comes after the faster-than-expected uptake and success of vaccination campaigns, which we all certainly welcome. Our teams obviously remain on the frontline of supporting the global response to the pandemic. And we are ready for any future pandemic testing needs given the increasingly volatile situation with the delta variant or other variants. But we have not factored into our numbers for 2021, the second half, any surge into our forecast. Fourth, we have updated our outlook for the full year 2021 based on the COVID-19 testing trends. Net sales are now expected to grow at least 12% CER and for adjusted EPS of at least $2.42. And as a last point, we really believe in our future growth prospects, and this is confirmed with plans to start a new $100 million share repurchase program. With that, I would like to thank you for your attention and hand back to John and the operator for the Q&A session. Thanks a lot.
Operator, Operator
The first question comes from Matt Sykes of Goldman Sachs.
Matthew Sykes, Analyst
I just have one question and then a follow-up. Could you just help us understand the margin progression through the back half of the year as we just try to reconcile the decrease in revenue growth guidance for the year versus the at least $2.42 in EPS for the year? Just help us understand how the margins should progress maybe relative to the previous year or your expectations.
Roland Sackers, CFO
Yes, thank you for the question. Currently, we anticipate that the margin for the second quarter will be slightly above what we experienced in the first quarter, then it may decrease somewhat in the third quarter before increasing again in the fourth quarter. Overall, for the full year, we expect it to be around 33 percent or slightly higher for adjusted operating income margin. This indicates strong margin development overall. In looking at the factors influencing margin over the next few months, it's clear that gross margin is likely to improve slightly compared to the first quarter. However, the R&D expenses will probably remain steady in absolute dollars. In the second quarter, efficiency is clearly coming from the digitalization occurring in our sales and marketing efforts, which provides opportunities for leverage. Additionally, we are seeing non-operational leverage from several factors, including lower financing costs and tax rates. These are the main drivers for overall EPS growth.
Matthew Sykes, Analyst
Great. That's very helpful. And then just do you have in mind a durable COVID revenue stream? I think about the variant work being done on the genomics side. But do you have in mind what could potentially be somewhat durable into '22 in terms of COVID-related revenues?
Thierry Bernard, CEO
Thank you for your question. With our updated outlook, we prefer not to base our forecast on predictions regarding COVID-19 trends, which are highly unpredictable. It’s important to emphasize that if we experience another outbreak, such as the delta variant or other variants, we will be prepared to supply our customers. However, we do not wish to make any bets on QIAGEN's performance related to COVID-19 developments for the remainder of this year or for 2022 and beyond.
Operator, Operator
The next question comes from Scott Bardo of Berenberg.
Scott Bardo, Analyst
So just on QIAstat and NeuMoDx, please. It seems that placement rates are still going pretty well here, but clearly bringing your revenue expectation down sharply in the course of the last few months. Given that the correction in COVID testing seems to be happening a little bit earlier and more deep than you expected, I wonder if you could at least share some sense on the 2022 outlook. You suggest sustainable double-digit growth. Are we now assuming, as of next year, you can grow these franchises positively? Or do you expect that there's still some COVID correction to come next year for these franchises? So if you could clarify there, please. I'd also like to understand, please, a very strong number in genomics at $80 million. How much of that would you classify as being COVID and somewhat one-off? And how much is sustainable? And last question, please. The profitability for the company is strong and healthy. And it sounds like you're maintaining a similar margin outlook for the beginning of the year despite the softer top line. I wonder if you can provide some sense, Roland, as we think forward for QIAGEN. Do you think mid to high-20s margin that we've seen in the past is something we'll see again for the company? Or has the company now reached a new structural level for profitability?
Thierry Bernard, CEO
Thanks, Scott, for those questions. I would propose to take the first one and then Roland can also speak about the profitability, obviously. So first of all, QIAstat and NeuMoDx. Yes, you are right to highlight that we still consider that we have a healthy level of placement. That means that there is still a strong interest for those two platforms on the market. Because of the nature of the menu, we believe that, obviously, once we have absorbed the pandemic effect, those two platforms have clearly, as we said in December of 2020, a double-digit growth profile. I believe in this case that I see QIAstat growing again, obviously, starting in 2022, where for NeuMoDx because of the different situation menu-wise between Europe and North America, I would say, rather, a more flattish in 2021 to absorb basically the impact of the COVID testing. This is for those two platforms. As regards to the genomic performance, most of it is really driven by non-COVID application. The COVID part sequencing for COVID testing is still rather limited in our revenues as most of the governments clearly invested major funds into it. We have the solution. We are ready, again, to supply customers if there are more needs, but it's mainly non-COVID-driven. Roland?
Roland Sackers, CFO
Yes. Thank you, Thierry. In terms of profitability, I think as I alluded to before, we expect the second quarter even somewhat better in terms of adjusted EBIT margin than what we have seen in the first quarter, probably quite similar gross margins. So overall, profitability is clearly quite strong. And as I said before, for the second part of the year, it's probably going relatively slightly lower or it's going lower in the third quarter before it gets again better in the fourth quarter. And probably for the year ending, it is 33-plus percent adjusted EBIT margin. In terms of mid and long-term outlook, I think, for me, it's quite obvious that a lot of the margin profile going forward, what is driving the margin profile is something that will stay mid and long term. The overall digitalization of our franchise is rather increasing, not decreasing, and I don't think that's going to change. We do probably right now more than 65% of all transactions in a digital way, leading to revenues. If you compare that with three years ago, where it was rather above 20%, a significant difference in the way we sell. That is also true for other areas. I also believe that while we continue to expand our portfolio, particularly in NeuMoDx, and that comes with incremental R&D spending, that is probably something that, over the course of '22, is going to stabilize on a certain level. So there's also margin expansion that is something that is reasonable. What is the overall level? I think it's clearly also dependent on what COVID revenue numbers for '22 and beyond. While we feel quite comfortable on the non-COVID business, and that is expecting to have a healthy double-digit growth rate in the mid and long term, I think that, as Thierry said before, something that we still have to see what is happening here for '22. It depends very much also on how we leave the year '21. The one thing where I feel comfortable around is that we will have post-pandemic higher margins than we had pre-pandemic. I think that is something where I feel comfortable given that there are new structures, new environments and also a totally new base of revenues. So I think that is the way to think about it.
Operator, Operator
Our next question comes from Jack Meehan of Nephron Research.
Jack Meehan, Analyst
Two follow-ups. Back on genomics, Thierry, was just hoping for a little bit more color. The business has done $40 million to $50 million of sales per quarter since the beginning of 2019. So wasn't COVID in the quarter, but what in the market caused that business to jump to $80 million this quarter? And then a clarification on the antigen side. I see the $70 million of sales pulled out of the guide. How much did antigen contribute in sales in the first half of the year?
Thierry Bernard, CEO
Jack, I apologize, but your voice was a bit blurred. Can you repeat the second one? I got the first one but not the second one. I'm sorry.
Jack Meehan, Analyst
Sure. Sorry about that. Hopefully, this is better. Just how much did antigen contribute in sales in the first half of the year?
Thierry Bernard, CEO
So very quickly for the first half of the year, it's nothing. I remind you that our antigen solution developed together with Ellume is not approved by the FDA. We are answering currently the question of the agency, so we'll see what is happening. And I think as we have shown with Roland, we are not factoring any sales for the second half of the year. Regarding genomics, this is mainly driven by the fact that oncology testing is coming back to a much more normalized level, quasi-to a pre-pandemic level. As you perfectly know, I mean, funds have been reallocated during '20, I would say, against allocation to oncology testing. And this is now coming back. This is what is in majority driving our NGS sales. Again, we have an offer on genomic surveillance, but those are not the main numbers to account for this performance in H1.
Roland Sackers, CFO
Just to add on that, Jack. For the third quarter in genomics, we probably expect a somewhat lower number compared to the second quarter. It's probably a bit higher than what we have seen in the first quarter. I think that helps you probably in modeling.
Operator, Operator
Our next question comes from Doug Schenkel of Cowen.
Doug Schenkel, Analyst
I want to follow up on a couple of things more directly. This isn't intended to be difficult; I just want to ensure that everyone understands the situation clearly and that we refine our models so we don't have to revisit this later in the year, aiming to position the stock better moving forward. My first question is about 2022. Many investors we've talked to believe that consensus EPS expectations for 2022 seem quite high, considering the uncertainty surrounding COVID-19 testing and related products. You've mentioned this in your prepared remarks and in responses to previous questions, but to be more specific, it's been observed that U.S. analysts generally have lower estimates compared to their European counterparts. The numbers seem too high for 2022 based on everything we've heard regarding COVID testing. Could you share your thoughts on how you're approaching 2022 or how you think analysts should be forecasting COVID-19 revenue for that year? I noted your comments about adjusting the numbers. To be specific, we've been assuming COVID-19 revenue will drop from the previously estimated $600 million in 2021, which is now clearly too high, to around $250 million in 2022. This would represent an EPS headwind of approximately $0.40 year-over-year. Are these expectations reasonable, or should we anticipate a larger headwind for 2022?
Thierry Bernard, CEO
Thanks for the question, Doug. I mean, once again, I would like to insist that I think it would not be very serious or credible on our side to bet again on expectations for 2022 level of COVID. Roland, once again, in part of the presentation, started to remind that we have a base, which is at $147 million in 2019. And since then, you have seen the bridge in our deck. I really would like to stay away from any forecast on this regard. I mean I prefer really to focus on the perspective of growth for the non-COVID business, which we have said to be at least 20% for the full year '21 and continuing at a healthy double-digit level for 2022. This is where I would prefer because here, we have clearer visibility. Perhaps, Roland, you want to add something to that?
Roland Sackers, CFO
No. I think not much to add. I would say, again, as Thierry has said, there is a part of our business which has gained momentum and we have our hands around, and it feels well on its way. And I don't think there is anything to change. I think, typically, we also have our hands quite well around profitability. But again, you can work in scenarios, right? If you assume a drop in COVID revenues, as you said before, that for sure has an EPS impact. There is no question around that. But I'm not going to tell you that now, as of today, it's being $0.10 more or less. But again, yes, $2.30 would sound high. There is no question.
Operator, Operator
Our next question comes from Falko Friedrichs of Deutsche Bank.
Falko Friedrichs, Analyst
So the first question, coming back to your adjusted EPS guidance for this year, to your new guidance, can you elaborate a little bit to what extent the flexibility of your cost models that you flagged before it's helping you here? And in that regard, did you have to postpone certain investments? Or were there other pockets here that help you to keep this EPS guide pretty much unchanged versus the previous guidance? And then a brief follow-up. The share repurchase program that you announced, is that reflected in this new guidance that you provided us?
Roland Sackers, CFO
Starting with the second question, yes, the $100 million share buyback is included in that. However, it's important to note that it only accounts for a pro-rata portion over one year, making its impact minimal over a six-month period. Regarding your first question, it's crucial to understand that a significant portion of our revenues, particularly from the antigen product, is expected to be delayed this year and this product comes with a lower gross margin. This, however, assists us in managing our overall situation. Additionally, the timing of the overall COVID situation has had an effect, which we have accounted for in our cost structure. We have made significant efforts to utilize variable costs and flexible cost structures. For instance, when adding personnel to production, we ensured that we had appropriate contracts in place. This strategy is beneficial for us. Furthermore, the way we interact with our customers has evolved, which has been advantageous. Importantly, we are not forced to cut costs; we are maintaining the increased operating rate observed in the second quarter. Our R&D projects are progressing well, and we don't anticipate making any significant changes. We currently have about 250 to 300 more employees than we did before COVID, primarily in R&D and to some extent in sales and marketing. We are comfortable with our current staffing and do not plan on increasing it further. Lastly, there are also non-operational factors that are favorable to us, contributing roughly 25 to 33 percent to the overall equation. As mentioned earlier, we now have a better financing environment along with a slightly improved tax climate, and other factors such as share count also support our situation.
Operator, Operator
The next question comes from Derik De Bruin of Bank of America.
Derik De Bruin, Analyst
I have two quick questions. First, can you discuss the pricing environment in sample prep? We’ve seen several companies enter the market during COVID, which has traditionally been dominated by QIAGEN. What are you observing regarding pricing in sample prep? Secondly, following up on Doug's point, you had $147 million in COVID-related revenues in 2019, and no other life sciences companies seemed to have that reflected in their 2019 models. What does that mean, and why isn't that amount considered a base number for 2022? Or are you suggesting that it should be excluded from the figures?
Thierry Bernard, CEO
So thanks. So first on the pricing environment for sample tech, first of all, as we said last year many times, we didn't try to take advantage of the pandemic to basically inflate prices. We also adjusted our prices according to the different geographies, and we haven't seen a specific pressure either on automated solution or manual solutions. And we do not foresee a specific pressure here. And as I explained in many calls before, it is QIAGEN's strategy to systematically pass price increases as much as we can every year. The first point. The question again on the COVID-19 base, what you have seen in pre-pandemic is to make sure that you can compare products that are of similar categorization and classification. That doesn't mean, obviously, pre-pandemic that they were obviously directed to the COVID-19. So to your point, it's obviously difficult to imagine that this base would vanish anytime soon because it was not related to the pandemic before the pandemic. So if you want to use it as a base, I mean, in a model, it's a decent number. Just what we don't want to do is to take any bet on any growth compared to that on the numbers, which is proving to be extremely volatile. That's what I could provide you as an indication with.
Operator, Operator
The next question comes from Patrick Donnelly of Citi.
Patrick Donnelly, Analyst
There's obviously been a few on the margin front. Roland, can you maybe just talk about how you balance cost savings to protect the bottom line, inflate the bottom line while revs are coming down here this year while also continuing to invest in some of the growth platforms you've discussed? I just want to talk about that balance again. Obviously, important for you guys to continue to invest given the growth outlook but, at the same time, the bottom line, not really moving much. The margins are hanging in there. I just want to make sure we understand that piece.
Roland Sackers, CFO
Patrick, I completely agree. We want to invest, especially in research and development, and in expanding our menu for QIAstat and NeuMoDx. This is essential for our strategy post-COVID, and there's no uncertainty about it. However, we shouldn't overlook that pre-COVID, we had a few hundred million dollars in additional revenue, which provides leverage on its own. Compared to the pre-COVID period, we have significantly more platforms deployed, resulting in a substantial efficiency gain for the company. Instead of competing for specific orders, we now have recurring revenue streams. While we may see some fluctuations or declines in COVID-related revenue, the installed base remains strong. In the coming quarters, we anticipate that customers will shift from COVID testing to more standard lab testing. Over the last few quarters, we have sold a notable number of instruments into the market, which will aid our efficiency. I believe that sums up our approach to this situation.
Operator, Operator
The next question comes from Tycho Peterson of JPMorgan.
Casey Woodring, Analyst
This is Casey on for Tycho. On QIAstat and NeuMoDx, the revision in guidance there, how much of that is a function of a faster slowdown in COVID versus potentially increased competition in the market? And I'm just asking this since the last time we spoke, you had talked about how QIAGEN's COVID testing is over-indexed to OUS markets that really haven't seen the same type of decline in testing. So maybe can you just talk about the competitive and geographic dynamics that play here for both of those platforms?
Thierry Bernard, CEO
Yes, the competitive landscape has remained stable so far. We have noticed potential new entrants with the acquisition of GenMark by Mobidiag. Regarding the impact of COVID testing volatility, currently, about 80% to 90% of our installed base for NeuMoDx or QIAstat is driven by COVID. Our goal now is to transition these customers to the rest of our product offerings. We are on track with our commitments, including the GI submission for QIAstat in the U.S. and the meningitis submission for Europe. We are also introducing a new menu item, as announced in our press release about NeuMoDx and adenovirus testing. The pandemic has likely helped us accelerate our market share growth by at least a year, and we now have a strong base of instruments that continues to expand. We provided some figures for the first half of the year, and our focus is on converting this base to the non-COVID part of our menu. This transition will take time, as we previously mentioned it would require several quarters to fully adjust to the effects of COVID-19. However, the two instruments are not solely reliant on COVID; they are designed for a broader menu. We emphasized in this call that the gastrointestinal segment in Europe is showing promising growth trends beginning in Q2, and we need to capitalize on that momentum in Q3. Additionally, we aim to launch the meningitis test and quickly bring the GI test to the U.S. market.
Operator, Operator
The next question comes from Peter Welford of Jefferies.
Peter Welford, Analyst
Regarding 2022, I would like to understand more about the margin. Specifically, can you provide context on the savings we are experiencing this year in SG&A due to the pandemic and the lack of travel? Should we expect these savings to return next year at a rate higher than normal inflation? Additionally, in terms of R&D, will the investment rate increase again in 2022 due to menu expansion, or do you believe the current level of investment is largely unaffected by the pandemic and will continue into 2022? This information will help us assess the potential margin impact as we consider COVID's effects in our 2022 projections.
Roland Sackers, CFO
Yes. First of all, I want to remind you that while our overall operating income margin appears high, this is primarily due to our strong gross margin. If you examine the operational expenses, there's still room for improvement in comparison to our peers. Nonetheless, we are comfortable with our current investment levels. We increased our headcount before COVID by around 250 to 300, which is quite reasonable. We have significantly ramped up our R&D efforts. Keep in mind that we underwent a major change at the end of 2019 in how we invest in R&D. We also halted a significant R&D program for a next-generation gene reader to focus on our five growth pillars, which I believe continues to be the right direction. In terms of sales and marketing, there are opportunities for us to leverage and we need to follow through on that. Given the number of placements and the overall digitalization trends, I think this will be beneficial. I expect some inflation-related cost increases next year, which seems reasonable to assume. However, I don't envision a return to a pre-COVID cost environment. The days of large marketing events in places like Marco Ireland are behind us, and I think we will see a shift moving forward.
Operator, Operator
The last question comes from Lisa Garcia of Wolfe Research.
Elizabeth Cristina Garcia, Analyst
Could you provide examples of what was included in the 2019 COVID base for context? Also, regarding QuantiFERON this year, it seems they have already reached about 50% of their $255 million target. Historically, this product tends to show seasonal strength in the latter half of the year, so I want to confirm if there are any changes in seasonality for QuantiFERON this year that I should be aware of.
Thierry Bernard, CEO
Those are two good questions. What you were seeing in the COVID category before 2019 involved some RNA testing, which isn't limited to COVID as there are other viruses involved. Additionally, we have other products related to extraction, purification, nucleic acids, and some enzymology in that category. Regarding QuantiFERON, you are correct that typically there is an acceleration in the fourth quarter during a normal year. However, it is important to note that one of the key growth drivers for QuantiFERON, which is migrant testing, is not yet operational in 2021. As Roland mentioned in our presentation, we expect this to gradually resume next year, but it won't be happening this year. Taking into account the summer period in Europe and the strong performance in the first and second quarters, our current forecast for QuantiFERON in the third quarter is slightly below the second quarter, compared to the first quarter of 2021, with an expected acceleration in the fourth quarter, exceeding the results from either the second or first quarter.
John Gilardi, Vice President, Head of Corporate Communications and Investor Relations
Thank you very much to everyone, and also to Thierry and Roland for your time today. With that, I would like to close this conference call and wish you all a good day. Goodbye.
Operator, Operator
Ladies and gentlemen, this concludes the conference call. Thank you for joining, and have a pleasant day. Goodbye.