Earnings Call Transcript - QGEN Q1 2022

Operator, Operator

Ladies and gentlemen, thank you for standing by. I am Elaine, your PGI call operator. Welcome, and thank you for joining QIAGEN's First Quarter 2022 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. At this time, I would like to introduce your host, John Gilardi, Vice President of Corporate Communications and Investor Relations at QIAGEN. Please go ahead, sir.

John Gilardi, Vice President of Corporate Communications and Investor Relations

So thank you very much, and welcome all of you to our call. The 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 IR team. Please note that this call is being webcast live and will be archived in the Investors section of our website at www.qiagen.com. Today, we will first have some remarks from Thierry and Roland and then move into the Q&A session. A presentation with details on our performance is available in the IR section of our website, along with the quarterly release that you saw earlier this week. We will not be showing slides during the call, but you have the slides from the website as a reference. Before we begin, let me cover as usual, our safe harbor statement. This conference call discussion and responses to your questions reflect the views of management as of today, April 28, 2022. We will be making statements, providing response to your questions and 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 refer to our filings with the U.S. Securities and Exchange Commission, and those are also available on our website. We will also be referring to certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP. All references to EPS refer to diluted EPS. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is available in the press release as well as the presentation. Again, these are both on our website. I'd like to now turn over the call to Thierry.

Thierry Bernard, CEO

Thank you, John, and welcome to our conference call today and thank you once again to everyone for joining us. We are very pleased to report strong results in the first quarter of 2022, which exceeded our outlook and reflects a solid performance in our non-COVID products with a 14% CER growth. In this current environment, this once again demonstrates the resilience of the portfolio of QIAGEN and the strength of our company, as well as the relevance of our strategy. Against the dynamic global situation, we have taken a very proactive approach to shoring up our business. This has enabled us to effectively manage supply chains and keep production running to ensure delivery of our products. As the beginning of the year brought further economic uncertainty on a macro scale, our teams did an excellent job of staying focused. Something that we are very proud to highlight is the fact that upon Russia's invasion into Ukraine, QIAGENers all over the world banded together in support of Ukrainians, as our teams all over the world donated funds, clothing and food, and even opened their homes to those in need. During those unprecedented times, we see the true culture of QIAGEN with a dedication to taking care of one another, while remaining disciplined towards execution of our goals. For that, I really would like to thank all our teams for their unwavering commitment. Now allow me to move to our key messages for today. First of all, we exceeded the outlook set for net sales growth and adjusted EPS for Q1 2022. Net sales for the first quarter of 2022 grew 15% at constant exchange rates to $628 million over the same period in 2021. This was well above the outlook for at least 7% growth CER. Our non-COVID product sales continued to deliver solid growth at 14% CER, which was ahead of our expectations. COVID-19 related product sales were also better than expected, driven mainly by surges of Omicron outbreaks in Europe. Adjusted earnings per share in the first quarter grew to $0.83 CER, which was above the outlook for at least $0.72. Second key message. We had strong profitability and increased cash flow in the first quarter, which further reflects the strength of our business. Operating cash flow for the first quarter of 2022 rose 61% to $207 million, while free cash flow more than doubled to $178 million over the first quarter of 2021. Those results demonstrate our ability to support future growth through smart investments while managing a rapidly changing cost environment. As a last message, we have increased our outlook for the full year 2022 as a result of our performance in the first quarter. Although we are in a time of international economic uncertainty, we feel optimistic that our strategy is robust and execution by our teams is on track. Therefore, we now expect sales of at least $2.12 billion for the full year 2022 to be mainly driven by double-digit CER growth coming from our non-COVID portfolio. And as for EPS, we now expect at least $2.14 CER for registered EPS. We remain focused on advancing our non-COVID product groups, and we are still taking a conservative view on COVID-19 testing demand for the year. Of course, as always, we will remain ready to support COVID testing as needed in case of any outbreaks in the future. We will provide more details on the outlook later in this call, and I would like now to hand over to Roland for our financial update.

Roland Sackers, CFO

Hello, and thank you as well for joining this call. As Thierry indicated, we had a very good start to the year and feel confident in delivering on the goals we have set for 2022. Let me begin by walking you through our sales and the results in more detail. For the first quarter, net sales grew 15% at constant exchange rates against a tough comparison to the first quarter of 2021. We saw a solid performance from our non-COVID product groups growing 14% CER. This represented growth widely spread across the portfolios and in an environment still impacted by the pandemic. In our COVID-19 product groups, testing demand in the first part of the quarter resulted in 18% CER growth in sales, when we were actually expecting a decline. Consumables and related revenues for the first quarter were up 17% CER over the same period in 2021 and represented 89% of sales. Instrument sales rose slightly at 2% CER, but this was against the highest level of quarterly instrument sales for '21 in the year-ago period. The Q1 2022 level of $70 million of instrument sales at CER was, in fact, higher than the sales in any quarter of '21. Key drivers for this growth were record placements of QIAstat and NeuMoDx systems, along with solid trends for the QIAcuity, QIAsymphony, QIAcube and EZ2 Connect instruments. In terms of sales among the four product groups, let's start with Sample technologies. These sales rose 22% CER and were driven by high demand for the QIAprep solutions for COVID-19 testing particularly in Europe. Instrument sales growth at a low single-digit CER rate was supported by placements of the recently launched EZ2 Connect instrument as well as QIAsymphony and QIAcube Connect. Consumable sales for non-COVID product groups faced headwinds against very strong demand in Q1 '21, a period when many customers were returning to work after lockdowns and back orders were being reduced. We expect more favorable trends for this portfolio in the second quarter and the rest of the year. Sales in Diagnostic Solutions rose 21% CER for the first quarter of '22. The key driver was QuantiFERON, with sales rising 41% CER to USD 78 million with strong growth across all regions. Sales trends for QIAstat-Dx and NeuMoDx systems were in line with our full year expectations for these growth pillars, which are both still in the commercialization ramp-up phase. Our Precision Medicine business benefited from the resumption of many pharma R&D projects and revenues from companion diagnostic co-development projects were up 26% CER for the quarter. In the PCR/Nucleic acid amplification product group sales rose 1% CER for the first quarter of '22. Here, we saw a high single-digit CER decline in COVID product group sales that vastly overshadowed a double-digit CER increase in the non-COVID product groups. This product group was supported by sales of the QIAcuity digital PCR system as well as OEM reagents used by other companies for their own products. Genomics/NGS sales were up 16% CER over the first quarter of '21 and led by a strong performance from the QIAGEN Digital Insight bioinformatics business. We also saw double-digit CER sales growth in universal consumables used on any next-generation sequencing platform for non-COVID applications. Moving to the regions, we saw good results in the EMEA region with 24% CER growth. This was led by strong growth in a number of countries including Germany, Spain, the Netherlands, and the United Kingdom. The Asia Pacific, Japan region also grew at a solid pace with 25% CER growth. And here, we saw China growing above 10% CER along with dynamic gains in Australia that were driven by instrument placements. In the Americas region, sales rose 4% CER against COVID headwinds from the first quarter of '21. The U.S. and Brazil delivered single-digit CER growth, supported by higher sales of both consumables and instruments, while sales in Mexico declined over the year-ago period. Moving down to the income statement, the adjusted gross margin stood at 68.6% of sales in the first quarter of '22 and largely unchanged from the year-ago period. This is despite absorbing costs in the first quarter of '22 for investments made last year to build up consumables production capacity, especially for QIAstat and NeuMoDx. R&D investments remained at a high level in terms of dollars, but declined as a percentage of sales to 7.4%, compared to 8.4% in the year-ago quarter due to the strong sales growth. Our target rate is at least 8% to 9% of sales being invested into R&D and for a significant share to be in our five pillars of growth. At the same time, we gained further leverage in other operating expenses. Sales and marketing expenses declined to 18.9% of sales in the first quarter of '22 from 21% in the same period of '21. We are ramping up our digital customer engagement capabilities and building on the new habits that customers developed during the pandemic and are showing signs of continuation. And as last point, general and administration expenses stood at 5.5% of sales in the '22 quarter compared to 6% in the year-ago period. Efficiency gains are being used to support investments in IT systems and cybersecurity. Based on these factors, adjusted operating income was 19% to USD 231.6 million and the adjusted operating income margin improved by about 10 basis points to a record 36.9% of sales. Adjusted EPS for the first quarter was again well above our outlook and was $0.83 CER versus the outlook for at least $0.72 CER. Results at actual rates were $0.80 due to the stronger-than-expected currency headwinds. The adjusted tax rate was 19% and above the outlook we have given for a tax rate of about 17% to 18%. Turning to cash flow trends for the first quarter of '22, we saw dynamic performance in both operating and free cash flow. Operating cash flow increased 61% to USD 207 million from $129 million in the first quarter of '21. This was driven by our strong business expansion that led to higher net income and adjusted adjustments from noncash items. Operating cash flow includes a decrease in operating assets and liabilities, primarily due to increased accounts receivable and inventories to meet the increase in demand and decreases in accrued and other liabilities and accounts payable. As for the free cash flow, we saw a 116% increase to USD 178 million in the first quarter of '22 from USD 82 million in the year-ago period. This reflects a decrease of purchase of property, plant and equipment in the first quarter of '22 compared to the year-ago period when additional investments were made to expand product capacity for key growth products at sites in Europe and in the United States. In terms of our balance sheet, our total long-term debt is $1.9 billion at the end of the first quarter of '22 and remains relatively unchanged from the balance sheet at the year-end. As of March 31, $469 million of this debt is due later this year, as a portion of both our U.S. and German private placement debt instruments will mature in October. While our total debt level remains in line with the end of '21, our net debt has decreased due to higher levels of cash, cash equivalents, and short-term investments held at the end of this first quarter. The decrease in net debt, combined with higher adjusted EBITDA resulted in a leverage ratio of 0.7x at the end of the first quarter. Our continued solid cash flow performance, along with the value we are creating in our portfolio through our investments into the business give us confidence that we are well-positioned for waves of growth in the coming years. This allows us to continue exploring options for capital deployment, including bolt-on acquisitions, alignment with our goals to create greater value for shareholders and other stakeholders. Our ongoing commitment to increase returns to shareholders is evidenced through the share repurchase program completed last year in which we repurchased a total of 1.9 million shares for USD 100 million. I would like now to hand back to Thierry.

Thierry Bernard, CEO

Thank you, Roland. And please, as usual, allow me to give you a quick update on our key portfolios. And here again, I would say that the key word is execution. In Sample technologies first, our new easy-to-connect system was launched at the end of 2021 as part of our program to upgrade our automated sample preparation instruments. With the launch of the latest consumable kit for extraction of RNA from cells and tissue, the EZ2 Connect is covering a wide range of clear application and enhances our human identification solution, HID. The new workflow on the EZ2 along with the QIAcuity digital PCR instrument offers streamlined biomarker profiling from liquid biopsies and paraffin-embedded samples, enabling quantification of viruses, bacteria, or other disorders, including rare cancer mutations. In Diagnostic Solutions, QuantiFERON-TB Gold Plus has reached a new milestone with over 100 million patients screened for latent TB. We anticipate the next few years to be a growth period from modern latent TB testing in emerging markets as the QIAreach TB test makes its way into high-burden, low-resources areas. Third, the QIAstat diagnostic rise, the new higher throughput version of the QIAstat diagnostic syndromic testing platform is on track for launch by mid-year. As a reminder, this system features random access with a capacity to hold up to 18 different tests and includes a new level of workflow efficiency. This comes at the same time as we expand the menu for QIAstat diagnostic with the CE registration of the meningitis panel and submission to the FDA for approval of the gastrointestinal panel at the end of 2021. In PCR/Nucleic acid amplification QIAcuity digital PCR is making good progress in expanding the application range for those systems. The recently launched Digital PCR microbial DNA detection assays leverage the simplicity and precision of QIAcuity in the fast workflow for the rapidly growing area of microbial analysis. In genomics, we are building growth through partnerships, as we have signed an agreement with NHS England for a 2-year licensing contract for QIAGEN's bioinformatics solutions to support work in the 100,000 genomes project. Also, a new collaboration with Element Biosciences, partners leverage the flexibility of QIAGEN's universal NGS consumables with validation on the Element AVT-sequencing system. This will include a complete workflow employing QIAGEN sample prep, custom-made assays, and industry-leading bioinformatics solutions. So as you can see, we continue to make progress on our goals for targeted expansion of our portfolios as part of our strategy to drive sustainable growth in the coming years. And now back to Roland.

Roland Sackers, CFO

Let me provide some additional perspectives on the outlook for full year '22 and also for the second quarter. Based on the strong start to the year, we have increased our outlook for full year sales to now reach USD 2.12 billion at constant exchange rates. This outlook reaffirms our expectations for double-digit CER growth in the non-COVID product groups building on the 14% CER performance in the first quarter. However, we do continue to take a conservative view on the course of the pandemic and still expect a significant decline in sales from the '21 levels of USD 704 million in product groups used in COVID testing. An important amount of the sales for '22 have come in the first quarter. For the second half of the year, we expect these product groups to deliver sales in line with the 2019 run rate. Also taking into consideration how the current inflation and macroeconomic trends, this includes the adverse impact of anticipated lost sales in '22 from Russia, Ukraine, and Belarus, which represented approximately 1% of net sales in '21. We are also taking a more cautious view on China due to the current lockdown situation. In terms of profitability, we now expect adjusted EPS of at least $2.14 at CER. This takes into consideration continued plans for investments into our portfolio and in particular, the five pillars of growth. It also takes into consideration some adverse impact on costs related to current inflation rates, which we are trying to offset with a second wave of price increases this summer. Based on exchange rates as of April 25, 2022, currency movements against the U.S. dollar, our reporting currency are expected to create an adverse impact of about four percentage points on net sales and about $0.08 to $0.09 per share on adjusted EPS for full year '22. For the second quarter, net sales are expected to reach at least USD 510 million CER and adjusted diluted EPS is expected to be at least $0.46 at CER. Remember that we had one-time revenues of about USD 20 million in the second quarter of '21 related to the sale of genomic patents and technology licenses. We also expect currency headwinds in the second quarter against the U.S. dollar and for an adverse impact of about four to five percentage points on sales and about $0.02 to $0.03 on adjusted EPS. I would like to now hand back to Thierry.

Thierry Bernard, CEO

Thank you, Roland. So let me provide you with a quick summary before we move into the Q&A session. First, our teams continue to deliver strong results this quarter with sales growth and adjusted EPS exceeding outlooks. This was driven by solid growth in non-COVID product groups as well as higher-than-expected sales from COVID-related demand. Second, we maintain an attractive level of profitability as dynamic cash flow enabled us to continue to invest in our growth drivers and digital customer engagement platforms, while disciplined spending gave us leverage in our operating expenses. We are obviously proactively thinking about our capital deployment strategy including evaluation of bolt-on acquisitions. Third, we continue to advance our portfolio with the launch of key products and platforms to upgrade our instrument systems and broaden the menu of our growth drivers. And as a last point, we have increased our 2022 outlook for sales and EPS after a very strong and solid start of the year. We, therefore, confirm our commitment for double-digit growth of our non-COVID portfolio in 2022. Our performance in the first quarter set a solid stage for continued execution in an increasingly volatile environment while our proactive initiatives have helped us to build resilience into our business. All over the world, our teams of empowered QIAGENers are highly focused on delivering on our promises for future growth. We continue to believe in our focus on execution quarter after quarter, from sales to project development. QIAGEN is more than ever well balanced between life science and molecular diagnostics, geographically and balanced between our five pillars of growth and our core business. With that, I'd like to hand back to John and the operator for the Q&A session. Thanks a lot for your attention.

Operator, Operator

We will take our first question today from Patrick Donnelly of Citi. Please go ahead.

Patrick Donnelly, Analyst

Roland, maybe one for you on the margins, and I have a follow-up on some longer-term stuff. But on the margin side, pretty nice performance here. Can you just talk about the moving pieces? Obviously, cost inflation, wage inflation are big topics. You guys seem like you're passing price along pretty well to customers in this environment. Can you just talk about the levers there and expectations going forward? How we should think about particularly the gross margin piece going through the year here?

Roland Sackers, CFO

Yes, thank you for the question. We have indeed started the year on a strong note, especially in terms of profitability, and pricing has played a significant role in that. We usually implement our regular price increase early in the year, and it has been well received by our customers. However, while we have increased our guidance for the full year, we also recognize the impact of inflation-driven costs, particularly in energy and logistics, which have partially affected us. We have managed to address these issues as well. One advantage of being a recognized strong brand is our pricing power, and we continuously engage with our customers on this matter, so we will monitor developments throughout the year. Additionally, it's important to highlight that we have a good handle on our overall cost structure, as seen in previous years. Although we are raising our guidance, we are also using some of the extra revenue to reinvest in research and development and marketing initiatives, allowing us to be more effective and quicker in our efforts throughout 2022. This encapsulates the framework we are operating within.

Patrick Donnelly, Analyst

Okay. That's helpful. And then maybe just kind of a longer-term one. I know a lot of investors focus on kind of trying to break out ahead. Is it still, Thierry, the right way to think about kind of that core business growing somewhere 6%, 7%. And then that COVID piece, you obviously had the preexisting $150 million or so the rest of that may be declining pretty healthily next year and then kind of put those two together and you can kind of get to a 23% number. I'm just trying to think, again, the framework, the right way to think about as we work into next year.

Thierry Bernard, CEO

Patrick, we've indicated over the past few years our thoughts on the future without providing formal midterm guidance. During this call, we mentioned that we expect our COVID business to return to pre-COVID growth levels in the second half of the year. We consistently noted a base of $150 million. As we transition to a more normal phase, this segment will grow at the low single-digit rate we experienced pre-COVID. Regarding the COVID comparison, we highlighted on December 8 during QIAGEN Day that four of our growth drivers are expected to achieve double-digit growth. While QuantiFERON won’t sustain its current levels indefinitely, we expect it to normalize to a growth rate of around 12% to 13% midterm. We stand by that. The new platforms in dynamic markets, such as QIAcuity, QIAstat, and NeuMoDx, are projected to have double-digit growth post-COVID despite previous challenges. Additionally, we anticipate our Sample tech business can grow from low single digits to mid-single digits based on new applications we launch. I want to emphasize that when we discuss our five pillars of growth, it’s important to understand that businesses not classified as pillars are still growing, as evidenced by our Q1 results. For instance, we expect our companion diagnostic business to continue with double-digit growth. Our Universal NGS solutions had a double-digit growth profile before COVID, and we see no reason why this would change post-COVID. Lastly, our bioinformatic activities, or QIAGEN Digital Insights, are also expected to maintain a double-digit growth profile. Does that address your question?

Patrick Donnelly, Analyst

Yes, that was great, Thierry. I appreciate it.

Dan Arias, Analyst

Two, if I may. Number one, Thierry, when you think about the outlook for QIAstat, what do you envision the mix looking like a few years out when it comes to the installed base for that system? And is $85 million still the right target for QIAstat in '22? And then number two for Roland. I just wanted to check in on the COVID-related margin assumption. I think at the end of last year, I believe the view is that absent the leverage that you'll get from the above-average volumes coming from COVID testing, the COVID testing revenues shouldn't actually come through the door and meet different profitability level than the rest of the sales base. Is that still the view?

Thierry Bernard, CEO

Thank you, Dan. Regarding QIAstat, we affirm our outlook for 2022. As for the syndromic market, we believe it is dynamic and currently valued between $1.2 billion and $1.3 billion, growing at approximately 15% annually. Some competitors estimate it is larger, claiming it to be a $2 billion market with a 20% growth rate, but we acknowledge its dynamic nature. Our goal for QIAstat is to capture at least a 10% market share, aspiring to be the number two player in this space behind BioFire. While becoming number one is overly ambitious at this stage, we are focused on securing the number two position in the next three years. Before COVID, we typically had between 250 and 300 placements each quarter. With our expanding menu—recently receiving approval for meningitis in Europe and anticipating GI approval in the U.S. by year-end—we also aim to submit for meningitis approval in the U.S. next year. By the third quarter of 2023, we expect to have a strong offering in both Europe and the U.S., featuring respiratory tests (with or without COVID), meningitis, and GI tests. Additionally, we are advancing our development for pneumonia and working on direct identification of positive blood cultures, as well as CAUTI. If we successfully execute our menu strategy, we expect to maintain pre-COVID placement levels in subsequent quarters. Does that address your question?

Dan Arias, Analyst

It does. And then just, Roland, on the margins, if you could?

Roland Sackers, CFO

Sure. Yes, I think it's fair to say that we have actually a broad bandwidth on different margins on the COVID products and that the mix is sometimes even shifting quite a bit. So for example, in the first quarter, you clearly have seen that we had a good contribution overall from COVID from sample products, particularly Prep&Amp, which I would say is probably a somewhat higher gross margin product. At the same time, we also had a good contribution from some of the OEM products within COVID, which typically have a significantly lower gross margin. So I think there is some fluctuation within that. I would say, on average, I would lean into that COVID probably has somewhat under average gross margin for us. But again, there is some volatility around that.

Derik De Bruin, Analyst

So two questions. I think the first one is your 0.7x net leverage, and you've alluded to some potential use of cash for acquisitions. Can you sort of update us on your capital deployment outlook right now and sort of like the balance between share buybacks or doing incremental share buybacks and M&A and just anything in terms of the outlook on the market and potential augmentation to your portfolio?

Thierry Bernard, CEO

Well, I can take the first part, and I would like also to point Roland to chime in also, especially on the balance between acquisitions, share buyback or other tools. I mean I think we said, Derik, during this call that the ambition is to create value for the shareholders and also stakeholders of the company. So we are obviously actively considering different tools. M&A is one of our focus at the moment, and we are strictly trying to execute on what we have told the market for the last two years. Priority is on bolt-on, but not only on bolt-on, on bolt-on that are really fitting into the core or the five pillars of growth for QIAGEN. In other words, do not expect us to come up with new technology, even promising that could be considered the bolt-on acquisition and whereby we would also tell you, we would probably have to expand, I'm sorry, $100 million in OpEx or CapEx to bring it to the market. No, we want to focus on bolt-on that are rapid plug-in in our portfolio. We always said also, especially last year, when we were asked about bolt-on that we want also to pay the same price in the market, which is sometimes slightly overheated. So you can, therefore, think about either reinforcement about raw materials, components for assays. You can think about menu addition for some of our existing either core activities or pillars of growth. This is what we call directly actionable. And obviously, we are targeting acquisition that should benefit quickly from an accretion standpoint, QIAGEN. Now obviously, there are other tools. You have seen QIAGEN doing share buyback program in the past, and I would like to invite Roland also to give his point on the balance between M&A and share buybacks, all other tools.

Roland Sackers, CFO

Thanks, Thierry. The decision depends somewhat on the size of the bolt-on acquisitions we are considering. However, our current planning suggests that we are likely in a position to pursue both options. Therefore, we intend to continue our capital allocation strategies established since 2012, which include making bolt-on acquisitions as well as maintaining our share buyback policy. This approach has proven effective over the last two years. Additionally, we need to consider that we have a significant repayment scheduled for the second half of the year, amounting to around USD 470 million. All these factors should be evaluated together.

Matt Sykes, Analyst

First one, just on NeuMoDx. You've talked in the past about the long-term potential of menu expansion, particularly in the U.S. on the longer-term side, but just can you kind of give us a reminder of what that menu expansion plan looks like and when we can expect to see some offset? I know the COVID revenue is rolling off at this point, but as that menu expansion starts coming through, when could we see some reacceleration for NeuMoDx specifically as we look through this year and maybe into next?

Thierry Bernard, CEO

Rather than focusing on general expansion, we are looking at a geographic expansion of our existing menu. When we mention menu expansion, some might think it requires additional development spending. In reality, we need to invest in clinical affairs and trials to bring our 15 CE-marked assays from Europe, which cover blood-borne viruses, sexually transmitted diseases, and respiratory issues, to the U.S. These involve a combination of 510(k) approvals and FDA PMA approval. We have communicated to the market that we anticipate these 15 NeuMoDx assays will receive FDA approval by the end of 2024, especially considering the current accessibility to clinical trials and the known backlog at the FDA. This timeline means we will be without the full menu available in Europe for several years, but it doesn’t mean we can't compete in the U.S. Each year, we will continue to introduce new assays. The U.S. market has COVID assays, both short plex and single plex, as well as GBS, and we plan to add CT/NG and more over time. NeuMoDx’s uniqueness lies in being the only automated platform that can be used flexibly with various samples, whether they are FDA-approved assays or laboratory-developed tests, which positions us well in the U.S., the largest market for LDTs globally. Our strategy in the U.S. involves attracting sites that currently use LDTs and transitioning them to NeuMoDx while complementing their offerings with respiratory panels and our existing menu of GBS, CT/NG, and future additions. Last year, we openly shared that due to the COVID impact, we could not offset this with other menu offerings, leading to lower NeuMoDx numbers compared to 2021. We reported $100 million in revenue in 2021 and provided guidance of over $80 million for 2022. Once the COVID impact is fully resolved in the U.S., we expect NeuMoDx to grow at double digits, and we anticipate gaining more customers across Europe, the U.S., and other regions. We are currently observing positive movement in Europe as NeuMoDx recovers from the COVID influence. Does that address your question, Matt?

Matt Sykes, Analyst

Yes. No, that was very helpful, Thierry. Just one more quick one. I know your newly raised guidance incorporates adverse impacts potentially from China and Ukraine. In regards to China, just wondering if you're also kind of baking in a recovery in China in the back half of the year. I think most expectations are that it's sort of focused on Q2, but just would love to hear how you're thinking about China for your business specifically over the course of this year.

Thierry Bernard, CEO

We have distinct models for China. We had anticipated the recent developments, particularly over the past month, as we observed trends through Hong Kong. This foresight enabled us to present those figures for Q1, as we increased shipments to China slightly. Our updated guidance takes into account that some cities are under lockdown; however, not all are affected. For instance, Beijing is functioning normally right now, while Shanghai is facing strict lockdowns. Our current model predicts that the stringent lockdown in Shanghai will persist for four to six weeks, which is reflected in our forecast. If the situation extends beyond that, the impact on QIAGEN will be manageable. We are not currently projecting any significant changes in Q4 because there is no indication that might occur. It's also important to note that QIAGEN has a strong presence in China not only with our main products but also through a second brand that is fully Chinese, equipped with dedicated sales and marketing teams. This provides additional flexibility in the market. Even in challenging circumstances, whether due to lockdowns or other issues, we have an alternative brand to leverage. Therefore, I believe our Tier 1 guidance comprehensively considers potential developments in China. If the lockdown persists, we don't anticipate a significant or material impact, as we will find ways to adapt. Of course, we are closely monitoring the situation daily. There is widespread expectation that the government will ease restrictions, particularly in cities like Shanghai, as it is not sustainable for the local population or economy.

Dan Brennan, Analyst

Maybe the first question on the guidance, if you will. So you posted 14% CER growth in 1Q, ahead of your 7% guide. So I think it was like a $40 million CER beat and you raised the full year CER, I believe, by $50 million. So just wondering, is the upside in 1Q not sustainable for the rest of the year? Or are you just being conservative? Or is these other factors, namely China, Russia, Ukraine that is maybe mitigating some of the underlying base business guidance raise?

Thierry Bernard, CEO

I think Roland has underlined in his presentation that Ukraine, Russia, both markets combined or Belarus for that matter, are not really material for QIAGEN. You have understood that we are talking about small numbers of less than 1% of our revenues are fully factored. We do not expect any activity in Russia or in Belarus for the rest of the year. The guidance factors, the new guidance factors obviously the stronger quarter factors what and where we have visibility on. We are extremely satisfied by the fact that despite a very strong, at least in January and February, push and surge of COVID, our non-COVID portfolio performed so well. We always told you that this was the focus, pushing that portfolio at a double-digit growth. So our new guidance factors a better-than-expected non-COVID in Q1, visibility of what we see currently in Q2. And as Roland said, in the second half of the year, we do not take more assumption on the COVID business, clearly.

Roland Sackers, CFO

In the first quarter of 2021, we reported $567 million, which included a 7% increase from our previous guidance. Currently, we are looking at $654 million on a constant exchange rate basis, resulting in a difference of $47 million rather than $40 million.

Thierry Bernard, CEO

We even gave a number for QuantiFERON, what we want to achieve, and we are currently confirming these numbers, and it will be a double-digit growth in 2022, yes, clearly.

Roland Sackers, CFO

I see the best way to describe it, sorry.

Thierry Bernard, CEO

No, please go ahead, Roland.

Roland Sackers, CFO

I think, Dan, the best way to describe it, of course, is as Thierry said, we guided earlier this year, a $310 million for QuantiFERON. We clearly had a strong start in the year. And as you said, we believe it's going to continue. Clearly, the comps getting a bit more difficult. Nevertheless, we are starting to believe that we are, I think, have a very good chance to make and probably to beat that number. Let's leave it there.

Casey Woodring, Analyst

Can you talk about the low single-digit decline in non-COVID sample tech in the quarter? I know it was a tough comp, but just wondering if there's anything else there you'd call out maybe Omicron slowed down some customer lab activity. And then going back to Patrick's question on 2023. It looks like using the back half of 2022 run rate for '23, non-COVID consensus consolidated revenue growth next year is in the low double digits. So just wondering if that's the right way to think about things on the non-COVID side longer term?

Thierry Bernard, CEO

On the first question, we can take this one, the two others. I can start with Sample tech, if you want. No, we clearly see the soft Q1, but it's clearly a harsh comparison, as you highlighted, Casey with Q1 last year. From a COVID perspective, customers were reallocating all their efforts into COVID, especially Q2, Q3. But some customers, obviously, starting Q4 started to say, guys, we need to come back into some non-COVID activities. We still need to have some oncology testing, some other infectious diseases. And therefore, in Q1 of last year, you had basically a pent-up demand for many customers in Sample tech non-COVID, DNA mainly and this is what you see here. I don't think that this is a trend. On the contrary, what I highlight is, remember last year, we highlighted many times that we were in more active growth in 2021 for Sample tech non-COVID than pre-COVID 2019. So I believe it's going to be normalized in Q2, Q3, and Q4 back to the normal classical growth of Sample tech.

Roland Sackers, CFO

Yes, regarding 2023, particularly on the non-COVID front, we haven't provided any official midterm guidance, but we maintain our expectation for a double-digit growth rate in non-COVID for the full year, which we reaffirmed today. We achieved strong placement numbers in the first quarter, especially with QIAstat and NeuMoDx, along with solid performance from other instruments. Therefore, we believe that our non-COVID figures may exceed your previous estimates. We feel quite optimistic, and I would say that the first quarter has even strengthened our outlook.

Jack Meehan, Analyst

My question, I know it's only April, but I was hoping you could provide a little bit more perspective on the exit rate into 2023. Just looking at your back half kind of implied guidance is around $0.40 a quarter of EPS. Can you just talk about like the leaping off point, as we think about 2023? I know, again, it's early, but just any thoughts on puts and takes would be very helpful.

Roland Sackers, CFO

I have some perspectives on that. First, I don't believe the average is $0.40. If you calculate based on our current situation and our guidance for the second quarter, it is higher. However, I want to emphasize two points. First, while we consider ourselves relevant to COVID, we do not want to be reliant on it. This means there are no additional COVID-related revenues included in our guidance for the third and fourth quarters, apart from what we had already accounted for in 2019, which was before COVID. We will see if this holds true or if there are still some COVID-related revenues. Secondly, in my previous remarks, I mentioned that we are gaining some extra flexibility this year. We increased our guidance in the first quarter, and we'll see what we can achieve in the upcoming quarters. We are also investing some of the funds back into this year, particularly in R&D and marketing efforts. I believe this should positively affect both midterm revenues and possibly midterm cost structures as we initiate various projects. We have demonstrated in the past that we manage our cost structure effectively. Therefore, rather than focusing solely on the second half, it is important to consider the entire year when evaluating the starting point for next year.

John Gilardi, Vice President of Corporate Communications and Investor Relations

Okay. Thank you, Roland. I think with that, we're going to end the call right on the hour. If you have any questions, please get back to Phoebe and me, and we really appreciate your participation in this call.

Operator, Operator

Thank you. Ladies and gentlemen, that will conclude today's conference call. Thank you for your participation. You may now disconnect.