Earnings Call Transcript - QGEN Q1 2025

Operator, Operator

Ladies and gentlemen, thank you for standing by. I'm Lisa, your PGI call operator. Welcome, and thank you for joining Qiagen's Q1 2025 Earnings Conference Call 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.

John Gilardi, Vice President, Head of Corporate Communications

Thank you, operator, and welcome all of you to our call for the first quarter of 2025. We appreciate your time and interest in Qiagen. Joining me today are Thierry Bernard, our Chief Executive Officer; and Roland Sackers, our Chief Financial Officer. Also joining us is Dr. Domenica Martorana from our IR team. This call is being webcast live and will be archived in the IR section of our website. A copy of the results press release and presentation are available on our website as well. Before we begin, I'd like to remind you that this call will include forward-looking statements. Actual results may differ materially from those projected due to various factors. These are described in our most recent Form 20-F filed with the U.S. Securities and Exchange Commission. We will also refer to certain financial measures not prepared in accordance with U.S. generally accepted accounting principles or GAAP. These non-GAAP measures provide insights for investors and reconciliations to the most directly comparable GAAP figures are in our release. Please note that all references to earnings per share refer to diluted EPS. And with that, let me hand the call over to Thierry.

Thierry Bernard, CEO

Thank you, John. Hello, and good morning, good afternoon or good evening to everyone around the world, and thank you once again for joining us. As you have read, Qiagen delivered a very good and very solid start to 2025, once again demonstrating the resilience and strength of our business. We exceeded our outlook for both net sales and adjusted earnings even as we continue to operate in a quite complex macro environment marked by cautious customer spending and evolving global trade dynamics. Through focused execution and strong operational discipline, Qiagen is navigating this environment and capitalizing on opportunities to deliver solid profitable growth while investing in our future. The performance to start 2025 reflects the differentiation of our portfolio, anchored by growth pillars, all products where Qiagen has a leadership position in highly attractive markets. This steady progress and constant execution now delivering for 22 quarters in a row give us confidence to drive sustainable long-term value creation. So let me highlight our key messages for today. First, we exceeded our outlook for Q1 2025. The full results confirm net sales of $483 million, rising 7% at CER compared to the first quarter of 2024. Adjusted diluted earnings per share were $0.50 at CER again, and this was well ahead of the outlook for at least $0.50 CER. Second key message, our portfolio is performing well in a quite challenging environment. QIAstat had an outstanding quarter, driven by double-digit sales growth from new panel launches and new instrument placements. We continue to build our global presence in syndromic testing for respiratory, gastrointestinal but also meningitis conditions. And we continue to advance research and development initiatives to add panels that create even more differentiation in the coming years. Our QuantiFERON tuberculosis test also delivered another strong quarter of double-digit sales growth as we continue to drive the transition to blood-based testing for TB testing from the outdated skin test. QIAcuity, our digital PCR platform continues to build momentum in high-growth fields like oncology, infectious diseases, cell and gene therapy and microbiome research. In our bioinformatics business, QIAGEN Digital Insight is extending its leadership by helping clinical and research customers unlock complex genomics data with greater speed and accuracy. And in Sample Technologies, we are preparing for a new wave of innovations and growth with the upcoming launches of important new automation instruments during the next coming months, QIAsymphony Connect, QIAmini and QIAstI. Third message, we are reaffirming our full year 2025 outlook. We continue to expect around 4% sales growth at CER, which is about 5% growth in our core portfolio, excluding the discontinued product like NeuMoDx or Dialunox. We confirm the upgrade of our target for adjusted earnings per share for about $2.35 at CER based on our strong start to 2025, and this is up $0.07 from the initial outlook for this year. As we look ahead in 2025, maintaining strategic flexibility is critical in this volatile environment. It is about adapting to challenges and sizing growth opportunity. Fourth message for today, we are expanding the range of options to increase return to our shareholders. At our upcoming Annual General Meeting in June, we will propose the introduction of an annual cash dividend. We will also seek shareholder approval for another synthetic share repurchase of up to $500 million for consideration over an 18-month period. With about $600 million already returned to shareholders since 2024, those actions reflect our disciplined approach to capital allocation. So we are moving ahead on our target to return at least $1 billion to shareholders by the end of 2028, absent of significant M&A. Finally, I would also like to mention the upcoming leadership transition in our Supervisory Board as well as the decision of two members to step down after the upcoming Annual General Meeting. On behalf of our leadership team and every Qiagen team member, we want to sincerely thank Larry Rosen for his dedicated service since 2013 and in particular, as our Chairman of Qiagen since 2020. This transition reflects a long planned evolution in our governance. After 12 years of valued service on our Supervisory Board, Larry is no longer classified as independent under proxy advisory guidelines. We, therefore, look forward to continue working closely with Steve Rusckowski, who is intended to be elected by the Board as our new Chairman after the general assembly. Steve, as you all know, brings extensive global health care leadership experience to Qiagen and that will support our ambitions in the years ahead. We would also like to thank Elaine Mardis, who also decided not to stand for reelection. Elaine provided tremendous scientific insight and deep expertise as a member of the Board since 2014. With that, we are back to eight Supervisory Board members, a composition consistent with historical levels at Qiagen. So to give you a quick summary, all of these elements, a great portfolio, a strong execution combined with expanded opportunity for shareholders' returns and development in our leadership help position Qiagen to make important progress in 2025 towards delivering on our 2028 ambitions.

Roland Sackers, CFO

Thank you, Thierry, and hello, everyone. We are pleased with the start to 2025 and see opportunities to deliver very strong results. Let me provide some highlights from the quarter. First, we delivered a significant improvement in profitability. Our adjusted operating income margin rose to 29.8% of sales, up more than four percentage points from the first quarter of 2024. We are very encouraged by the key drivers of this margin expansion. They included a favorable shift towards consumables and bioinformatics solutions. We are also seeing benefits from portfolio optimization actions, in particular the phase out of NeuMoDx, and this is on track for completion in mid 2025. Another point we are seeing is an even higher level of discipline across Qiagen in managing our cost base and the recent evolution of our organization was a key trigger for this. The broad progress is enabling us to invest in targeted areas like R&D, in line with our target for about 9% to 10% of sales. And we are steadily driving the digitization of our commercial channels to enhance customer engagement. In light of this strong progress and the fact that we continue to see momentum and an opportunity for growth, we are reviewing our target for an adjusted operating income margin of at least 31%, well ahead of the original timeline for 2028. This represents over 300 basis points of margin improvement since 2023. Let me now walk through some of the additional details on our performance. Among our product groups, diagnostic solutions sales rose 11% at constant exchange rates, driven by another strong quarter from QIAstat-Dx sales rising 37% and QuantiFERON sales up 16%. PCR Technologies delivered 14% CER growth, led by rising adoption of the QIAcuity digital PCR system and very strong growth in consumables. Also supporting the performance were higher sales of other products used in non-regulated PCR applications, including our OEM business. Sample Technology sales were down 1% CER, reflecting lower instrument sales amid cautious customer spending. At the same time, we saw good trends for automation consumables in key regions, in particular, high single-digit growth in the EMEA region and also higher sales in the Asia Pacific region outside of China. In genomics and next-generation sequencing, sales were down 2% at CER compared to the first quarter of 2024. This reflected lower demand for some NGS consumables and services during the quarter. However, we saw high single-digit CER growth from QIAGEN Digital Insights as both our discovery and clinical portfolios delivered strong performance. The positive momentum in QDI is an encouraging signal as we work through the transition to SaaS subscription models from longer-term licensing agreements, particularly with pharma customers. Turning to regional performance. The Americas grew 9% at constant exchange rates, supported by strong performance in the US, Canada, and Latin America. The EMEA region delivered 8% growth at CER, reflecting broad-based contribution across key markets. The top-performing countries included Germany and Italy as well as the Middle East. Asia Pacific experienced a modest decline, primarily driven by ongoing weak trends in China, a country that only represents about 3% to 4% of total sales, but still saw a high teens CER decline over the same period in 2024. This overshadowed expansion in other countries, in particular, solid single-digit growth in Japan. Turning to cash flow. We generated $140 million in operating cash flow during the first quarter compared to $133 million in the first quarter of 2024. The results were even stronger given that the 2025 results included about $19 million of cash payments for the efficiency initiatives. Free cash flow was $96 million, reflecting planned investments into targeted digital transformation initiatives. This includes the upgrade of our SAP system that is moving into the implementation phase this year. We continue to see improvements in working capital management based on solid operational control. As an example, we saw another improvement in accounts receivable as the days of sales outstanding stood at 55 days in the first quarter compared to 58 days in the year-ago period. Inventory days also improved to 175 days for the first quarter of 2025 compared to 221 days in the same period of 2024 as we continue to closely monitor supply chain trends in this environment to ensure adequate customer product availability. In terms of capital allocation, as noted in our earnings release, we are proposing to introduce a cash dividend to provide a new avenue for increased shareholder returns while preserving flexibility to reinvest in long-term growth. The initial annual dividend payment would be USD 0.25 per ordinary share. We also seek shareholder approval for a new share repurchase authorization. This is complemented by our teams reviewing opportunities for value-creating M&A that strengthen our portfolio and create new opportunities to enhance our growth profile. In essence, our strong financial position gives us the possibility to invest in strategic initiatives for future growth while expanding our range of ways to increase returns to shareholders.

Thierry Bernard, CEO

Thanks a lot, Roland. And let's now look at the progress across our product portfolio, starting, of course, with sample technologies. As you have probably read, we are preparing for the next wave of automation with the planned launch of three new instruments at QIAGEN, QIAsymphony Connect, QIAmini, and QIAsprint Connect. First, QIAsymphony Connect is our next-generation flagship system, set for a phased launch starting at the end of 2025. QIAsymphony Connect combines enhanced automation, digital connectivity, and expanded application flexibility, for example, for liquid biopsy customers. In 2026, we plan to introduce QIAmini to serve low throughput labs and QIAsprint Connect to address high throughput demands with up to 600 samples per day. Early access users have already shown very strong interest in those solutions. Together, those innovations will strengthen and expand our leadership in automated sample preparation by offering a comprehensive and scalable solution to meet customer needs. In terms of supporting public health and once again in sample tech, we recently launched the QIAprep Plasmodium Kit. This uses our proven liquid-based sample prep method as a new way to help research and surveillance of this global health threat, especially in areas with limited health care infrastructure. Second, turning to QuantiFERON, our market-leading blood-based test for latent tuberculosis detection. QIAGEN remains very confident in our ambition to reach at least $600 million in sales by 2028 for QuantiFERON. We have continuously improved and invested in QuantiFERON development, which is now in its fourth generation. We are obviously not stopping here, and we are already preparing the fifth generation version. The fifth generation version of QuantiFERON will bring further improvements in automation, throughput, and workflow efficiency. Over time, we believe there is a clear opportunity to continue to increase conversion well beyond the current 40% level in the market for the time being. Third, QIAstat diagnostic, our syndromic testing platform continues to expand its American presence. Earlier this year, we received FDA clearance for the second QIAstat GI mini panel, gastrointestinal, targeting five key bacterial pathogens. Designed for outpatient care, this panel complements the previously cleared bacterial and viral versions, providing fast results with very minimal hands-on time. Our portfolio for QIAstat now includes all three major American syndromic panels, respiratory, gastrointestinal, and meningitis. And we have, on top of that in the US, three mini panels tailored to outpatient testing. With those options, QIAstat is very well positioned to meet rising demand for flexible and rapid syndromic testing for both hospital and outpatient settings. Moving to QIAcuity now, our digital PCR platform that continues to deliver innovation, but also market shares and growth. We started 2025 with a major and significant upgrade. QIAcuity now supports the simultaneous detection of up to 12 targets from a single biological sample, more than double the capacity we had before. This expanded multiplexing capability is helping researchers across applications like translational research, microbiome analysis, pathogen detection and the development of cell and gene therapies. By saving time, reagents, and precious sample material, QIAcuity is making laboratory workflows more productive and cost-efficient, which definitely strengthens our position in the digital PCR market. We are also on track to launch at least another 100 new assays in 2025, building on an already strong portfolio expansion in 2024 that has been a contributor to the strong uptake and growth in consumables. As part of this new wave of assays, our teams recently launched the first new cell and gene therapy assays of the year, including our first assay dedicated to lentivirus applications. This is a very strong start to our '25 menu expansion. This definitely helps strengthen our installed base, broadens use cases, as well as customer reach and supports our competitive market shares in digital PCR. Closing with Qiagen Digital Insight, our bioinformatics business that continued to strengthen its global reach. As you have seen, we recently opened a new data center in Melbourne, Australia, expanding our secure cloud infrastructure to 8 global sites. This investment enhances our presence in the regions by enabling compliance with local regulations and also advancing clinical next-generation sequencing adoptions. So as you can see, with those efforts, QDI, Qiagen Digital Insight is well positioned to continue supporting the growing demand for bioinformatics solutions in both research and clinical settings.

Roland Sackers, CFO

Thank you, Thierry. Let me now provide some more perspective on our outlook for 2025 and the second quarter. Our ambition remains clear to deliver another year of solid profitable growth and continued improvement in operational profitability. For the full year, we are reaffirming our outlook for net sales growth in 2025 of about 4% at CER. This reflects about 5% CER growth from our core portfolio that excludes the discontinued NeuMoDx and DiaLunox products. Given the current volatility, we remain conservative about the revenue growth for the second half of the year, but could well increase our net sales guidance once we have more visibility on the macro trends. On adjusted earnings per share, we are reaffirming the recently upgraded target for about $2.35 at constant exchange rates. This reflects about 8% CER growth compared to 2024, supported by operational margin expansion while also accounting for the current tariff environment and a better-than-expected adjusted tax rate versus the beginning of 2025. For the second quarter of 2025, we are targeting net sales growth of at least 5% at constant exchange rates. This translates to an at least 5% CER growth in our core portfolio, excluding discontinued NeuMoDx and DiaLunox products. Adjusted earnings per share are expected to be at least $0.60, up from results of $0.55 in the year-ago period and another solid improvement. Turning briefly to currency trends. These have improved since the start of the year, and we now expect less headwind given the current US dollar trends against the euro and other key currencies. For the full year, we now expect currency movements to be neutral on net sales and a negative impact of about $0.01 to $0.02 on adjusted earnings per share, so slightly better than the assumption from the start of the year. For the second quarter, we anticipate a positive impact on net sales of about 1 percentage point and neutral currency movements on adjusted earnings per share. Overall, our guidance reflects a balanced view of both the opportunities and challenges in today's macroeconomic environment. Our results for the first quarter and the latest reviews with our teams give us confidence in our strategy, our execution, and our ability to deliver on these targets.

Thierry Bernard, CEO

Thanks a lot, Roland, Domenica, and John. And as usual, to all of you, we are very respectful of your time. So let me very quickly summarize before we move to the Q&A part. First, we delivered a very good and solid start to 2025, exceeding our outlook for both net sales and adjusting earnings in the first quarter. Our highly recurring revenues account for about 90% of our total sales and are a key foundation for growth, even in this macro environment, where customer spending remains cautious. We were especially pleased with the strong contribution from QIAstat, QuantiFERON, and the momentum gain in QIAcuity, together with the robust performance of Qiagen Digital Insight. Those successes, along with our efficiency initiatives drove a significant improvement in our adjusted operating income margin and supported another quarter of very strong cash flow generation. We have reaffirmed our recently upgraded target for adjusted earnings and also reaffirmed our full year 2025 targets for net sales. This is combined with our commitment for further significant margin expansion as we move above 30% this year. Our financial strength and operational flexibility gives us increasing conviction in our ability to deliver on our 2028 commitments for solid, profitable growth and stronger shareholder returns. That said, back to John and the operator for the Q&A session. Thank you.

Operator, Operator

Ladies and gentlemen, at this time we will begin the question-and-answer session. One moment for the first question please.

Dan Leonard, Analyst, UBS

Thank you very much. I'll keep it to one. I was hoping you could elaborate a bit further on what drove the acceleration in QuantiFERON in the quarter. I know you mentioned skin test conversion, but that's a trend that's been underway for a couple of decades. So perhaps there's some additional color on the quarter performance specifically. Thank you.

Thierry Bernard, CEO

Thanks a lot, Dan. And no, there is no specific event. It's just a confirmation of our strategy, a strategy based on constant innovations. As we said today, we are at a fourth generation of product. We definitely have proven reliability and quality. You have seen in our recent deep dive on QuantiFERON, the number of citations, the number of publications. Second, the value of our partnership for automation with not only DiaSorin, but also Tecan, Hamilton, and all this together reinforces the continuous global performance of QuantiFERON. And I insist on global—it is growing all over the world in North America, Europe, Middle East, and Asia Pacific.

Doug Schenkel, Analyst, Wolfe Research

Hi. Good morning. Good afternoon, everybody, and thank you for taking the questions. So, just a couple on guidance. Given Q1 strength and how you're guiding Q2, our math suggests that essentially, you're assuming a deceleration in top line growth to around 4% in the second half. I definitely could be doing the math wrong. But if I'm not, I just want to see if there's something you're seeing that's moderating from a growth standpoint. It doesn't sound like that's the case. So you're really cutting through all of this. Is this just prudent conservatism in the current environment? So that's the first question. And then the second is, again, on guidance, you're maintaining your 4% constant currency outlook for the full year at the top line. Recognizing how the environment has changed over the last few weeks and few months, are there specific areas that we should be thinking of that are doing better than original plan? And then if so, what are the offsets? Thank you very much.

Thierry Bernard, CEO

So, Doug, thanks a lot. You called that conservatism. I would call it realistic ambition. Your math is not necessarily wrong, but you have also seen that the volatility in our economic environment or geopolitical environment has not improved, not at all. So we are still living in a kind of operating in a shaky environment. And this is why we prefer to remain prudent. But obviously, as soon as we have more visibility, we will not hesitate to upgrade and update our top line also guidance, but we need to have more weeks of visibility behind us before doing that. And so on the guidance for 4%, which is 5% excluding Dialunox and NeuMoDx divestment, we based that guidance taking into account that volatility, taking into account and weathering the current discussions or debates around tariffs in the world, for example. At the same time, factoring the still cautious environment on spending, especially for capital sales, and factoring also the discussion around research funding in different countries of the world, but also leveraging the very good start of QuantiFERON, QIAstat, QDI, and the good performance of QIAcuity in consumables.

Patrick Donnelly, Analyst, Citi

Hey guys, thank you for taking the questions. Maybe one just on the tariff exposure, probably for Roland. Can you just run through what you're seeing on that front, any mitigations? We've heard from some others, maybe some of the diagnostic reagents are more on the exempt side with China. I know you guys don't have a ton of exposure there. But can you just talk through what you're seeing on that front and what the impact could be?

Roland Sackers, CFO

Yeah. Hi, Patrick. I think overall, just to put things in perspective, as you know, it's clearly a very volatile environment, and I'm quite sure there will be more changes. And by the way, that is one of the points that you just raised; there is nothing company-specific that will change the direction right now. We really are a bit more conservative right now in terms of the outlook for the year. Same is true here on the tariff side. We feel actually that we were well-prepared moving into that year. As you know, we ramped up quite early our inventory levels. We reviewed our supply chain ways. We clearly looked at a couple of company processes. All of that, which I think allowed us to mitigate most of the impact, which we're right now seeing. There's clearly also the benefit that we are working closely with our customers in sharing some of these impacts. At the same time, I think it's also very fair to say that we see right now also a somewhat lower tax environment in general, which is helping us not only to compensate but, as you have seen with our guidance increase on the EPS side, even overcompensating for the impacts we see on the tariff side. I remind you that we do not have anything material from China into the US. That is nothing that is important for us. From the US into China right now, in general, that is something that is not really material. And therefore, I would say, for us, it is really something we have so far been able to manage quite well, which is US to Europe—up from Europe to US, sorry. Thanks for that question, because I think it allows me also to reemphasize one important message. As you know, on one hand side, we said before that we discontinued NeuMoDx in particular last year. But this only accounts for somewhere around 40% to 45% of the overall margin improvement. I think Thierry in one of the earlier calls alluded to that we have ongoing what we call Qiagen efficiency programs, and they are actually adding up quite nicely. That goes all the way from digitization initiatives. As you know, we also reorganized the company at the end of last year. And this all is helping to improve margin. So we expect also clearly for this year to end up north of 30%, and again, outside any larger whatever tariff or macro impacts that might or might not happen. But in that environment, which we're seeing right now, I think we feel very confident that we stay north of 30% and clearly expanding from that level also going forward.

Tycho Peterson, Analyst, Jefferies

Hey. Thanks. I want to probe on some of the other guidance assumptions. Academic and government has obviously been a pressure point. We've seen most of your peers kind of recalibrate expectations for the year. Just curious what you guys are baking in for US academic and government for the rest of the year. And then instrument softness, curious if you're assuming any stabilization or recovery on instruments, in particular for QIAcuity. And then Roland, you kind of alluded to maybe potential drivers of upside in the back half of the year. Curious where you think that could come from?

Thierry Bernard, CEO

So thanks, Tycho. I mean—so first of all—as you know, 90% of our revenues are coming from consumables. So I believe, therefore, that with this, we are probably a bit less exposed to huge cuts in academia and research. But obviously, like any company involved in research and academia testing, we feel that there is a slow environment, and we remain cautious. That drives, by the way, when I answered the question from Doug, why we continue to maintain our guidance. It's just being cautious because the environment is not moving that fast. That being said, I believe that we are a bit more protected. And I believe also that most of our sales in research and academia are still mainly around Sample tech, and those are expenses that are very difficult to completely eliminate. For capital sales, our assumption continues to be that we should see a level of normalization in the second half of the year or early 2026. Obviously, it's very difficult to predict that. We continue to say that there is a normal cycle of renewal in instruments in labs. It's very difficult to say exactly when it's going to happen, but we believe it has to normalize at a certain point in the coming months. Roland, do you want to take the second part of the question?

Roland Sackers, CFO

Yes. Again, just to add on that, on the instrumentation side, of course, keep in mind that most of our instruments clearly have price points which are probably for instruments on the lower side. So that's clearly also helpful. And you see QIAstat and also QIAcuity doing quite well. And again, I don't see any reason that that should change over the course of the year. In general, upside, I think you have seen where we started very well and strong into the year from QIAstat. What is really driving that is the menu expansion. As you know, we got a significant number of products approved last year through the FDA, and that clearly helps us not only in the US with gastro and meningitis to expand on that, the larger instruments going online. So there's a lot of things being helpful. We added menu quite nicely to QIAcuity, adding 100 panels last year, and we're going to add another 100 panels this year. Therefore, the consumable pull-through continues to be quite strong. So I would say it's a mix of new launches and clearly what we believe that Qiagen now is driving since quite some time still pays off.

Michael Ryskin, Analyst, Bank of America

Great. Thanks for taking the question. I think Tycho touched on NIH—or sorry, one of the earlier questions touched on NIH and government policy. You want to talk a little bit about the pharma biotech end market, what you're seeing there? I think it's been a little bit weaker to start the year. Obviously, there's still a lot of noise and there's potential for more noise from ongoing discussions or from pharma-specific tariffs. Just curious if you're seeing anything different in budgets relative to how you were going into the year. And I'll throw in my second one at the same time. On the capital deployment front, the initiation of the dividend, a little bit more color on the buybacks. Just curious how you're going to balance capital allocation priorities between those two and M&A going forward? Just give us some guidance.

Thierry Bernard, CEO

Those are good questions, Michael. Thanks a lot. On the pharma side, I would say, on direct testing sales, we are pleased with the performance of especially solutions like QIAcuity on the pharma side. This is where we get the best pull-through on our large throughput QIAcuity system, which we call the 8-plate system. So we don't see any specific downgrading of the situation here. What I would say, what we believe is encouraging is that we see a growing appetite, again, of pharma company for companion diagnostics. You see that this is a good activity for Qiagen. This is where we are probably the leader in the world. We are the only company offering pharma companies with solutions not only on PCR companion diagnostics, but also NGS companion diagnostics and also digital PCR. And you have seen recently also that we have opened contracts on QIAstat. So we see a pretty good demand here, and we are confident that it should continue. On capital allocation, we continue to try to optimize the management of our healthy balance sheet. As you know, we have three priorities. First of all, investing into our organic growth, which is R&D. Qiagen maintains a healthy investment on R&D ratio to sales. It's around 9% to 10%. It's a good ratio. But we always need to make sure that that ratio is paying off and that we have good return factors from those research and development investments. Second, the new announcement of share buybacks is just proving our active listening to investors and to analysts. Many of you have been telling us for the last years that dividends could open up our stock price to different kinds of investors. We listened. We took our time, and we decided to come up with that policy. And we perfectly understand that it's a long-term policy as well. And the increase to up to $500 million is an authorization. That doesn't mean that it's going to happen on a given date. We said we have 18 months to deploy that. But it also confirms a vision and willingness to return the appropriate level of capital to our shareholders. They deserve that. And we believe also in our company. Third, it's M&A. it's not one against the other or it's not that M&A is going to become less of a priority. We believe in M&A to create value. It has to be synergistic with our current portfolio. We mainly focus on what we say, bolt-on or what we call bolt-on. And I would invite you to stay tuned because we have a very, very good pipeline. And I think we are in a position potentially to close some of those M&A in the coming weeks.

Jan Koch, Analyst, Deutsche Bank

Good afternoon. Thanks for taking my questions. My first question is on Sample Tech. What kind of growth should we assume over the coming quarters given that the comps are actually getting a bit tougher? And do you expect a catch-up in instrument sales once you have launched the new instruments driven by pent-up demand? And then secondly, on QuantiFERON, could you remind us of the market potential you are seeing in China? Given that China is not really a focus market for your partner, do you believe that the installed base of instruments in China is sufficient to grab that market opportunity once you receive the necessary approval?

Thierry Bernard, CEO

Thanks a lot, Jan. On Sample Tech, this is a strategy, but let me highlight something. What the current numbers are not really showing is that where we have decided to clearly put the research and development efforts in what we call high-value Sample Tech applications like liquid biopsy, minimal residual diseases, and microbiome research. We are growing, and we are in some of those fields growing at double digits. And this is exactly where we want to go. Second, to your point, obviously, there is no other competitor in Sample Tech with such a program of investment into new system. And it's not new. It has started three years ago when we started to upgrade QIAcu with QIAcu Connect, EZ1 to EZ2, and now we have those three launches. So all this together makes us believe that the guidance that we gave you in New York during our Capital Market Day last year in June to come back to a growth of around 3% per year is really achievable. To QuantiFERON in China, honestly, Jan, at the moment, QuantiFERON in China is the leading blood-based test for latent TB. We have many competitors that are very local that are not elsewhere, but in China. It is not our top priority. We will bring the workflow of automation with Diasorin to the regulatory authorities. But the growth of QuantiFERON absolutely does not depend on the performance in China. I would not qualify China as a priority for QuantiFERON. It's a market. We are using all our presence, including with Diasorin to continue to take market shares, but this is how we would see it.

Jack Meehan, Analyst, Nephron Research

Thank you. Hello, everyone. I wanted to ask about the PCR strength in the quarter through two lenses. First was, if you look at the 14% growth, QIAcuity high single-digits, it implies everything else grew in the high-teens. So I was just wondering if you could talk about why that was so strong. And then on QIAcuity, it does—it seems like things are going well on the consumable side, but it does also feel like that prior $105 million target might be a little bit of a stretch given the instrument environment. I was just curious if you had any updated thoughts on that, too. Thank you.

Thierry Bernard, CEO

Thank you, Jack. And so on the first question, first of all, especially if you compare with what has been disclosed by some competitors, I mean, we are growing in digital PCR. We continue to sell or to place instruments. Obviously, given the environment on capital expenses, of course, we would like to be able to place more, but we still grow, and we are posting, as you said yourself, a very nice growth in consumables. So we are definitely taking market shares. And you have seen from other disclosures that it's not necessarily the case elsewhere. So on the rest of the PCR portfolio, what was quite interesting and encouraging this quarter was the performance of our OEM sales. And you remember that this is also an activity of Qiagen, where we have always said it's difficult sometimes to plan for a growth on a quarterly basis because those are mainly bulk sales. So you have sometimes high quarters, lower quarter, the quarter after. Overall, OEM for us is on a yearly basis, roughly an $80 million activity, but it performed very well in Q1. So now addressing your question, is this a stretch or is there a stretch on QIAcuity? For sure, we acknowledge that the capital sales environment, especially in research lab or academia is not helping. But honestly, Jack, I mean, this solution, QIAcuity is taking market share. It has been probably the fastest-growing installed base ever in diagnostic and life science. We continue to grow in consumables, as Roland said. I don’t judge the efficiency of that solution just on a year, let alone on a quarterly basis. We confirm what we told you. We are on our way to get above $200 million by 2028, and this solution deserves to be the number one on the market on digital PCR, and we confirm that ambition.

Dan Brennan, Analyst, TD Cowen

Great. Thank you. Thanks for the question. Maybe one for Roland and then for Thierry. Just Roland, just back on the tariff math, if you could. Did you guys ever size what the gross impact is? Obviously, you're doing a terrific job offsetting a bit, but I'd be interested to see just what that impact is on the gross side between cost actions and moving production and suppliers. Anything you can share on kind of how you're offsetting that just in a little more detail since it is just a topic?

Thierry Bernard, CEO

Roland, do you want to take the first part?

Roland Sackers, CFO

Yes. To be honest, I wish I could because the reason why I think it's not as easy for us is we started actually already quite early last year with some of the mitigation actions. As I said, we changed quite a few internal procedures. We really ramped up inventories. And therefore, it is not actually to set a baseline. But I think what it's fair to say is that our assumption right now is probably that it would be a few cents EPS for that period. Nevertheless, as I said, there's clearly an area which we were able to offset so far. So I would say we feel comfortable that this is in that given environment something that we can cover quite nicely, and then we have to see where it moves—but I would say, so far, we feel quite comfortable. We're still looking into that if there are other areas where we can improve. Again, a big impact for us is clearly Auto that we are actively working with our customers and explaining to them the actual situation.

Thierry Bernard, CEO

Thanks, Roland. And to follow up on the question on M&A, what I confirm is that it's clearly one of the top priorities of our capital allocation. As you know, we have a very healthy balance sheet. We have a very long-lasting experience of M&A, especially bolt-on. And I just can tell you that our pipeline is very solid. We are engaged in very discussions that are coming to now, I hope, closing. But as you can imagine, it always takes two to tango. And as long as the signature is not done, I don't say anything. But yes, I confirm that in the coming weeks, we should be in a position to communicate on some of those.

John Gilardi, Vice President, Head of Corporate Communications

Okay, Thierry and Roland, thank you very much, and thank you all for joining our call. Let me close it here. If you have any questions or comments, please don't hesitate to reach out to Dominic and me. Thank you very much. Bye-bye.

Operator, Operator

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