Conference Transcript - QGEN 2026-06-03

Tycho Peterson, Analyst — Life Science team

We're going to kick it off. I'm Tycho Peterson from the Life Science team. It's my pleasure to introduce Kaijin. We've got Roland with us today. Let's jump into it and maybe setting the stage here, just talking a little bit about trends coming out of 1Q. You had the guidance reset. Just start at a high level. How should we be thinking about what was kind of idiosyncratic in the quarter and broader demand trends as you feel about the rest of the year?

Thierry Bernard, CEO

Well, you do it on there. Holland, you also have Dominica, so which is probably my point. But, you know, I think you're absolutely right. I think overall the Q1 starting to the year was, I would say, a quarter with mixed results. And on the other side, four of our five growth drivers actually performed quite well. At the same time, Quantiferum clearly had a difficult start. It was due to the immigration-based testing, particularly in the U.S. Just to remind you, Quantiferum for us is on about a $500 million business for us. So 10% of that is immigration-based testing. By far the majority is legal immigration. And one thing that we clearly had to experience is that there were changes coming up in the legislation in the U.S. It took some time that it got effective. We really haven't seen any larger changes, more or less, all the way to February of this But then digging into that, it became quite obvious that some of our larger clients have seen that impact. And have in mind that kind of testing is not done in any kind of dedicated lab environment. It is done with very regular centralized labs. And it probably also took them some time to figure that out and to rebalancing. Nevertheless, what we did is we took literally 100% of the exposure in the US out, which is around 30 million US dollars. At the same time, of course, we see similar trends for very different reasons in the Middle East. we might go back a couple of years when we clearly talked about that that we want the TB testing in areas like Qatar Dubai, Abu Dhabi and so on given for the war we also took out 5 million for that we haven't seen any change in Europe for immigration based testing nor haven't we seen any change in 90% of the TB business and therefore I think that is quite stable now being in Q2 I would say what we did was the right thing. I think trends got confirmed. So if you go back to the call, what we said, we said quantifieron around minus 5% in Q1. Probably Q2 is flattish, slightly negative, Q3 slightly positive, and Q4 more or less a normalized growth rate. I do think that is what we also see today and therefore no change. Of course, we had to, going also to your second part, given And the changes we have seen then and realized on Quantiferon, of course, we turned a lot of other stones within the company. That's also a reason why we took a couple of larger OM deals out of the guidance because one thing is very clear, we delivered under Q1 26 quarters in a row in terms of revenues and in terms of EPS. Once you realize you have to reset guidance for a specific reason, you turn every other stone.

Tycho Peterson, Analyst — Life Science team

And we'll jump into the businesses in a minute, I guess before I do, I just want to hit on the CEO search. You kicked it off in November. Originally, we're targeting June. Now kind of back half of the year. Just walk us through where we are in the process, how you're thinking about the candidates, how the board is thinking about what the business needs at this stage.

Thierry Bernard, CEO

No, I think it's fair to say in the last call we updated it that it is probably now more an H2 event. I don't think it's all the way down to December, but it's clearly an H2 event. A couple of reasons for that. Furthermore, the board is looking for what you probably would call in the U.S. like somebody who has seen the movie, so a very senior, experienced leader, clearly with a strong footprint in the life science and in the clinical side, clearly given also in the international setting, somebody who has either lived and worked in Europe and all the U.S., so also here somebody who's was very experienced. I don't think that you should, because of the, in brackets, delay, read into that that we're short of candidates. I think it's probably actually the opposite. But at the same time, as a lot of investors were waiting for clarity from some of the CMDs one of our competitors had on the Quantiferon product on the KIAGEN side, there's also other parties who were waiting for that kind of feedback and that probably led to the situation and discussion let's wait a couple of more weeks.

Tycho Peterson, Analyst — Life Science team

And anything you can say about what the board is looking for? I mean, you mentioned international.

Thierry Bernard, CEO

Again, senior person, C-level experience. Again, somebody who did the job in a different country before.

Tycho Peterson, Analyst — Life Science team

Let's jump in on Quantifera, I guess, the biggest swing factor to the RESET guidance. You've taken down expectations on immigration. Are we at a clean base from here, or are there still moving pieces for the next couple quarters?

Thierry Bernard, CEO

It's about immigration. The rest is very straightforward. I haven't really changed. Again, we were careful in taking out 100% of the exposure in the US. I'm not sure that's 100% realistic. At the same time, we do not expect any legislation change in the US as well. Therefore, I think it's the right thing to do. In the Middle East, I would call it that at some point either the war is going to end or we will see these countries going back to a more normalized environment like we see that in Israel and others. So back to work, if you like. The reason for that is, and therefore I think there we should see, again, some normalization. It's hard to say when, but it for sure will not take as long.

Tycho Peterson, Analyst — Life Science team

And just how about underlying growth, x, you know, immigration? What did that look like in the first quarter? How do you think about that for the remainder of 26?

Thierry Bernard, CEO

As you know, overall, we said it's a kind of a 6% growth rate for the full year. Now, of course, we took $35 million out of that number. So at the end of the year, we will grow again that business nicely single-digit, and let's see exactly where we are.

Tycho Peterson, Analyst — Life Science team

You mentioned the competitive dynamic. I guess what we saw there was limited markers, limited head-to-head data on sensitivity, specificity, lingering questions on workflow. You've obviously laid out your roadmap on automation with the Impeco partnership. Just talk a little bit about how you're thinking about competitive dynamics evolving, and was the market obviously getting ahead of itself relatively to the headwinds?

Thierry Bernard, CEO

Yeah, I think it's probably a fair summary. I do think there was clearly a couple of remarkable outcomes. First and foremost, as you were alluding to it, it looks like that our competitor is missing one very important critical market, which is CD4, CD8. Why is CD4, CD8 so important? that is for the sub-segment, which is actually the fastest-growing sub-segment if it comes to latent TB testing, immunocompromised patients, Z-critical marker. If you don't have that, it's hard to test. And I do think that is important, again, and clearly a factor also for the labs, because depending a bit on where you are in the world, it is a population group between 10% and 20% of the total population and the testing population. And, of course, as I said, the fastest-growing population as well. So I'm not sure that you will see customers going for two different work streams to address that topic. Second, it became very clear that the automation solution, I think, as they said, is beyond 28. I'm a bit surprised by the wording. Typically, if I mean beyond 28, I would say 29. So I'm not sure what beyond 28 means. Very clear also that there's nothing short-term in the U.S. We like the fact that they finally come up to the market in Europe because it's helpful for us to prove what we said before in terms of, again, our success in the market. So I think overall, I think it was incremental good news for Kaijin,

Tycho Peterson, Analyst — Life Science team

And just on your pipeline, can you talk through the partnership changes within PECO and whether this should be viewed as shared defense, new lab adoption, potentially both?

Thierry Bernard, CEO

I think in PECO, it is a great addition to our overall workforce. as you know, we have a great partnership with Diasarine on the back end that is not going to change. But on the front end, of course, there's a couple of steps which still require certain manual steps, which we are, of course, going to automate this Impeco solution going forward or we fully automate that. And that is clearly unique then to Kaij. Nobody else can do that. And Impeco is clearly a well-known proven provider for this kind of workflow automations. As we do believe that TB D-testing is still a significant volume grower. Have in mind 60% of the global market is still literally 120-year-old skin test, and even that skin test market is growing 4%. We do believe that there is an increasing need for automation, and therefore the impact of solution, which at the end of the day provides you with a walk-away solution, is a step in the right direction.

Tycho Peterson, Analyst — Life Science team

And then maybe just shifting over to life science, You know, the other piece of the guidance cut there was just reset expectations, you know, partially on the weaker A&G outlook here, and then the OEM headwind. I guess between the two, you said $35 million, $40 million headwind for the year. Can you unpack, you know, each piece relative to what the expectations were when you first laid out guidance in February?

Thierry Bernard, CEO

To be honest, it's not too much the general environment for academic and life science in the U.S. here, I think it's also fair to say that historically, also last year, Kyrgyz had a reasonable consumable performance. Clearly, instrumentation business was for us, as for many others, a bit more volatile. But what we did, as I said before, we looked particularly in the larger OM contracts, which are also part of the live science business. And we have here a couple of contracts with large governmental organizations in the U.S., but also in South America, where given the political environment we are not 100% sure that they will come up they were very reliable customers for the last few years always high single digit million dollars of revenues but if you do for example something pandemic preparedness you might have even orders on hand but you're not 100% sure that it comes in in a situation where you have to make sure that the new guide you set out is more than reasonable you adjust this

Tycho Peterson, Analyst — Life Science team

And I guess was the reset more a forecasting issue or demand deterioration?

Thierry Bernard, CEO

I think it's probably also just to make sure that the forecast is realistic and therefore I think well doable. And again, that's probably the base behind that. I would say overall the automation business was actually quite strong for us. We talked about that in a call, Tycho. As you know, sample prep, for example, instrumentation was growing double-digit. So hard to complain about that, right? And as I said, consumable in general is moving in the right direction. You know, there's a couple of pockets who can do better. PCI in general is something that we clearly probably will draw a bit more attention to. But in general, we clearly see an increased activity, particularly on demos in terms of requests for proposals on the academic side, on instruments. Will all of that lead to more web news instantly? Probably not. But do we see, I would say, a certain kind of refreshment of interest?

Tycho Peterson, Analyst — Life Science team

And then just honing in on USA and G, obviously, you know, you've got a slight increase in the budget, up 1%. You've got this, you know, multi-year budget dynamic that's, you know, impacting labs. I guess, how would you describe the backdrop now? And do you think there's a chance we get a pickup as we go through the summer?

Thierry Bernard, CEO

Just to frame it also with some numbers. So our more or less work from H1 to H2 only requires 5 million more incremental revenues coming from a better life science environment. If that is our issue, I'm fine, right? So we do assume it will improve, as I said, on the implementation side. Since the bigger step forward for us clearly comes also with some of the new launches, particularly on sample prep, there we do expect around about $20 million of incremental revenues given the size of instruments we're launching with Kaya Sprint and Kaya Symphony and also I would say the visibility on pipelines and so on. I think there's, I would say so far we feel quite good about that. So I would say an environment in Europe, life science is good, horizon budget is distributed, we're seeing more and more budgets in the US finally reaching the benches. Is everything perfect right now? Absolutely not, but do we see that people are clearly getting more interested, particularly on the instrumentation side, yes.

Tycho Peterson, Analyst — Life Science team

And then maybe just shifting over to pharma, you know, it seems to be better for most in Just from a high level, you know, how did it do in 1Q, relative to expectations for

Thierry Bernard, CEO

So pharma for kaiogen has a couple of very specific drivers which make it quite successful for us. One is kaiacuity. Clearly, pharma is a big partner here on biopharma research, double-digit growth rate and consumable instruments in Q1. Same is actually PaaS acquisition. I think what we PaaS, clearly an outstanding product offering by itself. Now with the acquisition of Kaigen, so partnering with our global pharma teams helps them also to gain access to some of these larger accounts. And these are sizable deals. There's also a reason why we said we feel quite comfortable on the $40 million guide we have given for PaaS. So I would say, in general, pharma is for us probably more on the positive side.

Tycho Peterson, Analyst — Life Science team

And then as we think about biotech, I mean, funding's been good, sentiment, you know, strongest since 2022. Where in the portfolio will you see it, you know, when that funding starts to convert to spending for SMICAP biotech?

Thierry Bernard, CEO

Several reasons. Of course, basic research. We see also biotech's clearly, again, doing more lab work. I'm not sure if they all want to regenerate now AI-based data or so. But there's clearly more fundamental lab work done, and therefore, again, areas like sample prep are important. And again, biotech is not like the largest customer group for Kyogen, but it's clearly incremental to be helpful. Other area is actually around bioinformatics. Also here, I think we see increasingly requests. So I would say it's always good. Finally, I think the funding is on the highest level since 2020. Let's keep on going.

Tycho Peterson, Analyst — Life Science team

You know, you mentioned sample tech a couple times and the expectation for a 200 basis point uplift in the back half of the year. I guess what's happening now? Is it funnel conversion, is it replacement detailing, competitive wins? Just talk a little bit about what you're actually seeing on the ground to give you confidence in that pickup.

Thierry Bernard, CEO

The uplift is actually somewhere between 400 and 500 bps, but some of them is quite easy because 200 bps is just the headwind from the deconsolization of Neumodex and Dialogues will disappear as of June 30th, so it's just a technical impact. So that's the 200 basis points. 200 basis points, as you said correctly, it's coming from the new product launches, in particular, Kaya Sprint and Kaya Symphony. So the good news is these instruments are launched in the market. The pipeline is building. Again, there was not too much in Q1. There's probably only a few in Q2. But again, the pipeline for Q3 and Q4 looks good. So I think that it's going to happen. Have in mind also that Kaya Sprint clearly is a brand-new instrument. So every instrument we sell is not all in instrumentation sale. It's clearly also generating incremental consumable pull-throughs, therefore important. Also on the Kaya Sat side, you know that there's new launches coming up, so blood culture is a big topic here as well. So I would say on the new product launch, it's good. Then we have another 50 bips of what we discussed before. We clearly do believe that quantifier should get better in the second quarter compared to the first half, sorry, in the second half compared to the first half. And last but not least, pass as it is still growing and kicking off, we'll have 5 million more revenue in the second half compared to the first half, so another 50 bips there.

Tycho Peterson, Analyst — Life Science team

And I guess just thinking, you know, midterm on the sample tech, I think you've sized it at 115,000 placements or greater than for the three instruments combined as the opportunity. A couple points tailwind there. You know, what would get you to do better than that?

Thierry Bernard, CEO

Again, I think one thing which we already discussed is clearly it's always good if you have a more stable environment and people have the beliefs that they can plan mid and long term. because consumable is something what you buy for your daily work at the end of the day, right? So I think there's also a reason why we actually had a very reasonable consumable business last year. While the environment was not the easiest one for many companies, we were still growing. Well, we shouldn't forget that Kaizen still has, again, historically outperformed the industry quite nicely. Instrumentation, again, is different. I think the benefit we're having is that most of our instruments are was a price point between $35,000, $40,000. and even the Kaya Sprint depends a bit on the configuration is probably around $70,000, $75,000 I think is reasonably priced. So we would believe if people believe that there's a midterm budget the year after and not everybody loses their job are going to buy this instrument. More important is it is not only life science. We clearly see that the pharma guys are going for efficient solutions. We see volume growth with some of our liquid biopsy customers who are significant customers for us. You have seen a couple of them just minutes ago, right? So I do think there's opportunities for us to go also by other companies doing quite well.

Tycho Peterson, Analyst — Life Science team

What percent of the sample tech systems do you think go into clinical placements, the new systems?

Thierry Bernard, CEO

I would say the share of the sample web instrument is not much different than the global split up, so it's roughly half-life

Tycho Peterson, Analyst — Life Science team

And then, you know, Parse, you touched on, I think you've suggested potential upside to the $40 million, you know, target this year. What's changed since the initial, you know, deal in terms of, you know, where you're seeing

Roland Sackers, CFO

So, yeah, the interest of special pharma and translational space for single cell is going the tile therapeutics data set with 100 million cells is definitely a good proof point that you can scale with the PARS technology and on top also keep quality, that's an important factor and also in we see a shift from bulk analysis into single cell but the major driver here is the pharma part

Tycho Peterson, Analyst — Life Science team

And competitively, I mean how do you see that? Obviously scale got acquired around the same time, I mean And how do you see kind of the competitive dynamic playing out?

Roland Sackers, CFO

So, yeah, I mean, the parse technology is instrument-free. You named it perfectly right that scale would be the head-to-head comparison. And here we're not seeing much. Just look at the revenues, right, $40 million for parse that we expect, or even more than that for 2026, and then two handfuls of million from scale.

Thierry Bernard, CEO

and so it's the reason why we double down on R&D you might know while the business is actually doing quite well and actually has healthy gross margins we clearly put quite some dollars into R&D because we want to build the menu even much faster than the original past plan was it's the reason why it is diluted for this year particularly in Q1 and Q2 but again we do believe also it pays off quite quickly

Tycho Peterson, Analyst — Life Science team

maybe we can hit on a digital PCR strong growth there They're over 20% in the quarter. One of the more compelling stories, I think, in the five-pillar plan. I think people are still trying to get comfortable with what the longer-term outlook looks like for that business. So can you just talk on how you think about that trajectory? I know you originally laid out a 25% CAGR at the Capital Markets Day, and it's been below that. But how do you think about that business improving from here?

Thierry Bernard, CEO

Again, first and foremost, we should remind ourselves that four of the five growth drivers, I think, overall are on track. and probably more important, nothing has changed. Our $2 billion target for 2028 on the five pillars of growth hasn't changed. You are right that the compensation or the composition of the mix might be different. Things happen. But I think the $2 billion are more than doable. I do think that hasn't changed and I don't think there's any reason that it should change. Particular high acuity, I think it was fair to say that last year we had always good double-digit growth on the consumer side, but the instrumentation environment in general was difficult, not only for us, but for many companies. Despite the fact it was very encouraging that Q1 had a very good start, double-digit growth rate, not only in the consumables, as always, but also on the instrumentation side. And I do think we will not expect anything different for the second quarter. And again, for the full year, we feel on track as well. I do think what makes the difference for us is clearly also the investments we made on the consumable side. I would say historically most people would say that Kaijin always had the better instrumentation solution but at the beginning we were clearly a bit short menu but with the investments we made over the last two years and we continue to do this here in expanding menu and portfolio for digital PCR we are probably more than head to head I think we have even a certain advantage here and I think that pays off. We are not standing still here also here on that side we are clearly pushing hard on the menu side because we do believe the transformation from qPCR into digital PCR is just the beginning. If sequencing is doing well, it's great news for digital PCR because you need validation, you need quality control. It is always most likely a digital PCR step. So there's a lot of good reasons to believe that business continues to do well.

Tycho Peterson, Analyst — Life Science team

You mentioned on the one key call a kind of a prioritization strategically of digital PCR over qPCR. Can you maybe just talk about what needs to be done to drive more of that transition? Is it workflow, cost per sample, further menu development that Roland mentioned?

Roland Sackers, CFO

Yeah. So just as a teaser here, we also have a deep dive coming up on June 15 on Chi-Acuity. There you will learn more about that, but just a few words on that. So if you just look into the qPCR space, then you will see that a lot is coming from gene expression. And this is something that we also mentioned earlier this year that this is something that we want to continue focusing on and hear what is important for that multiplex capability is always a big topic and here you saw that we're able to target 12 or to analyze 12 targets in just one reaction. Ease of use is important because as you know qPCR is a very simple technology and then how can you automate that and this is all what CHIQE can do. Cost per sample or cost per experiment is going down the more targets you can put into one reaction. That's an important factor. And the menu, as Roland mentioned, to just catch as many applications as possible in the space.

Tycho Peterson, Analyst — Life Science team

Maybe we can hit on QDI and you've taken growth expectations down from double digit to something closer to mid-single digit, you know, this year. Just talk a little bit about, you know, how much of that is discovery, research, you know, sluggishness, and what, you know, specifically changed in the underlying demand environment versus prior expectations.

Thierry Bernard, CEO

Yeah, you know, we feel still very good about the business. We shouldn't forget that right now we're still going through a SaaS transition. That means, again, typically historically customers were buying rather upfront licensing deals for typically three-plus-year periods. Now they're going for rather quarterly installments. Overall, I would say it's probably somebody more profitable for us, but clearly has a different revenue recognition event for us. In general, it's quite obvious that the clinical part of that is an important one. We clearly see also now that, again, some of the AI components are being helpful, helping customers with getting more volume done. Again, I'm not sure if it long-term is rather a high single-digit or low double-digit business. I wouldn't differentiate here too much, but overall, it's a nicely profitable business for us, which is growing above average.

Tycho Peterson, Analyst — Life Science team

Okay. I mean, you previously talked about 15% CAGR for longer term, but now you think high single, low double?

Thierry Bernard, CEO

Let's see where it ends, right?

Tycho Peterson, Analyst — Life Science team

And then, I guess, Kaya Stat, you're pointing to a meaningful ramp there, right? a double-digit in the back half of the year. Just walk us through what needs to go right on that.

Thierry Bernard, CEO

Because the former Skyastat was also a good start in the year in terms of placements. We had health, as you know, historically we always said if you have around 150 placements in a quarter, it's a good quarter for us. We had that four times last year, and I would expect it's also the kind of a run rate you should expect for this year on average. Clearly respiratory is in Q1, but also in Q2. we said that on a call as well, is a tough comp. I think it's going to normalize in the second half. And we should also not forget that, again, as we said before, there's clearly an important launch coming for us. We'll see how quickly that involves and contributes. But the significant wealth still comes from the launches of gas-torn men and gaiters in the US because, have in mind, while it got launched more or less end of 2024, Or that business in the U.S. is very much a tender-based business. And these tenders are typically three-plus years. That means only every year one-third, one-fourth of the market is addressable for us. So we're still rolling nicely into that business. That will drive growth for still quite some time.

Tycho Peterson, Analyst — Life Science team

I want to hit on margins quickly. So, you know, you previously suggested there was a path to pull forward to 31 percent, you know, margin target. Now, you know, we're thinking about flat to maybe slightly down this year. are obviously some FX headwinds in there, but how should we think about confidence in

Thierry Bernard, CEO

the 31% framework? In fairness, there's a couple of headwinds. First of all, we did an acquisition where we clearly said it's dilutive, it's 100 bps. The United States decided to implement some tariffs which is also quite some headwinds, and currency was not helpful either. Despite that fact, we were growing margins last year, and despite that fact we are probably keeping it somewhat flattish with what we said for this year 29.5% on a constant exchange rate, which the actual rate is probably 29 plus percent, so in all fairness so I would say we still continue to expand margins we still have 40 efficiency steps going forward helping us to expand margin as well and on top of that of course overall the menu direction is being very helpful it's no surprise to you, to anybody else that sample prep, but Gaijin has probably a higher gross margin than most other products so if sample prep continues what it is doing right now growing quite nicely the mix will be helpful we always were being quite open that Kaya Stat is an important product in terms of margin expansion because the utilization of production is an important topic in that environment so again as you said by yourself we do believe that it's a good product which is going to grow as well I don't see any reason that margin shouldn't improve Again, I hope that you're not increasing tariffs every second month. But despite that factors, which we cannot control on the efficiency side, we are in the middle of stepping up on changing our ERP system, bringing two systems to one system. There are a lot of detailed projects behind it. There's clearly updates on that coming up.

Tycho Peterson, Analyst — Life Science team

Just under a minute left. Maybe the door is open to ask about the strategic process. And we talked on the CEO timing. Maybe just talk about where the board's heads at. You announced to the world you hired bankers.

Thierry Bernard, CEO

Yeah, as we said, a couple of, probably a few weeks ago, we announced that we engaged two bankers to help us and help the board to review all the different options which we have. Clearly also a reaction on all the rumors being around since the announcement of Tegi and Kaijian taking parts. Nevertheless, I do think there's also an important event which we described before which was important for shareholders which was a capital market day it's probably important for a lot of different parties so let's see how that plays out and then we'll take it from there

Tycho Peterson, Analyst — Life Science team

great we'll leave it at that

Thierry Bernard, CEO

thanks thank you Michael thanks for having us