QIAGEN Q1/2019 CONFERENCE CALL TRANSCRIPT - May 07, 2019 - Sample to Insight
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QIAGEN Q1/2019 CONFERENCE CALL TRANSCRIPT May 07, 2019 Sample to Insight__
QIAGEN Q1/ 2019 CONFERENCE CALL
TRANSCRIPT
JOHN GILARDI: Thank you, and welcome to our conference call.
The speakers today are Peer Schatz, the Chief Executive Officer of
QIAGEN, and Roland Sackers, the Chief Financial Officer. Also join-
ing us is Phoebe Loh, a new member of our IR team, with deep ex-
perience in the genomic testing industry, as well as five years with
QIAGEN.
Please note that this call is being webcast live and will be archived
on the Investors section of our website at www.qiagen.com. A copy
of the press release is also available in the same section.
2(SLIDE 2: FORWARD LOOKING STATEMENTS)
JOHN GILARDI: Before we begin, let me cover our Safe Harbor statement. The dis-
cussion and responses to your questions on this call reflect manage-
ment's view as of today, Tuesday, May 7, 2019.
We will be making statements and providing responses to your
questions that state our intentions, beliefs, expectations or predic-
tions of the future. These constitute forward-looking statements for
the purpose of the Safe Harbor provisions. These statements involve
risks and uncertainties that could cause actual results to differ ma-
terially from those projected. QIAGEN disclaims any intention or ob-
ligation to revise any forward-looking statements. For more infor-
mation, please refer to our filings with the U.S. Securities and Ex-
change Commission.
We will also be referring to certain financial measures not prepared
in accordance with generally accepted accounting principles.
You can find a reconciliation of these figures to GAAP in the press
release and presentation for this call.
Before I turn over to Peer, I would like to remind you that we are
planning to hold an Analyst and Investor Day on Thursday, June 20,
in New York. An invitation has already been sent out.
I would like to now turn the call over to Peer.
3(SLIDE 4: Q1 2019 – PEER)
PEER SCHATZ: Thank you, John, and thank you to all of you for joining us for this
call.
Our performance for the first quarter of 2019 was in line with our
outlook for solid sales growth and continued improvements in prof-
itability. We have made significant progress already in 2019 on ad-
vancing our portfolio of differentiated Sample to Insight solutions
and are pushing ahead to ensure continually increasing delivery of
value over the course of this year and beyond. Even though we are
seeing some challenging macro trends, especially in Europe, and
have a lot to do in terms of execution on our growth opportunities,
our teams are performing well, our strategic initiatives are well on
track, and we are reaffirming the outlook for the full year.
We have these key messages for you today:
First, we achieved the outlook we set for net sales growth, and ex-
ceeded the target we had set for adjusted earnings per share.
Net sales were 348.7 million dollars in the first quarter of 2019, rising
6.1% at constant exchange rates, and this was solidly at the high
end of the outlook we gave for 5 to 6% CER growth. Adjusted earn-
ings per share were 27 cents on a reported basis, and 28 cents at
CER, and this exceeded the outlook we had set for 26 cents to 27
cents CER.
The adjusted operating income margin remained steady at 22% of
sales compared to the first quarter of 2018, and absorbed the sig-
nificant investments we have been making in our portfolio, in par-
ticular the development and commercialization initiatives for QI-
Astat-Dx as well as other products.
Second, we are making progress on developing our Sample to In-
sight portfolio fueled by dynamic innovation and disruptive solu-
tions.
We have a set of differentiated growth drivers moving in the right
direction and creating a broad base from which to accelerate our
performance in the coming years.
Among the highlights, in Precision Medicine we had the break-
through U.S. regulatory approval and launch of a new companion
diagnostic to help guide treatment decisions in urothelial cancer.
The FDA approval for the new therascreen FGFR assay is the first of
its kind for this biomarker, and QIAGEN has now achieved five FDA
approvals for companion diagnostics. This is the latest success to
emerge from our portfolio of more than 25 master collaboration
agreements with leading pharma companies worldwide.
4Sales of the QuantiFERON-TB test grew 15% CER, in line with our tar-
get corridor for the year of about 15% plus CER growth. A key de-
velopment was reaching the milestone of 60 million tests adminis-
tered worldwide since launch, and usage is growing by more than
12 million tests annually.
We have also expanded our range of automation system partner-
ships with a new collaboration with Tecan for the automated pre-
analytical handling of blood tubes. This is now the second option
available for customers to fully automate the preanalytical process
of QuantiFERON, as we also already offer a preanalytical option
through our existing partnership with Hamilton Robotics.
Our partner for the automation of the assay step is DiaSorin. The
number of customers running the assay step on DiaSorin’s LIAISON
systems is growing following the European launch in late 2018, and
we are on track for launch in the U.S. this year.
A key focus of our strategy is to develop a comprehensive range of
molecular testing automation systems to address the evolving
needs of our customers – from low-plex to high-plex, and from mid-
throughput to high-throughput – and all based on advanced mo-
lecular technologies. These systems address unique customer
needs while sharing a common sales channel.
It is worth noting that the combination of QIAstat-Dx and NeuMoDx,
along with the modular QIAsymphony automation system, our
QuantiFERON latent TB test, and a range of NGS gene panels,
showed customers at ECCMID the extremely broad coverage of
our portfolio for infectious disease detection.
Placements of the modular QIAsymphony automation platform in
the first quarter put us on track to achieve the 2019 goal for more
than 2,500 cumulative placements, which would be the fourth year
in a row of beating the targets.
As another highlight, the European rollout of the QIAstat-Dx system
is getting very positive feedback. This system was also highlighted
again at the recent ECCMID meeting, and it is gaining rapid recog-
nition as a next-generation solution for providing accurate insights
into complex disease syndromes.
Further reinforcing the value of QIAstat and our commitment we
showed new data at ECCMID for our new meningitis / encephalitis
panel, which is in late-stage development. This assay detected
central nervous system pathogens with high analytical specificity,
including clinically relevant strains and subtypes.
The CE-IVD launch is planned for late 2019 in Europe, as a key ad-
dition to the current offering of respiratory and gastrointestinal pan-
els for QIAstat-Dx. Our overall pipeline is also progressing well, and
covers a range of new indication areas.
5As mentioned before, syndromic testing is a 800 million dollar mar-
ket growing very quickly. We believe we have a true next genera-
tion solution with many advantages and are committed to creat-
ing a strong position in this market.
We are also building out the commercial test menu for NeuMoDx,
with plans to have 11 tests on the systems in Europe by the end of
this year, up from 4 today. The NeuMoDx systems are truly disruptive
next-generation solutions for molecular testing in clinical laborato-
ries, offering full automation, scalability and cost efficiency with
ease of use and much faster time to result than others. We believe
the market for clinical laboratory testing is currently around 2.7 bil-
lion dollars annually, and the feedback from customers is exciting.
Third, we are announcing plans for a new 100 million dollar share
repurchase program.
We plan to start this program after completion of the current 200
million program, of which about 50 million dollars remains. We con-
tinue to pursue a disciplined capital allocation policy focused on
targeted M&A and increasing returns.
As a fourth point, we are reaffirming our outlook for 2019 to deliver
faster sales growth, along with improvements in adjusted earnings.
We have a target for about 7 to 8% CER total net sales growth for
the year. We are on track to achieve our goals for full-year sales
growth, and we aim to deliver faster growth particularly weighted
toward the fourth quarter of the year.
We continue to expect about 30 million dollars of sales from QIAstat-
Dx, with a significant share in the fourth quarter following the antic-
ipated mid-year FDA clearance and the start of the respiratory sea-
son in the fourth quarter.
For adjusted EPS, we continue to expect about 1.45 to 1.47 dollars
per share, and this includes about three cents of dilution from our
investments in the digital PCR platform that is in late-stage develop-
ment and planned for launch in 2020.
So as a quick summary, we are pleased with the start to 2019 and
are reaffirming our full-year outlook.
I would now like to hand over to Roland.
6(SLIDE 5: Q1 2019 FINANCIAL REVIEW)
ROLAND SACKERS: Thank you, Peer.
Good afternoon to those of you in Europe and good morning
to those of you in the U.S. I will first review the financial results for
the first quarter of 2019 and later provide you with our guidance
for the second quarter and the full year.
For the first quarter of 2019, net sales grew a solid 6.1% CER, and
this was solidly at the high end of our target for 5 to 6% CER
growth. On a reported basis, net sales rose 1.5% to 348.7 million
dollars, which included currency headwinds of 4.6 percentage
points. This was higher than we anticipated for about 3 to 4 per-
centage points. You can find more information in the appendix
to the presentation.
In terms of growth components, the first-time contributions from
the launch of QIAstat-Dx provided about one percentage point
of total CER sales growth. The rest of the portfolio provided five
percentage points of CER sales growth, which absorbed a
headwind of one percentage point from the divestment of our
veterinary assay business in the spring of 2018 and the ongoing
decline in third-party revenues from instrument service con-
tracts.
So this means total CER growth excluding these two portfolio
changes was 7% CER.
Moving down the income statement, the adjusted gross profit
margin was 70% of sales in the first quarter of 2019, largely un-
changed from the same period in 2018, as the favorable prod-
uct mix toward higher-margin consumables helped to absorb
the launch investments in new products. QIAstat-Dx remains di-
lutive to gross margin at this time, as we are building up capac-
ity.
Adjusted operating income rose 1% to 77.9 million dollars, which
reflected ongoing efficiency gains and our prudent approach
to cost management, while considering the investments in the
launch of QIAstat-Dx for the European rollout and preparations
for the U.S. launch in the second half of 2019. The adjusted op-
erating income remained at 22% of sales in both quarters.
Adjusted diluted earnings per share were 27 cents on a re-
ported basis in the first quarter of 2019 compared to 26 cents in
the same period of 2018. At constant exchange rates, adjusted
EPS was 28 cents, and this was ahead of our target for about 26
to 27 cents CER.
7(SLIDE 6: Q1 2019: CUSTOMER CLASSES)
ROLAND SACKERS:
I would like to now review our sales results for the product cate-
gories and our customer classes.
We had solid growth of 7% CER in consumables and related rev-
enues to 313 million dollars in the first quarter of 2019, and they
accounted for 90% of total sales. We were pleased with the
placements of instruments, particularly under reagent rental
agreements where sales are recognized through consumables
purchases over a multi-year period. However, the focus on rea-
gent rental placements, along with the reduction in third-party
instrument service contracts resulted in only a 2% CER increase
in instrument sales to 36 million dollars in the first quarter of 2019.
Excluding the reduction in third-party service contracts, instru-
ment sales were up 8% CER.
Among the customer classes, Molecular Diagnostics grew 10%
CER to 168 million dollars, and provided 48% of total sales. This
was led by the ongoing double-digit CER sales gains for the
QuantiFERON latent TB test, which grew 15% CER, while Precision
Medicine grew on higher revenues from co-development pro-
jects for companion diagnostics. We also saw good single-digit
CER growth in consumables for the QIAsymphony automation
system.
Life Sciences sales rose 3% CER to 181 million dollars in the first
quarter of 2019, and provided 52% of total sales. We experi-
enced solid single-digit CER growth in instrument sales, while
consumables and related revenues were largely unchanged
compared to the first quarter of 2018. This was disappointing
and below the trends we had seen in 2018, but reflects the chal-
lenging macro trends we mentioned before, particularly in Ger-
many and southern Europe.
Within the Life Sciences, sales to Pharma customers rose 4% CER
on growth in all regions, led by higher consumables sales that
more than offset weaker instrument sales trends, and provided
20% of total QIAGEN sales.
As you saw in the press release, we have decided to now focus
on the overall performance of our Life Science customers, and
combine sales results for customers in the Academia and Ap-
plied Testing areas which mirrors our internal structures.
For the first quarter of 2019, the new Academia / Applied Testing
customer class rose 2% CER and provided 32% of total QIAGEN
sales. We saw double-digit CER growth in sales of instruments,
but steady year-over-year quarterly trends in sales of consuma-
bles and related revenues.
8(SLIDE 7: Q1 2019: GEOGRAPHIC REGIONS)
ROLAND SACKERS: I would like to now review the performance among our three
geographic regions.
The Americas region led all regions with 8% CER growth in the
first quarter of 2019 to 170 million dollars, providing 49% of sales.
We saw strong growth in the United States along with double-
digit gains in Brazil, but had weaker trends in Mexico.
The Europe Middle East Africa region grew 4% CER to 109 million
dollars and represented 31% of sales in the first quarter. Among
key countries, we saw good growth trends in France, Turkey,
and the UK against lower sales in Germany and Italy.
The Asia-Pacific Japan region grew 6% CER in the first quarter,
with sales of 69 million dollars that represented 20% of total sales.
Continued strong double-digit CER growth in China and lower
single-digit sales growth in Japan and Singapore more than off-
set lower sales in South Korea
9(SLIDE 8: Q1 2019: BALANCE SHEET / CF)
ROLAND SACKERS: I would like to now give you an update on our balance sheet
and cash flow.
A key development in the first quarter of 2019 was the reduction
in group liquidity, which fell to 780 million dollars from 1.0 billion
dollars in the same period of 2018. This reflects the repayment of
the 2019 cash-settled convertible notes for about 430 million dol-
lars. We also invested about 45 million dollars in the share repur-
chase program during the first quarter of the year.
These were among the factors that led to our leverage ratio ris-
ing to about 1.7 times net debt to EBITDA at the end of the first
quarter of 2019, compared to 1.4 times at the end of the same
period in 2018.
In terms of cash flow, operating cash flow declined to 44.7 mil-
lion dollars in the first three months of 2019 compared to 48.2
million dollars in the first quarter of 2018. Key factors in the 2019
period were significant cash payments for derivatives and
higher tax payments to settle tax audits for prior years, which
were accrued for in the past.
Investments in property, plant and equipment were also higher
in the 2019 period, rising to 23.4 million dollars from 18.9 million.
This was mainly due to investments in building up our manufac-
turing capacity to support new product launches, in particular
QIAstat-Dx. As a result, free cash flow was 21.3 million dollars for
the first three months of 2019, down from 29.3 million dollars in
the same period of 2018.
We anticipate better cash flow trends as the year progresses,
and plan to continue using our healthy balance sheet to imple-
ment our disciplined capital allocation policy. This involves tar-
geted acquisitions along with increasing returns through share
repurchase programs. As we noted in the press release, we in-
tend to start a new 100 million dollar share repurchase program
after completing the remaining 50 million dollars of our current
200 million dollar commitment.
I would like to now hand back to Peer for a strategy update.
10(SLIDE 9: SUMMARY ON SAMPLE TO INSIGHT)
PEER SCHATZ: Thank you Roland.
On slide 9, you have an overview of key developments in our
Sample to Insight portfolio.
I would like to go into more detail on the progress our teams
have made in the areas of:
• Precision Medicine
• QuantiFERON-TB
• Our leading portfolio of automation systems based
on PCR technology
• Next generation sequencing
• and new solutions we are developing in our
offering of Differentiated Technologies.
11(SLIDE 10: PRECISION MEDICINE)
PEER SCHATZ: Our Precision Medicine franchise had an exciting start to the
year with the U.S. regulatory approval of a new companion di-
agnostic therascreen FGFR, and this is the first FDA approval for
this biomarker.
The therascreen FGFR test was approved as a companion diag-
nostic to help guide the use of Janssen’s new therapy BAL-
VERSA, which was approved at the same time and is a break-
through therapy for use in patients with metastatic urothelial
cancer. The therascreen FGFR test leverages a worldwide ex-
clusive license from Columbia University. There is a high unmet
need among patients who are looking for new treatment op-
tions with advanced metastatic bladder cancer.
As part of our efforts to accelerate the adoption of our com-
panion diagnostics, and provide physicians and patients with
faster access to novel drugs, the therascreen FGFR test was
quickly released through our Day-One Lab Readiness program
which is a network of major labs partnering with QIAGEN and
ready to ensure fast testing readiness for our companion diag-
nostics following approvals.
As you might have seen, we are pleased to welcome LabCorp
to the Day-One network.
Traditionally, due to the need for validation and commercial
preparations at labs, testing using newly approved companion
diagnostics was available often only months after their ap-
proval. With our new Day-One program, we can offer almost
immediate availability.
12(SLIDE 11: AUTOMATION SYSTEMS)
PEER SCHATZ: I would like to now provide you an overview on the complete
line-up of QIAGEN’s automation systems for the molecular diag-
nostics market.
This chart shows how we offer a full suite of automation platforms
covering a wide range of common diagnostic needs. We are
uniquely positioned in our industry with the most comprehensive
scope across key segments of molecular testing.
Our focus has been on building up this portfolio of automation
systems to address important customer needs. We are now turn-
ing our attention to enriching their utility with a wide range of
tests for these platforms – and delivering on their promise with a
sharp focus on execution in terms of new placements.
13(SLIDE 12: QIASTAT-DX)
PEER SCHATZ: I would like to now give you an update on our progress with QI-
Astat-Dx. This is our fully integrated, real-time PCR-based plat-
form for syndromic testing applications, and it was launched in
Europe in 2018. As you know we had over 300 placements at
the end of 2018, and obviously expect a steep increase in
placements in 2019.
We are planning for greater expansion and focusing our teams
even more on this growth opportunity, especially as the FDA ap-
proval of QIAstat-Dx could be achieved in the middle of 2019.
This will be in time for the 2019-2020 respiratory season, and we
are also planning to launch the gastrointestinal panel later this
year in the U.S. We are creating a solid foundation of initial tests
to gain share and drive expansion of the current market for syn-
dromic testing, which we estimate at about 800 million dollars
of annual sales.
At the recent ECCMID conference in Amsterdam, we high-
lighted data on the new Meningitis / Encephalitis panel in de-
velopment for CE-IVD launch in the second half of 2019. The
data showed the test can detect central nervous system path-
ogens with high analytical specificity, including clinically rele-
vant strains and subtypes.
As a key differentiator, the panel analyzes more than 20 patho-
gens that can cause meningitis / encephalitis syndromes, in-
cluding bacteria, viruses and yeast – with all the benefits of the
QIAstat-Dx system in terms of workflow, ease of use and con-
nectivity. With the capability to provide actionable insights in
about one hour, this test meets an urgent need for rapid and
reliable diagnosis of meningitis and encephalitis infections.
We also plan to develop this test for U.S. regulatory approval,
and have a deep pipeline of additional tests in development
that take advantage of our differentiation to offer both quanti-
tative and qualitative molecular results.
Completion of this panel is just one step in our strategy to pro-
vide a deep menu of additional tests for QIAstat-Dx in the next
couple years, covering infectious diseases and other therapeu-
tic areas.
14(SLIDE 13: NEUMODX)
PEER SCHATZ: I would like to now give you an update on NeuMoDx, our latest
addition to the Automation Systems line-up.
We have just announced expansion of the content menu for
the NeuMoDx 96 and 288 automation platforms in Europe to in-
clude HBV and HCV assays for hepatitis B and C. Laboratories in
Europe can now simultaneously run molecular diagnostic tests
for four different viral and bacterial pathogens, as well as labor-
atory-developed tests, on the random-access NeuMoDx plat-
forms.
As part of our menu expansion plan, we plan to be able to offer
11 CE-IVD assays by the end of 2019 – including blood-borne
viruses, women’s health and transplantation assays – up from
the four tests currently available.
The positive feedback about the disruptive performance of this
system is truly exciting. Customers are emphasizing their appre-
ciation for the ease-of-use of NeuMoDx, the best-in-class fully in-
tegrated automated test set-up, throughput capability and
flexibility, and rapid turnaround times, which can be up to 4
times faster than other systems.
During customer demos at the ECCMID conference in April,
many customers commented that a highlight was the true ran-
dom access loading, a technology unique to this platform
which allows up to 30 different assays to be stored and run in
any combination.
NeuMoDx is a key element in our automation system portfolio,
and we look forward to working with our partner NeuMoDx on
expanding the footprint.
15(SLIDE 14: QUANTIFERON)
PEER SCHATZ: I would like to now give you an update on our QuantiFERON-TB
test, the modern blood-based gold standard for latent tubercu-
losis detection.
We reached a new milestone in early 2019, breaking through 60
million tests administered since the launch of QuantiFERON-TB.
We are now on a pace to deliver about 12 million tests annually.
At the same time, this shows there is still significant market con-
version opportunity among the 70 million latent TB tests done
annually, which we believe can be converted to modern
blood-based testing from the tuberculin skin test.
QuantiFERON-TB continues to strengthen its position as the lead-
ing modern latent TB test, especially given its scalability to sup-
port large screening programs that require a rapid ramp-up
and the ability to quickly process thousands of tests.
To satisfy this demand, we have focused on highly efficient au-
tomation solutions. We have built up partnerships with Hamilton
and Tecan for the pre-analytical handling of blood tubes, and
with DiaSorin for the read-out of test results on their LIAISON plat-
form.
So we have significantly raised the bar in terms of automated
processing capabilities.
We are actively promoting use of QuantiFERON on DiaSorin’s
Laison systems and feedback has been very positive, especially
given that there are more than 7,000 LIAISON systems placed
worldwide. The partnership provides great automation, while
also embedding our QuantiFERON-TB test into the test menu of
the LIAISON, which includes more than 130 other assays. We
launched the CE-IVD version of the QuantiFERON-TB read-out
test for Liaison systems in Europe in late 2018, and the rollout is
progressing well. The launch in the U.S. is planned for this year,
subject to a PMA approval from the FDA, and in China for 2020.
The partnerships with Hamilton and Tecan are synergistic to the
DiaSorin relationship and offer significant benefits as well, in par-
ticular the ability to reduce hands-on time by 50% or more,
providing greater ease of use and ensuring consistency in pre-
analytic methods to reduce processing errors and variability.
Given that we had very strong sales in the second quarter of
2018 with over 30% CER growth, which included the stockpiling
by labs in anticipation of the transition from the third generation
to the fourth generation of QuantiFERON, we currently expect
16these sales to grow in the mid single digits CER range in the sec-
ond quarter of 2019. This was factored into our guidance for the
second quarter and full year.
We expect to deliver full-year 2019 sales in our growth corridor
of 15% plus CER from 2018 sales of 223 million dollars, and to
reach our 2020 goal for 300 million dollars.
17(SLIDE 15: DIFFERENTIATED TECHNOLOGIES)
PEER SCHATZ: In the liquid biopsy market, QIAGEN is the clear market leader
and delivers gold-standard sample processing technologies for
isolating cell-free targets from blood or other biofluids. To build
on this market leadership, we have launched two new products
to assist researchers in sample preparation for cell-free RNA
workflows.
First, the new exoRNeasy kits enable efficient isolation of highly
pure RNA from exosomes and other extracellular vesicles circu-
lating not only in blood, but in most common biofluids, including
urine and other body fluids. Exosomes, which are tiny enclosures
able to transport molecules such as RNA between cells, are of
increasing importance in liquid biopsy research.
Second, we launched the miRNeasy 96 kit for automated high-
throughput purification of cell-free total RNA from small volumes
of serum and plasma. Unlike the products from other suppliers,
this kit combines ease of use and a phenol-free protocol without
any compromise on RNA quality or yield. This kit is automated
on the QIAGEN QIAcube HT, a version of our QIAcube instru-
ment designed for automated nucleic acid purification in a
higher throughput format.
In Next-Generation Sequencing, we launched new solutions for
customers to streamline NGS analysis and interpretation by inte-
grating our cutting-edge bioinformatics solutions with precon-
figured QIAseq DNA panels or custom panels for use on any se-
quencing platform, as well as with QIAact panels on the QI-
AGEN GeneReader NGS system.
The new assay and software packages include QIAGEN’s CLC
Genomics Workbench and Clinical Insight-Interpret bioinfor-
matics solutions. This gives customers the ability to generate re-
ports that make sense of raw genomic data often beyond hu-
man comprehension, and delivered in reports that can provide
actionable insights to support sound research decisions.
With this, I would like to hand back to Roland.
18(SLIDE 16: FULL YEAR 2019 OUTLOOK)
ROLAND SACKERS: Thank you, Peer.
I would like to first review our outlook for 2019, which we have
reaffirmed, and then provide some perspectives on the outlook
for the second quarter.
We continue to expect about 7 to 8% CER total net sales growth
for 2019.
We also continue to expect adjusted diluted EPS of about one
dollar and 45 cents to one dollar and 47 cents at constant ex-
change rates. We are sharpening our focus on accelerating
sales growth and combining it with operational and financial
improvements in profitability. This takes into account the signifi-
cant investments in our portfolio to support mid-term growth, in
particular three cents of dilution for the development of our dig-
ital PCR platforms. As we have mentioned before, QIAstat-Dx is
expected to be neutral in terms of impact on the adjusted op-
erating income margin in 2019. But this is based on dilution in the
first half, and accretion in the second half.
As for currencies, based on rates as of April 30, 2019, we now
expect more severe headwinds of about three percentage
points on sales for 2019. For adjusted EPS for the full year, we now
expect a currency headwind of about three to four cents. The
main factors are the strengthening of the U.S. dollar against the
euro and the Turkish lira, and to a lesser extent against the Ko-
rean won.
For the second quarter of 2019, our guidance is for total net sales
growth of about 5% CER. This outlook takes into consideration
the continuation of some adverse macro trends, and also that
we expect QuantiFERON-TB to grow at a mid-single-digit CER
rate that is below the 15% CER plus growth corridor for 2019, due
to the very challenging comparison to the strong second quar-
ter of 2018, when we had the U.S. transition from the third gen-
eration to the fourth generation. It also takes into account our
expectations for a sharp decline in revenues from co-develop-
ment projects for companion diagnostics after the significant
gains in 2018, and also the ongoing adverse impact of reduced
revenues from third-party instrument service contracts. These
three factors combined are expected to create a headwind of
at least two percentage points on CER sales growth in the sec-
ond quarter of 2019.
Adjusted EPS at constant exchange rates is expected to be
about 33 to 34 cents per share, also at constant exchange rates.
19In terms of currency impact for the second quarter, and again
based on rates as of April 30, 2019, we expect a headwind of
about four percentage points on the CER net sales guidance
and about one cent on the adjusted EPS guidance at CER rates.
With that, I would like to hand back to Peer.
20(SLIDE 17: Summary)
PEER SCHATZ: Thank you, Roland.
Here is a quick summary before we move into Q&A. Let me re-
view what we have announced:
• First, we achieved our outlook for net sales growth in the
first quarter of 2019 and exceeded the outlook for adjusted
EPS, and have reaffirmed our outlook for the year.
• Second, we are advancing our Sample to Insight portfolio
across the continuum from basic research to routine clini-
cal healthcare. We look forward to geographic expansion
and new product launches during 2019 and beyond.
• Third, we see value in our shares, and have announced
plans for a new 100 million dollar share repurchase pro-
gram after completion of our current 200 million dollar
commitment.
• As a last point, we are reaffirming the outlook we have set
for sales and adjusted earnings growth in 2019 at constant
exchange rates. We are determined to execute on our
strategy in 2019 and strengthen our position for even faster
growth in 2020 and the coming years.
With that, I’d like to hand back to John and the operator for the
Q&A session. Thank you.
JOHN: With that, I would like to close this conference call and thank
you for your participation. If you have any questions or com-
ments, please do not hesitate to contact us.
Thank you.
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