Qiagen NV (QGEN) 2008 Q1 法說會逐字稿

Good morning. My name is Cheryl and I will be your conference operator today. At this time I'd like to welcome everyone to the QIAGEN first quarter 2008 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. (OPERATOR INSTRUCTIONS)

Thank you. It is now my pleasure to turn the floor over to your host, Solveigh Maehler, director, investor relations. Ma'am, you may begin your conference.

Thank you very much, Cheryl and hello everyone. Welcome to QIAGEN's first quarter 2008 earnings conference call. I'm Solveigh Maehler, director of investor relations at QIAGEN. With me on the call are today QIAGEN's CEO, Peer Schatz and CFO, Roland Sackers.

We issued a press release last night announcing QIAGEN's financial results for the first quarter 2008 ended March 31, 2008 and describing the company's recent business highlights. A copy of this announcement as well as the presentation we will be using during this conference call can be downloaded from the investor relations section of our home page at www.qiagen.com

This conference call will cover a 30-minute presentation followed by a Q&A session. The time of the conference call is set at one hour. We therefore would like to ask you to please limit yourself to only two questions during the Q&A session. The call will be archived on our website.

Before I turn over to Peer Schatz, please keep in mind that the following discussion and the responses to your questions reflect management's view as of today, May 6, 2008. As you listen to the call I encourage you to have our press release and presentation in front of you since our financial results and detailed commentaries are included and will correspond to the discussion that follows.

As we share information today to help you better understand our business, it is important to keep in mind that we will make statements and provide responses in the course of this conference call that state our intentions, beliefs, expectations, or predictions of the future. These constitute forward-looking statements for the purpose of the Safe Harbor provisions. These forward-looking statements involve certain risks and uncertainties that could cause QIAGEN's actual results to differ materially from those projected.

QIAGEN disclaims any intention or obligation to revise any forward-looking statements. For the description of such risks and uncertainties, please refer to the discussions and reports that QIAGEN has filed with the U.S. Securities and Exchange Commission.

With this I would like to hand over to Peer Schatz. Thank you.

Thanks Solveigh and welcome to our call. We are very pleased to report the results of our first quarter, which give evidence that QIAGEN's successful start into 2008.

With over $207 million in sales, we exceeded our guidance both in revenues and also with $0.18 per share adjusted EPS, we exceeded our guidance targets for earnings per share as well. We feel confident that we are well on track to reach our targets for 2008 and will reiterate our positive outlook for 2008 in this call.

One of the highlights of our financials, and Roland will walk you through those in more detail later, is the increasingly visible value generation from synergies that we were able to generate from our recent acquisitions. We have not only created strong leadership positions, but also significantly increased our profitability. At the same time we are managing what I can clearly call one of the most excited pipelines in our company's history.

Based on market and other data, we clearly believe that we have been gaining market share in all major customer segments and market segments. Our formula of innovation and focus on sample and assay technologies and leveraging that strength over four customer segments is showing that--those results.

QIAGEN today is focused on excelling in one area, sample and assay technologies, and we bring these critical technologies into four customer segments--into research, into pharma biotech, into applied markets and into molecular diagnostics. Notably in all customer segments we have the leading position.

As I said before, we are managing a very deep and promising pipeline and are executing well. Execution on our pipeline has been and continues to be a key strength of QIAGEN and we are very excited about what we will be bringing forward to our customers over the next few years.

In the first part of this year we launched 19 new products. As I said in recent calls, these are not only variations of a same theme, but truly novel solutions in sample and assay technologies. In January alone we launched QIAsymphony and QIAxcel, two instruments with the potential to revolutionize the way our customers work.

QIAsymphony is getting an amazing reception and already primarily in molecular diagnostics but also in pharma and applied markets and forensics, veterinary and those areas, is receiving already a great order book. We are looking forward to commencing shipping late in the second quarter.

QIAxcel is also a product that I believe we will be able to soon report some exciting numbers on.

But while such flagship products are exciting, QIAGEN is much more than a handful of products such as QIAsymphony, QIAxcel, HPV testing, artus assays, RNeasy, QIAGEN Plasmid or QIAplex. The breadth and depth of our solutions in molecular sample and assay technologies is unrivaled and our few hundred products form the basis for a strong brand reputation and also sales that in this quarter once again exceeded our guidance.

Our company is performing well, also integrations of the recently acquired businesses. We are on track in terms of timing, synergies and accretion, especially the acquisition of Digene has given rise to great opportunities and synergies and that has added tremendous strategic momentum to our leadership position in molecular diagnostics.

I will give you some details later, but we are performing well here and even despite Easter falling into the first quarter, our HPV revenue increased sequentially over the fourth quarter and we are well on track on our previously communicated plan to reach $260-- to $270 million in HPV revenues for calendar 2008.

On the next slide you will find the usual breakdown by product type on the left. Consumables continued strongly, also organic growth was strong. The lower revenue growth in instruments should be seen in relation to a higher than usual revenue base in the first quarter of 2007. In addition, there is actually a positive perspective on this as it was partially caused by the massive interest in our new QIAsymphony and EZ1 advance systems, which we will start shipping late in the second quarter.

So with a system with great specs like the QIAsymphony boast, it was tougher to close orders for some of the older systems that could have been shipped in the first quarter.

We have a great list of orders for the new instruments, some directly off trade show demos or even off flyers. Nevertheless, our star performer, QIAcube, continues very strong in units but it is clearly a smaller ticket item. In addition we saw lower sales of Rapid Capture systems in the first quarter of 2008.

The geographic breakdown on the right side is comparable to last quarter and I'll address some aspects on a later slide. But in terms of Asia, we are reducing third-party distributorships, which we had as leftovers in small entities that we had acquired in 2007.

As many of you know, we have a very strong position in Asia. Our molecular diagnostics assay sales are unit-wise about the same as the largest in Europe and we have a great pipeline primarily in blood banking assays to be launched later this year.

On the next slide, slide five, you see the usual breakdown of our revenue growth. Once again we are at the magical 4% of sales coming from products introduced in the trailing 12 months. I would actually have expected these numbers to drop and then increase from time to time but this is really a performance we are very proud of and one which clearly differentiates QIAGEN from other companies and which has given us great brand equity, vis--vis our customers.

In addition, we increased prices in the first quarter, typically country by country by their respective inflation rate.

Let me turn to the next slide, slide six. This is really a very important slide as it puts our activities into perspective. The most important section is on the bottom, the focus on sample and assay technologies as our core competency. We don't really differentiate by customer segment in many areas, for instance research and development, and this allows a very fast flow of technologies between customer segments. At the same time, we separate the sales and marketing channels to allow for tailored messaging.

Now let me start at the right. Research, both public/academic and private, are slightly over 27% of sales. We saw continued good growth in Europe and we are also very pleased to report reinvigorated growth in the North American markets. This was actually a bit surprising as the public funding growth levels are still very low here but we think our success has to do with the positioning of our products, which includes innovation, a great team and maybe also the fact that many customers have gotten more used to dealing with a lower growth environment and public budgets and are managing those better.

In pharma, slightly under 20% of sales, the market is clearly tough. However, QIAGEN refocused over the last few years increasingly on the development section of pharmaceutical research and while pharmaceutical discovery, i.e., early stage research, is being cut, we are performing quite well in pharma as our technologies are used to select and monitor patients in clinical trials, and in those areas we have actually seen very robust growth.

In applied testing we are pleased with our growth here. It is around 20% and we are very hopeful for some of our new assays in the veterinary area as well as for new solutions in forensic sample technologies.

In molecular diagnostics we are seeing continued growth. Molecular diagnostics is about half of our sales and a little over half of that are HPV related sales. Growth here was solid. We are gaining share in all major areas and growth is driven by geographic expansion, new products and assays and the strength of our significantly large sales and marketing engine, where we have about 400 people selling to clinical laboratories or to physicians, i.e., to the molecular diagnostics customer segment alone.

Remember we have about 1,100 people in sales and marketing across all customer segments, 400 in the molecular diagnostics sector.

Now let me turn to the integrations in more detail in the next slide, slide seven. The integration of Digene is very well on track. 84% of products are completed or expected to be completed in the near future in time. About 2% of projects are facing delays however none of those projects are critical to our success.

This is a great result for an integration at this advanced stage and I really have to thank the integration team and all of our employees for making this happen.

Most of the functions have now been fully handed over to line management, probably the most critical milestone in any integration. There is so much happening in our sales and marketing infrastructure in molecular diagnostics. We are very excited about the engine that we're building.

As of January 1, we consolidated the lab sales force. Again these are the sales people going to our laboratory customers. For some members of the team it was new to sell such a portfolio of products, such a large portfolio of products we have in this area, but we had training and mentorships to support the process.

Our customers, many of which we as management actually met over the last few months personally, have fully embraced the concept and value proposition that we as a combined company are now offering. Breadth and depth, innovation and market leadership, and a phenomenal pipeline, some of which we showed at our recent Analyst Day and in more depth to customers on a selected basis.

Our new product breadth, for instance, allowed us to actively migrate some Hybrid Capture customers for non-HPV targets such as hepatitis B, CTGC and CMV over to QIAGEN's performance leading artus real-time PCR solutions.

We also increased our clinical sales channel very significantly to over 100 people in the field during the first quarter. This was not--this was up from about 75 people. This was not originally forecasted to be in this magnitude, but late in 2007 we recognized the importance of the interactions with physicians and their appreciation for QIAGEN's Digene HPV test.

The adoption process here starts with physicians and we are in a unique position with our ability to reach these critical decision makers with our large and growing clinical sales force.

In molecular diagnostics, this is a truly unique capability and infrastructure and as far as I know, we are really the only company with a sizable clinical sales force in molecular diagnostics, and this is clearly a very differentiating factor for our customers.

We're executing on the geographic expansion, the consolidation of the sales channels around the globe. We are significantly expanding in Latin America and working intensely on a number of countries in Europe and Asia.

In Europe we are seeing still a country by country varying level of adoption of HPV screening but within the last few weeks alone real exciting data was released by groups, for instance in Germany and Italy.

In Italy a study was conducted with over 50,000 women. The German study was about 10,000. Both strongly recommended HPV screening as a primary screen and both also used QIAGEN's Digene HPV test to reach their conclusion.

The R&D programs are well under way. I'm really excited about this. While our current systems have unrivaled performance in validation and clearly the clinical validation is what counts, what we are building is compared to everything that is being talked about significantly more advanced and powerful.

We shared the specs at our recent Analyst Day in February. They speak for themselves and targets meet and exceed what we have laid out to accomplish, is very clearly set forward.

And last, the marketing campaigns. We really unveiled quite a bit here, starting with a new, more branded website. We also unveiled a new advertising campaign with new, fresher messages. I added the link on this slide. The new DTC ads are also on that site as well.

And very importantly, we are working very closely with our partners, more closely actually than ever, with the enlarged infrastructure, with our laboratories and physicians working together to contribute our best to increasing access to HPV screening.

Lastly, let me turn to our recent announcement on the in-licensing of HDA. That's on the next slide. This could actually become quite an important relationship for us. Combined with some internally developed technologies, we believe we can create a very exciting assay portfolio based on HDA. The beauty of this solution is that the technology is extremely sensitive and specific, yet very, very robust. You can run it on almost any given detection system from real-time PCR cyclers running in isothermal mode to hybrid capture.

We are using the technology in a number of areas including for some assays targeted for use in our QIAensemble and next generation screening systems as well as other areas that we will disclose at a future date.

With that, I'd like to hand over to Roland for an in-depth review of our financials.

Thank you, Peer. And good afternoon everyone in Europe and good morning to those joining from the U.S. Our first quarter financial results reflect a strong start for 2008. We exceeded both analysts and our revenue EPS expectations. We demonstrated solid performance in terms of revenue growth.

As expected, much of our growth remains to be driven organically but our acquisitions from the last two years are all integrating well, especially on the Digene front where we expanded our molecular diagnostics sales force this past quarter addressing the needs of physicians and clinical labs, which builds on the recognized brand name and leadership we carry.

Here is an overview of our key financial metrics. We had reported revenues in the first quarter of $207.1 million, which are up by 62% over the same period last year. There's only a marginal foreign currency impact on revenue growth, moving our guidance rate from January 31, 2008 approximately half a percent.

Driven by strong operating profit, our first quarter adjusted EPS of $0.18 per share is also better than we had forecasted at the time we gave guidance. We exclude from these adjusted figures any acquisition, integration relocation related charges as well as amortization of acquired IP and equity based compensation.

A breakdown by product groups shows that in the first quarter 2008 we [pressed at] aggressively with our consumables business, which accounts for approximately 92% of total revenues. We have seen this step up in consumables over the past few quarters and this quarter is particularly strong with 59% growth at the constant exchange rate. Products in gene expression contributed strong growth as did our regulated products.

(Inaudible) related sales remain on track, which means we feel confident in our ability to reach $260-- to $270 million in revenue for calendar 2008 as we have guided before.

We had 19 new product introductions with 4% of revenue growth coming from products that have been on the market less than 12 months. Clearly QIAGEN is a forerunner in bringing innovation to the market, expanding and capitalizing on our market and technology leadership.

Our instruments continue to set new standards as cutting edge technologies that are transforming how our customers work. With three key introductions, the QIAsymphony stands out as it is the first system in an entirely new series of model instruments, not to forget the QIAxcel and the EZ1 advance.

As typical for any new product launch, sales need some time to ramp up, but we remain confident that we are solidly on track for the year in our instrument product group.

While our growth in Asia was strong at 14%, the number does not necessarily accurately reflect our strong performance as we are phasing out a number of third party distribution agreements, which we had inherited through previous acquisitions.

Overall the first quarter numbers break down as follows. We once again recorded strong topline growth. Our net sales of $207.1 million this quarter compared to $127.9 million for the same period in 2007 reflects a very strong growth rate of 62%.

Adjusted operating income demonstrated approximately 79% growth over the first quarter 2007 and a jump in adjusted operating margin from 26% in the first quarter 2007 to 28% this quarter. In fact, on the constant exchange rates, it would be 30%.

Clearly our integration with Digene is progressing well, especially in general and administrative and sales and marketing and it is already contributing to our significant expansion in operating margin.

Our adjusted net income showed a strong growth of 63% in comparison to the first quarter 2007, from $22.6 million to $36.9 million. A contributing factor to the level of our net income is also the drop in our reported tax rate from 32% in the first quarter 2007 to 26% in the first quarter 2008. The main driver behind this has been the tax reform in Germany.

In respect of diluted earnings per share, we had an increase to $0.18 a share, up from $0.14 a share for the comparable quarter in 2007 and above our expectations for the first quarter 2008. This further supports a positive impact of the realized cost synergies of the Digene acquisition.

I think this next slide is a good template to show our reported versus adjusted figures. First our net sales, the same under both GAAP and non-GAAP. Operating income adjusted of $25.7 million related to factors including a faster Digene integration process, landing a greater portion of these costs into the first quarter 2007. This also includes 123R Digene pertaining expenses.

Turning to our cash flow statement, our operating cash flow decreased to $9.2 million from $21.2 million in the first quarter 2007. This was mainly driven by two extraordinary impacts, namely an increase in inventories in preparation for new instrument launches, and secondly, Digene related exceptional expenditures pertaining to legal, severance and change of control payment.

For the second quarter guidance we have listed a number of assumptions here. For the time being as we don't have a comparable quarter due to the acquisitions made in 2007, we will continue to provide you with this guidance as it also frames some items more precisely.

Revenue, we [are prepared] to be in the range of $215-- to $218 million using our guidance rate. This would probably translate to $219-- to $222 million using actual currency rates.

With the guidance for the second quarter of adjusted EPS of $0.18 to $0.19 per share, we feel fully on track for the fiscal year 2008.

On slide 16, I would like to provide you with some more details behind our assumptions. In terms of adjustments to operating income, 123R expenses between $3-- and $4 million, amortization of acquired IP of approximately $16 million. The $1 million increase is amortization, is due to currency impact.

Integration and acquisition related charges of approximately $6-- to $7 million is slightly higher than the $4-- to $5 million we guided for previously. This is driven by an accelerated integration and therefore an acceleration of expenses. In addition are certain legal and litigation expenses, which are being recorded as integration charges that had not been taken into consideration at the time of our original guidance in February.

The tax rate to be between 26% and 30%, the weighted average number of fully diluted shares outstanding will be around 210 million share.

With this, I would like to hand over to Peer.

Thanks Roland. To sum up, we are pleased to report a strong first quarter 2008. We exceeded our targets and are showing significant value creation from our recent acquisitions. We are leveraging infrastructure and strength, staying focused and managing a very exciting pipeline.

Our integrations are on track in terms of the timing, in terms of the synergies and accretion. They're all on green lights. Now we reiterated--are reiterating our outlook for the year 2008, a year of further strong growth and profitability.

With that, I'll turn over to Solveigh.

Thank you very much Peer. We are now looking forward to taking your questions. To open the Q&A session, I would like to hand over to the operator. Sherry?

Thank you. (OPERATOR INSTRUCTIONS) We'll pause for just a moment to compile the Q&A roster.

Your first question is coming from Quintin Lai of Robert W. Baird.

Good morning, or good afternoon. Can you hear me okay?

Hi Quintin. How are you?

Nice quarter.

Thank you.

As we look at the guidance and some of the comments that you've made, with the launch of QIAsymphony and QIAxcel in the late Q2, should we kind of expect a normal kind of backend loaded then of Q3, Q4 impact to revenues then? And kind of a followup to that, what are you hearing from your customers? Are they having any issues with giving the funding to make those purchases?

Quintin, good question. We are getting a very strong response for both systems, especially the QIAsymphony is truly revolutionary and we have quite a long order list already. We hope to start shipping on late in the second quarter.

As typical when you introduce a new product, the first customers that line up are typically the ones that have better access to funding and are--have been waiting for a system like this with funding already lined up. So we have not really seen any issues with funding for these systems.

The QIAxcel is a very attractively priced system at around $20,000. The Symphony is around $75,000. Both are, in terms of their performances, at a very acceptable price level for our target customers, so we have not really had any discussion around the pricing or funding availability. But again, this is an early time of the market.

Typically the molecular diagnostics laboratories are less of a funding concern and the funding is more tight at the moment in pharma discovery and in academic sectors but pharma discovery is, I would say, a secondary target for the QIAsymphony and so are the academic markets. The primary markets are clearly pharma development, applied testing and molecular diagnostics and there we have not seen any funding issues.

And then as a followup and I'll jump back into the queue if possible, with respect to the HPV sales, thank you for the color on the Easter holiday. And then you also kind of mentioned that you are up against a tougher comp last year with respect to Hybrid Capture and instrumentation. Could you tell us a little bit about what are you seeing for the full year that gives you confidence of hitting your goal and is part of that the expanded sales force?

Well absolutely, the expanded sales force is really revving up quite nicely, also internationally and based on the sequential, good sequential growth and also the good year-over-year growth that we have in the HPV assay business, we feel very confident to be well on track for our $260-- to $270 million annual target.

Remember we typically don't split out individual products. This target number was one that we gave a year ago at the time of the acquisition and this is one that we feel very confident in reaching.

What I think is interesting to note is that we, due to the portfolio of products that we have now, for instance, we were able to move some of the products based on Hybrid Capture where we actually have a better real-time PCR assay, such as CTGC, CMV or hepatitis B over to those real-time PCR products. The underlying growth in the HPV area is clearly a very exciting market.

And so when that happens, when that migrates over, do you count that as core growth, as part of----not acquisition related growth?

Yes, then it becomes organic because these are organic products.

Thank you.

Thank you. Your next question is coming from Maykin Ho of Goldman Sachs.

Yes.

Good morning.

Can you refresh our memory? When do you recognize your sales, for example in QIAsymphony?

Roland, do you want to take that one?

Absolutely. Hi. On the--as you know on the consumables side is of course on shipment and this instrument is--we're signing off as a customer, so as you know most of our instruments require installation process and only when the customer signs off on the installation, we recognize our--the revenues on that.

So then most of the sales, even though you're starting shipping late second quarter will be occurring in the third quarter.

Yes, shipping on the last day of a quarter wouldn't help in recognizing revenues, that's correct.

And you also mentioned that you are reducing some of the smaller third party distributors in Asia. What is the impact on margins, not as much this year, for example, next year?

I think to be precise here, and it's--what we're doing right now is that QIAGEN was distributing third party products. It was products which we got with the acquisition of some of our distributors in Asia over the last couple of years. They were not only selling QIAGEN products. They were also selling products from other companies.

What we are doing right now in refocusing all our subsidiaries worldwide is that we're phasing out this kind of distribution business so clearly it's an impact on both on our revenues, on top line, but of course also on cost margin because typically this products don't have such a good cost margin than the QIAGEN product on average.

If I may add to that, Maykin, these numbers were absolute, not very big, but a million or two on the Asian numbers can clearly have an impact on the growth rate and later to a 14% growth rate versus the typically higher growth rates that we've seen in previous quarters. So the underlying growth is still something we're very satisfied with.

I'd also like to add to the instruments topic, revenue recognition. Some of the smaller instruments we recognize on shipment like the QIAcube, which are basically plug-n-play systems. But clearly all of the larger systems have a different revenue recognition.

Okay. You just indicated that that maybe you're still on track for your guidance. What about growth of 12% this year?

Roland, do you want to take that?

I didn't hear that. I have some noise on my line, sorry.

I said that you indicated that you're on track to meet the guidance of (inaudible) sales. What about the organic growth of 12% this year?

I think as for the organic growth rate, I'd say we feel very confident with achieving our guidance in total, which was $875-- to $905 million. We had a better than expected start in 2008. We over-achieved our first quarter goal so yes we feel we're on track.

Excellent. Thank you very much. I'll get back in the queue.

Thank you. Your next question is coming from Peter Lawson of Thomas Weisel Partners.

I wonder if you could talk about the HPV business. Have you seen any pricing pressure or any pushback from customers?

Hi Peter. Well no, the business is growing very nicely and the--we've not really seen any pricing discussions. It's--typically these pricing discussions are ones that, some that you take from time to time and on a daily basis. But in general we're seeing a very, actually an increasing interest in this area at the moment and we clearly have seen also now selected adoptions or increased adoption in Europe and they're clearly a new regulatory, like systems are being putting in place. You will get differentiations in different countries.

For instance in Germany, there was a change in the regulation where low-risk testing was added to a lower reimbursement rate or it's not even reimbursed at all versus the high-risk testing now being more established. So you see changes within various regions that are very detailed but overall we're still seeing a very robust also pricing situation.

And this is also evidenced by our gross margins that are very solid. While HPV is only about 25% of our sales, its big changes will clearly offset the swing on the gross margin overall.

Are you starting to see cross selling of products between QIAGEN, Digene and are you starting to see sales of HPV into Europe?

Well the cross selling is really what is quite exciting. I think one of the strategic--strategically very important aspects of this combination has been the focus on the laboratories. The laboratories now have access to phenomenal depths and breadths of solutions and the ability also to pick solutions that are optimal from one supplier and also be able to get the service and support that they would get from a supplier with such a critical mass.

And I gave you an example before that we're, for instance we have performance leading CTGC real-time PCR assays. We have--we're the absolute market leader in the areas of CMV and real-time PCR and overall and we found the ability then to get customers to use these assays, which we--they previously potentially were using Hybrid Capture assays and this is clearly giving a lot of benefit to customers as they move forward.

In Europe we definitely are seeing an attractive environment. Some of these studies that I just mentioned before, the study in Italy alone is ten times larger than some clinical trials that people are talking about. The data set is just phenomenal. That has been coming out of the trial from [Romco] in Italy, but also from [Petri] in Germany and we are clearly seeing increased pushes now to either regionally or even nationally now start pressing harder for HPV screening.

The interesting thing on the Petri study was that a whole region in Germany actually had a two-prong approach. One prong was primary screening on HPV with reflex into cytology and the other one was traditional screening on these 9,000 women. Actually the traditional arm missed 17 cases of cancer.

The data is just amazing and we're very proud to have been part of these--both of these studies.

Okay. Thank you so much. I'll fall back into the queue.

Thank you. Your next question is coming from Dan Leonard of First Analysis.

Hi, good afternoon.

Good morning Dan.

My first question pares a little bit of clarification on the HPV revenue. My notes from last quarter are probably off but I thought you reported HPV assay revenue in the high $15 million from the fourth quarter, which would suggest sequential weakening of the HPV assay. So one, help me correct my notes and then two, a bit more description on the what looks like a little bit of a deceleration in the HPV revenue.

Well now it's a little bit more difficult to get to the individual product lines. We did say that the acquired revenue from the Digene transaction where last year we gave guidances on certain quarters and we gave guidance on the HPV related sales in 2008. What we clearly did is we migrated some of the products over into the real-time PCR area. We had slightly slower sales of instrumentation in this space. This is very typical that you have this in the fourth quarter run-up as we saw last year. And there were also currency impacts on a year-over-year basis.

We actually are seeing sequential growth in HPV and good year-over-year growth and this--if you would do the trajectory, it would very well lead into the $260- to $270 million range.

So again, we're not--we don't have a division selling HPV products. It's the molecular diagnostics division. It's completely integrated now and we're migrating between various products. And this is, therefore, it's not a one to one calculation. It's the back end too.

Okay. And then my second question, what sort of lead time or range of lead times do you think is necessary to develop a chlamydia/gonorrhea test with your BioHelix technology?

Well we think that the CTGC but also other assays could be available at time of launch of the next-gen system, which we said would be around the late 2010, early 2011 time frame. And so these time frames as disclosed in the Analyst Day are in tact and we are running parallel tracks with the CTGC assays that are starting a little bit later but will be able to catch up as the regulatory process, the clinical trials. It's a different ball game than HPV.

So you could basically use the same timelines as you currently have for the HPV assays, both in Europe and the U.S. But it's not really only going to be CTGC. We're also looking at HDA for other assays as well. It's a very, very fast and robust technology that you can use across different platforms, and from high throughput screening all the way down to point of care.

So it's one more assay technology that we have but one that we think is quite interesting.

Okay. Thank you.

Thanks.

Thank you. Your next question is coming from Derik de Bruin of UBS.

It's actually Martin Wales with UBS.

Hi Martin.

Sorry, just to come back to your full year guidance, firstly, if we look at your $875-- to $905 million in today's currency, what would that equate to? Secondly, what's going to drive the acceleration in your organic growth rates such that you can deliver that 12% organic growth for the full year?

Roland, do you want to take that?

First question, yes, first of all you're absolutely right. Our guidance for the full year is based on guidance (inaudible) January 31 rates and I gave at least an indication for the second quarter, what is the difference compared to the actual quarter. Nevertheless, of course, it's very hard to say what is the U.S. ratio when there's only one impact. We have other currencies as well over the next, especially on the third and fourth quarter.

So we want to stick to this index, which is the rate as of January 31 and everybody can use his own rates for the full year guidance number or expectations 2008. So using the rates as of January 31, our guidance is $875-- to $905 million.

And your question on what our organic growth rate was?

Well you talked about 12% organic growth for the year. You did 10% in the first quarter. What's going to accelerate the organic growth across the rest of the year or what are the key things that are going to get you to that 12% number that you've indicated you're happy with?

I think Peer mentioned some drivers, things in the first quarter, other things which we'll probably see and expect in the second, third and fourth quarter 2008. Actually one driver was the launch of the instrumentation site. We should expect different instrumentation number in the second part of the year, which should have a quite significant impact.

We also clearly should see other drivers. I think there is clearly something what we have seen in the first quarter. Again, in Asia having a couple of million less in a year-over-year has a certain impact but we do believe that we will--we are able to replace this organic--even stronger organic growth in our QIAGEN products over the year.

So overall I think the confidence is much higher now after the first quarter to achieving guidance for the full year.

What extent do you (inaudible) to buy fewer sales days in the first quarter this year than first quarter of last year and was it one or two sales fewer sales days do you believe for your company?

Well there's certainly an impact. The fact that Easter fell into, more or less into the middle of the week, was a significant impact in particular in Europe. But it's very difficult to quantify what that exactly was. You clearly had a very slow week around that time point primarily in the pharma and the academic markets, also in some areas in the molecular diagnostics sectors as well.

But it's very difficult to quantify. It could be a percent, it could be two. It's very difficult to say.

Okay, thank you very much guys.

Thanks.

Thank you. Your next question is coming from [Darrah Henry] of Credit Suisse.

Hi, it's actually Ravi Mehrotra. A couple of questions on the HPV market, very general. Can you just talk about the competitive environment and how you see it? You obviously talked about expanding a little bit in Europe. How much headroom do you see in the U.S. market? Thanks.

Sure. Well the European market is actually a very interesting market and there is intense competition in Europe. But we clearly have a very significant market leading position in Europe. There are a number of approved products available in Europe, a number of--also products out there that we compete against very directly. Roche has been in the market for quite some time in Europe. There are more than a dozen players with approved products in Europe in the HPV area.

And it is a different market but one that we've been very successful in simply based on the clinical validation that we can prove. And the fact that basically all of these large studies that you're seeing are using our technologies gives evidence to the fact that this is clearly what people are looking for right now is to enter into these politically very important, large studies. They want to have a high degree of validation.

What we see however in Europe more than in the United States is a lot of home brew and a lot of home brew primarily in the--using PCR. With all of the issues around it, it's still a very--even though there are more technologies around, more approved products around, it still is much less standardized but we clearly are by far the market leader in this market as well.

In the U.S. we see some home brew but it is not really done openly as there are clearly restrictions on using home brew in the United States and with the availability of approved products. And we clearly are not seeing a big discussion about competitive products right now. For us the more important thing is the increased adoption of the current guidelines.

As we are still at a very low penetration rate in the United States, the mid-20s, there is still a lot of room to grow and we're very focused on helping the market understand the use of HPV testing, even though the guidelines have been around for quite some time, and giving access to the best solutions in the market. And this is going to be very similar for a lot of time still to come with obviously a very strong growth rate for our company over the next few years.

So it's a very different market. And Asia, again, is a totally different ball game again. And a very, very different in the different markets, but in all cases, very synergistic with our marketing strategies, with our product portfolios that we have and now the enlarged organization. And we look forward to using that a lot more effectively going forward.

In some of these marketing initiatives that you saw now rolled out and this is really only the tip of the iceberg, I guess, unless you go into doctors' offices and into laboratories, you'll see a lot more. But the tip of the iceberg, the DTC campaigns, the marketing campaigns, and also the increased focus on the physicians as very important decision makers, all of these things are testament to the enlarged infrastructure and the energy that we're putting into this area.

Thank you.

Thank you. Your next question is coming from Bill Quirk of Piper Jaffray.

Good afternoon.

Good morning, Bill.

First question, Peer, not to dwell on the HPV action, [we'll upgrade it] from the numbers though, but there has been some chatter actually from several countries in the EU and this goes back at least a year and a half, about moving towards primary screening. We know there's been a couple of pilot campaigns I think most notably in (inaudible) Germany, but what can you say or can you help us think about the timing here on some of these frankly large countries rolling over to primary screening? I guess at a minimum expanding it from an [Askis] perspective?

Well Askis is as you know reimbursed and standardized in a lot of countries already and typically the revenue that you see today and there is some private payer revenue in some countries. But a primary screening infrastructure has not been adopted in any country yet but there are a number of them that are moving in that direction.

And the one that is clearly being talked about quite a bit is are The Netherlands and that's also a country that has been doing all studies based on our technologies and it's a very exciting time right now politically for this whole initiative over the next 12 months or so, maybe close to six months, it could be 12 months.

The vaccination guidelines came out a few weeks ago. The screening guidelines were reference in there so they should be out shortly as well. And they're basically all saying the same thing or targeting the same thing and most of the countries at certain interval screening and reflexing into PAPs in various intervals.

So it's difficult to time these political processes but I think we would probably see the first announcements in 2008 already. And some countries are moving very, very quickly in the meantime and at the same time we're also seeing regional adoptions where local insurance carriers, as you know, sometimes these insurance carriers are regionalized in some countries, like in Germany, that where they are actually moving to adoption on a regional basis and seeing quite some interesting results.

So the interesting thing is that the payers are in many countries in the meantime very convinced of this and so you've got the public and you've got the payers behind it, what is currently still being worked through are the--are basically the standardization bodies that are more political bodies that have to make formal resolutions.

Recommendations have been made by a number of bodies, a number of governments and they all again call for a very similar result.

So is it something where the expanded infrastructure that QIAGEN brings, is there any way to accelerate that payer or is it simply a matter of we have to see the recommendations come out of the physician groups and then kind of see its way to the governmental red tape if you will?

Well it certainly helps that we have a very strong infrastructure in Europe and are a very well recognized leader in Europe and have access to a lot of political decision makers. And that's something we're very intensely using at the moment to basically help people understand the value of HPV testing in general.

And that's something that we hope has a positive effect and certainly we're investing quite intensely in it.

Okay, understood and then Roland, just a quick question on you concerning the guidance. The tax rate, obviously given the tax rate reform in Germany continues to help you guys out because this is the second quarter in a row now. Having said that, presumably we should continue to see the benefits of that throughout the balance of the year but no change to the bottom line guidance. Can you help me think about that a little bit? Is it a little conservatism on your end or is there something here that I'm missing?

The tax rate reform of course was out already last year and of course also part of our guidance in general. I think the big difference in the third quarter compared to our fourth quarter guidance was that we were able even faster to achieve the cost synergies through our operating income, actually record on 28% and even if you wouldn't count the exchange rate it would be actually 30%, which would be a recorded number on QIAGEN itself.

So the tax rate I would say stays around the number we have seen in the first quarter and of course it contributes into the guidance over the year.

Thank you.

Thank you. Your next question is coming from Peter Welford of Lehman Brothers.

Hi, thanks. I've got two questions. Firstly on the--I guess it's slide four, I do have a question with regard to the constant currency growth rate. I'm wondering if you could help me with it, in that you say the North America grew more than 100% and it represents 50% of your business, yet the constant exchange rate growth for your--for the entire top line was around sort of 53%.

So I guess I'm trying to understand how if 50% of the business grew over 100%, you can still have significant growth in Europe and Asia to arrive at an average of 53%. I'm wondering if (inaudible) some of the math with me is wrong because of the constant growth rate.

And then secondly, just on the HPV, you talked a little bit about Europe and the U.S. I'm wondering if you can talk a little bit more about Asia and in particular I guess some of the more developed economies there and how you're looking about potentially or if you can think about going into some of those to further expand the reach of those products. Thank you.

Okay, I'll address the second question and then Roland if you could take the first?

(Inaudible) quickly done, if you have let's say 150% with 105% and then go on to 35 plus percent in Europe with 21% and take 41% of 110%, you're actually coming to the 53%.

Okay, thank you.

Okay. The second question is on the infrastructure in Asia, very, very different countries. I'd like to leave Japan aside, which is clearly a different, totally different market to many other countries in Asia. But we clearly have been very active in Asia.

As you know we're in terms of units, we're selling many millions of assays a year and if you take that number, I would say this is probably more assays than the number, three or four in molecular diagnostics, overall sales a year we're selling alone in China. So a really, really strong unit volume that we have in Asia and it's primarily targeting some of the blood banking but also in vitro diagnostics markets.

What we did over the last few years is we built a sales channel, which is quite impressive. We have about 400 people in Asia now. In China for instance we have about 150 sales people. We went directly into Korea. We went directly into Singapore. We are in Malaysia. We have quite a powerful sales channel into molecular diagnostics that is now starting to use also HPV in addition to the infectious disease and genetic assays that we previously had in the portfolio.

So it's all--the theme is basically synchronization and consolidation of the sales channels and that's an enormous undertaking and our teams are performing very well on that and at the same time we're moving into new countries as well.

I mentioned Latin America and you will recall that that was a target for us this year, to move more actively into some areas of Latin America, and we're doing that more or less as we speak and I've already had the first successes there.

Thanks so much.

Thanks.

Thank you. Your next question is coming from Un Kwon-Casado of Pacific Growth Equities.

Hi, good morning.

Good morning, Un.

I was wondering, Roland, would you be able to clarify for me within your organic growth guidance of 12%, are you starting to include Digene related revenue as we get part way through Q3, given that the acquisition would have anniversaried?

Very good question. Normally we would do so, but of course with Digene being so exceptional, we actually excluded it as we gave guidance for the year 2008. So this 12% was calculated in excluding the Digene figures for 2008.

Okay, great. And then just secondly one for Peer. I really appreciated the commentary you made on some of the non-HPV revenue from the Digene acquisition. So is it fair to say that that transition accelerated more so this quarter than last quarter? And is it relatively minimal now for that business?

Well absolutely it--both answers are correct. As you recall, the sales force was consolidated January 1, i.e., we had the new laboratory sales channel that was cross-trained on all of our products going out to our customers and clearly also identifying customers that were still using some of the Hybrid Capture related products, non-HPV Hybrid Capture related products. And we really have phenomenal related products in this area using real-time PCR and a lot of them have now started adopting that.

So we are--we still have some sales in this area but it was always part of the plan to focus on HPV--using Hybrid Capture for HPV and application based technologies for some of the other blood virals. And the CTGC assay for instance only had a cervical swab claim in there and ours has a urine claim and so there's clearly a lot more value to some of the assays that we have on the real-time PCR basis and customers have very well embraced that.

They really like just to have a combined service offering and so we can create one approach to the customer and also give them the service that they're expecting and migrate them to the best product.

Okay, great. Thanks very much.

Thank you very much. I would like to close this conference call by thanking you all for participating. We hope to welcome you again to our second quarter 2008 earnings conference call on August 5, 2008. If you have any additional questions, please do not hesitate to contact us.

Again, thank you very much and have a nice day. Bye-bye.

Thank you. This concludes today's QIAGEN first quarter 2008 earnings conference call. You may now disconnect.