Qiagen NV (QGEN) 2012 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the QIAGEN N.V. Investor and Analyst Conference Call on the Q4 Results 2012. (Operator Instructions).

I would now like to turn you over to your host John Gilardi, VP Corporate Communications. Please, go ahead, John.

Thank you. And good afternoon, and welcome to the QIAGEN conference call to discuss our latest quarterly and full year results.

Joining me on the call are Peer Schatz, our CEO; Roland Sackers, our CFO; and Peter Vozzo, our new Director of Global Investor Relations based in Germantown, Maryland.

A copy of the announcement and the presentation for this call can be downloaded from the Investor Relations section of our homepage at QIAGEN.com.

Before I turn it over to Peer, please, keep in mind that the following discussion and responses to your questions reflect management's views as of today, January 30, 2013. Today, we will be making statements and providing responses to your questions that state our intentions, beliefs, expectations, and predictions of the future. These constitute forward-looking statements for the purpose of the safe harbor provision. They involve certain risks and uncertainties that could cause our actual results to differ materially from those projected. QIAGEN disclaims any intention or obligation to revise any forward-looking statements. For more information, please, visit our filings with the SEC.

I'd like to now hand over to Peer.

Hello. I'd like to welcome you to our conference call to discuss our results for the fourth quarter of 2012 and the full year.

As you saw on our release last night, we made significant progress during 2012 on initiatives to drive innovation and growth. The efforts of our over 4,000 employees around the world were reflected in QIAGEN exceeding its sales and adjusted earnings targets for the fourth quarter and full year.

In 2012, net sales rose 10% at constant exchange rates, ahead of the 8% to 9% growth rate we had set as a goal, and reached $1.25 billion. Adjusted operating income grew 12% to $356 million, while adjusted diluted EPS was $1.08 for the year, which was $0.02 ahead of our target.

Results for the fourth quarter were also ahead of our targets. Net sales rose 4% at constant exchange rates, and we were pleased, given the challenging comparison against the fourth quarter of 2011, which included revenues from a major product tender. Adjusted earnings per share were $0.34, compared to $0.31 a year ago.

I want to note here that we also achieved a 31% adjusted operating income margin in the fourth quarter. And that was a year ahead of the schedule that we had set as a target.

These results give us confidence in achieving the goals we have set for 2013, even in light of the challenging macro environment.

Our top goal is to further accelerate sales and adjusted earnings growth through sustainable innovation, superior quality of products and services, and targeted allocation of our resources to do so. Our goal? Focus on accelerating organic and strategic growth, delivering efficiency and effectiveness, further improving our position as an employee of choice, and also to exceed the expectations of our customers.

So we have set important milestones for 2013. We are on track for the QIAsymphony install base to break through 1,000 placements during 2013 after exceeding our 2012 target and placing well over our originally set target of 200 systems.

We have assembled a highly competitive R&D portfolio of molecular diagnostic assays with more than 35 projects. These are a combination of internal R&D efforts, as well as a series of new, external collaborations, some of which were announced earlier this year. Many of the assays which are being designed for use in the QIAsymphony, which will improve our value proposition to customers -- Our ambition is to create a stream of US and European submissions that is set to begin later this year. This is a core focus of ours, and we are working internally and externally on many programs.

In personalized healthcare, we want to strengthen our leadership through new pharma co-development collaborations. Conversion of the KRAS market to our FDA-approved therascreen KRAS test is going very well. And we are also preparing for a potential 2013 launch in the US of the therascreen EGFR companion diagnostic for non-small-cell lung cancer. And you will also hear more from QIAGEN this year about our NGS initiative. We are seeing strong demand for the pre-analytics products launched in November, and the first workflow solutions for use in clinical research in human healthcare are expected to be launched in 2013.

Turning to slide 5, I would like to review the performances of our four customer classes in 2012, since they create an important baseline for assessing our prospects in 2013. Molecular Diagnostics continues to perform very well, particularly the group of growth drivers that now account for about one-third of our total sales.

In Prevention, the QuantiFERON test for latent tuberculosis delivered more than 20% sales growth in 2012, as planned.

Our Personalized Healthcare portfolio, which includes sales of companion diagnostic kits, as well as revenues from our co-development programs, again grew at a fast, double-digit pace.

AmniSure has very strong growth in the fourth quarter, as we realized benefits from integrating this novel point-of-need test into QIAGEN's commercial operations and by creating synergies with our clinical sales force initiatives.

Our profiling business also grew at a good pace, gaining on demand from QIAsymphony customers using this automation platform for viral load testing in HIV/hepatitis, as well as for testing of esoteric pathogens in transplantation and other areas through QIAGEN's artus assays or their LDTs.

As I mentioned earlier, instrument placements for QIAsymphony are going very well and exceeded our placement goals for 2012. The full sales contribution is understated in these results due to the shift to more and more reagent rental contracts. However, these placements are creating important, multiyear customer commitments and future revenue streams.

In the other area of Molecular Diagnostics, sales of products for HPV testing were in line with our expectations, declining at a single-digit pace and shrinking as a percentage of total sales. Volumes rose modestly in 2012 as US market conversion initiatives provided growth impulses. Remember that only about half of all potential HPV tests are actually being performed. We continue to drive conversion to modern cervical cancer screening using HPV testing and are capturing volumes.

We're successfully managing our market share leadership. During 2012, competitor entries did not gain much market share, as the superior, clinical utility of our HPV test continues to be demonstrated in studies. We are now three years following the first and over one year after the latest entry and still have an overwhelming leadership in the United States.

Prices, however, remain under pressure, and this was due to another round of multiyear contracts being signed with customers. So lower prices more than offset volume gains, as we had predicted. We anticipate much of the same in 2013.

In Life Sciences, which provided the other half of sales, we saw outstanding growth in Applied Testing. These customers have reacted favorably to the QIAsymphony launch in early 2012 in this customer class to automate workflows for human ID forensics, (inaudible), and better medicine.

Pharma sales grew at a mid-single-digit, constant exchange rate growth, which was in line with our goal. During the second half, we felt the impact of pharma industry restructuring initiatives.

Academia was up 1% on a constant exchange rate basis in 2012, reflecting the cautious spending patterns of some of our customers in the US and Europe due to funding uncertainties. However, we continue to grow faster than the market and are gaining share.

So, in summary, we are pleased with our performance in 2012 and exceeded our targets. We have a competitive and differentiated portfolio of sample and assay technologies with untapped potential and are determined to accelerate innovation and growth in 2013.

I would like to hand over to Roland now.

Good afternoon to everyone in Europe, and good morning to those joining from the US.

Let me start first by reviewing the full year. As you heard from Peer, we exceeded our targets for net sales and adjusted EPS while making significant progress on our strategic initiatives.

On slide 6, you'll see our results for the full year. Amidst challenging market conditions, net sales at constant exchange rates advance at a double-digit pace on a mix from the acquisitions of Cellestis, Ipsogen, and AmniSure, which provided 6 percentage points of growth, and 4 percentage points from the rest of the business. Currency movement had a negative impact of 3 percentage points on reported sales growth.

Adjusted gross profit rose 8% to approximately $897 million. We had set a target of 71% for the adjusted gross profit margin in 2012, and I'm pleased that we achieved this despite product mix pressure from (inaudible) in the quarter, as well as from higher sales of QuantiFERON, which currently has a gross margin below the QIAGEN average since this is still not manufactured in house but through a third party.

Adjusted operating income rose 12% to $356 million over 2011, and the adjusted operating margin improved to 28% of net sales from 27% a year ago. As Peer mentioned, we have been reallocating resources to our growth initiatives. We expect more benefits to emerge in the future, and this should help us towards our goal of a 29% adjusted operating margin for full year 2013.

Adjusted net income grew 11% to approximately $261 million, and adjusted EPS of $1.08 per share exceeded our target for the full year by about $0.02.

The adjusted tax rate was 21% and in line with our target. This shows the benefits of ongoing tax optimization programs. We anticipate here some marginal improvement overall for 2013.

I'm now on slide 7. In terms of the sales by geographic regions, the Americas provided 46% and grew 8%, constant exchange rate-wise, based on organic growth rate, as well as from the QuantiFERON latent TB test and the AmniSure test. Personal Healthcare delivered significant growth, and we are pleased with the uptake of the KRAS companion diagnostic. Applied Testing also grew at a strong, double-digit pace in this region. Our HPV franchise performed in line with our expectations, driven by pricing pressure with a single-digit decline.

Net sales in Europe, Middle East, and Africa rose 9% CER. A number of countries in northern Europe, including Germany, France, and Scandinavia, performed well. The top emerging markets of Turkey and Russia also achieved dynamic growth. However, southern Europe, as you know, has been challenging. Governments are holding back healthcare expenditures and research spending. But keep in mind that we have limited exposure to these countries.

In the Asia-Pacific and Japan region, sales rose about 15% CER. China, Japan, and South Korea all grew at double-digit rates in 2012, the solid growth seen across all customer classes. A number of these countries are also among our top emerging markets, which represent 12% of sales. The current consumable business from the top seven emerging markets grows more than 20%.

And now, on slide 8, we'll provide a few comments on the sales of instruments, as well as on consumables, and other revenues. Consumables and other revenues provided about 86% of sales and grew at 10% CER in 2012. All customer classes and regions supported the business expansion led by double-digit growth in Molecular Diagnostics and Applied Testing and slower growth rates in Pharma and Academia.

Instrument sales provided about 14% of total sales, rising 11% using constant exchange rates over 2011, having a strong finish in the fourth quarter. As Peer mentioned, the rollout of QIAsymphony is going very well.

Moving to slide 9, I would like to review our results for the fourth quarter. We faced a challenging comparison against the fourth quarter of 2011, since it included sales from a major product tender that we have noted previously. Still, net sales rose 4% at constant exchange rates with 2 percentage points of growth coming from very strong demand for AmniSure and the other 2 percentage points of growth coming from organic growth. As we noted in the press release, organic sales growth would have been about 4% in the quarter when excluding the tender in the year-ago period.

Profitability improved significantly in the fourth quarter with a 31% adjusted operating income margin, exceeding our target for 30%. The adjusted gross margin of 72% was largely in line with the full year rate. Also remember that the 69% level in 2011 was an exception to recent trends and due to the adverse margin impact of pass-through costs included in some pharma milestone payments. We also saw improvements in other expense areas.

Adjusted net income rose 13% to about $83 million from approximately $74 million in the 2011 quarter. Adjusted diluted earnings per share were $0.34, up from $0.31 in the year-ago period. The 2012 results also absorbed about $0.005 of dilution from the net effect of higher interest expenses as a result of the private placement.

The adjusted tax rate in the fourth quarter of 2012 was 14%, and this was due to the tax savings measures we have been implementing and planning, as this put us in line with our target of 21 to 23 percentage points. Also, in comparison, the quarterly tax rate in 2011 was higher than usual due to the restructuring charges taken in that period.

A quick remark about the number of shares outstanding, which increased to 241.8 million from 236.7 million a year ago. Although the share repurchase program reduced the diluted share count by about 1 million shares in the fourth quarter of 2012, this figure was higher as recent gain in QIAGEN's share price led to an increase primarily coming from one of the convertible bonds. For a comparative reference, our third quarter share number was 242.1 million.

I'm now on slide 10 to update you on the progress of our $100 million share repurchase program, which was launched in October 2012. As we have stated before, this program is a signal of our commitment to improving the tranche to shareholders. We are offsetting some of the dilution from higher interest expenses coming from the US private placement, which raised $400 million at very favorable rates and is strengthening our long-term financing profile.

The latest data as of January 25 shows that approximately $57 million of the program has been completed with the repurchase of 3.1 million shares at weighted average prices of EUR14.11 and $18.84. And, today, we are reaffirming the announcement we made in late 2012 regarding out intention to complete the program by the end of March 2013.

The impact of the share buyback on the calculation of adjusted EPS in 2013 will, unfortunately, be more than offset by two factors, and these are incorporated into our full year guidance. First, we have higher interest expenses in 2013 of about $33 million compared to about $23 million in 2012. So this means dilution of about $0.02 to $0.03 per share.

And, second, we will have some dilution from the start of the US medical device tax in January 2013. So this means additional dilution of up to $0.02.

Another factor is that an increase in our share price leads to an increase in the number of shares, and this is due mainly to a convertible bond. As we have been saying for some time, every $1 increase in the share price results in about 1 million additional shares in the diluted calculation.

As for our strategic flexibility, we have a solid balance sheet, a healthy free cash flow, and significant financing capabilities. Moreover, we will continue to pursue targeted, value-enhancing M&A opportunities in line with our long-term strategy.

Moving to slide 11, as I just mentioned, we had a solid financial position at the end of 2012. This is ever more important, given the case of (technical difficulties) industry and startup new technologies, new products, and opportunities for regional expansion. Group liquidity rose about 75% to $485 million from $276 million at the end of 2011, in part due to the private placement. We used about $220 million of new funds to pay off the revolving credit facility.

Net debt increased to $382 million from $338 million in 2011, and that led to lower shareholder equity ratio of about 66%. Leverage remained at about [one turn] of net debt to adjusted EBITDA in 2012.

The level of free cash flow in 2012 has been seen in light of the cash restructuring payments made during the year, which amounted to approximately $65 million. We also had higher investment in property, plant, and equipment in 2012, mainly from expansion of our North American headquarters in Germantown, Maryland, and, also, costs for closing smaller sites. For 2013, we expect a significant lower number in property, plant, and equipment expenditures.

With that, I would like to hand back to Peer.

I'm now on slide 12 to review our achievements of 2012 and the progress we are making on our strategic initiatives.

In terms of driving platform success, the QIAsymphony rollout is going very well. We also improved HPV automation with the launch of the Decapper unit in early 2012.

A new topping in 2012 has been our initiative to enter targeted areas of next-generation sequencing; specifically, clinical research in human healthcare. The first pre-analytic products were launched in late 2012, and we are moving ahead with plans to launch a bench-top workflow with our own sequencer in 2013. We're investing heavily in this area and are very excited about this opportunity. And we'll start sharing more information on this initiative later this quarter.

In terms of adding content, we completed two important submissions in the US in the fourth quarter -- the EGFR companion diagnostic and the QuantiFERON CMV test for monitoring the level of anti-CMV immunity in persons in risk of developing CMV disease, particularly immunosuppressed patients, such as those who have had a transplant. The test, which is based on our proprietary QuantiFERON technology, which provides an excellent fit with our leading position in infectious disease testing, transplantation, and immune suppression monitoring --

We are particularly pleased to have received three positive US regulatory decisions in 2012 -- clearance for the Rotor-Gene Q PCR cycler, as well as approvals for the therascreen KRAS companion diagnostic and the artus influenza assay.

Another achievement was the launch of our next-generation CE-marked BRAF assay in Europe, which complements our extensive range of personalized healthcare assays, including KRAS, EGFR, and others, in this region. In first studies, our BRAF assay significantly outperformed the competition, with higher sensitivity and discrimination of the key mutations to allow superior clinical value.

And, in terms of growing efficiently and effectively, the actions begun in late 2011, along with a series of organizational and leadership changes during 2012, are having a positive impact on transforming QIAGEN. These actions will help improve our growth and profitability in 2013 and beyond.

I'm now on slide 13 to provide some insights on the success of the QIAsymphony automation platform. We expect to break through 1,000 placements during this year and see significant untapped opportunities in Molecular Diagnostics, Applied Testing, and our other customer classes.

The reasons for the uptake are clear. Customers are reacting very favorably to QIAsymphony being the only system offering sample-to-result processing for both commercial assays as well as laboratory-developed tests. This is a need that other systems are not able to address. What you see from competitors are screening systems that can only handle a few commercial assays and not the LDTs, which can be more than half of the test volumes in a typical molecular diagnostic lab.

In terms of placements, about 70% of the QIAsymphony placements are with Molecular Diagnostics customers. These worldwide placements include particularly good demand in the Asia-Pacific region as well. In the US, placements have been in areas where customers are using a lot of LDTs, where placements in the rest of the world are driven by QIAGEN offering one of the industry's broadest menus of more than 20 regulated, commercial assays in profiling and personalized healthcare.

We are seeing ongoing double-digit sales growth in QIAsymphony consumables, and we have set goals for accelerating growth further in 2013. This is a favorable situation, since we are securing long-term revenue streams.

As we have said before, there's a certain degree of cannibalization as we convert some customers using manual methods to QIAGEN kits on automated systems. However, we see the impact as very manageable. We are primarily gaining market share, and we have seen no signs at all of any customer peaking in terms of consumables pull-through on the system. Average pull-through rates are improving as well, and they range anywhere between $30,000 a year and, now, more than $300,000 on some systems. So we are looking for further improvements in 2013 and beyond, especially as we turn our attention towards expanding the menu and increasing throughput.

Moving to slide 14, here you see an overview of our current menu of molecular diagnostic assays and also some of what we are looking -- some of what we are working on in terms of potential submissions.

We have 21 CE-IVD assays for use in Europe and other areas of the world, and our ambition is to continue expanding it across these franchises. In the US, 2012 was an important year, as we gained approvals for the PCR cycler and the artus influenza assay, as well as the therascreen KRAS assay.

In terms of potential submissions, you can see that we have a full slate in development and have reallocated resources towards these projects. These are all some mix of internal activities as well as some external collaborations.

A key priority of the R&D teams and our partners is expanding the menu in the United States. So you will be hearing more from us during the year in terms of regulatory submissions and clearances and also with approvals, particular for the therascreen EGFR test in the US that was submitted late in 2012.

Turning to slide 15, as we have been saying, QuantiFERON is expected to deliver more than 20% constant exchange rate growth on an annualized basis for the next few years and coming from a pro forma base of about $55 million in 2011. We continue to stress the potential of this test, both internally and externally, given the extent of latent TB in the world. The WHO estimates that about one in three people worldwide have latent TB. And, of those who do have this condition, which has no symptoms, about one in ten will develop active TB. The challenge is to find those with latent TB and treat them before developing active TB and then infecting others.

The current market is about 55 million tests, and more than 90% of those done are done with the old skin tests created more than a century ago. This means that there is a vast market opportunity, and we're actively converting the market.

This chart shows you the target groups for testing, led by public health and employment screening. We are putting additional resources to drive the use of this modern, gold-standard test across all groups. As an example, in the US, we have seen immediate results from shifting some of our clinical sales reps to QuantiFERON TB and have them call on physicians treating immunosuppressed patients, such as rheumatologists, endocrinologists, diabetologists, and oncologists -- in other words, physicians treating patients with weakened immune systems and where patients with latent TB are at risk of becoming active.

QuantiFERON TB has significant potential and we believe should surpass HPV in terms of sales. A new driver could be the future combination of QuantiFERON with the development project we announced earlier this month. We have made a strategic investment in Drug Response DX, a German company developing a test to evaluate rheumatoid arthritis patients to guide treatment with the TNF-alpha inhibitors. A number of pharma companies have already expressed interest in the test, given the number of R&D projects underway to develop new RA treatments, especially for the estimated 30% to 40% of patients who do not respond to TNF-alphas. This test would be highly complementary with the QuantiFERON TB test, since the TB test is also required before the use many biologic drugs, including TNF-alphas.

I'm now on slide 16. In Personalized Healthcare, we reached and surpassed $100 million in sales in 2012 and this coming from a business only created in 2009. We expect growth of more than 20% constant exchange rate again in 2013, driven by contributions from assays, co-development project revenues, and other products used for biomarker analysis and development.

The launch of the therascreen KRAS test in the US for use in patients with metastatic colorectal cancer is gaining momentum. Our number-one priority is converting labs to our test. At the end of 2012, we estimate that laboratories were doing about 45,000 therascreen KRAS tests on an annualized basis and, therefore, have converted a significant part of the market. This is double the estimated 20,000 KRAS tests from QIAGEN being used before the FDA approval.

In fact, this morning, we announced that Clariant has adopted the use of the therascreen KRAS RGQ PCR kit as a companion diagnostic. Clariant has a customer base of more than 2,000 pathologists, oncologists, clinical labs, and hospitals.

We're stepping up initiatives to reach oncologists and brand therascreen as the test of choice for companion diagnostics. Our teams are targeting physicians in coordination with our pharma partners through medical advisory boards and ensuring a presence in treatment guidelines.

At the same time, we're stepping up programs for laboratories to drive adoption. The fact that QIAGEN will bring a broad portfolio of FDA-approved, real-time PCR tests on one platform and then with automation on the QIAsymphony is among the reasons encouraging laboratories to convert to our tests and platforms. This means a key message to labs is that using the FDA-approved therascreen test will not expose them to what could be significant reimbursement, regulatory, and liability risks if they use an LDT.

We're building a new market, and growth will come as we continue converting labs and expanding the market. We are also preparing the market for the entry of more therascreen companion diagnostics and, particularly, therascreen EGFR in 2013.

Next, on slide 17 -- we submitted our therascreen EGFR test in late 2012 for FDA approval in non-small-cell lung cancer patients paired with afatinib from Boehringer Ingelheim. Compared to the two KRAS submissions in 2011, this was an important submission in several ways. It was the first time we completed a late-stage registration trial simultaneously with the investigational drug candidate. It was also the first time we made the regulatory submission at the same time the drug candidate was submitted to the FDA. So this was a major achievement for our teams.

Therascreen EGFR is an easy-to-run and validated test, testing for 29 mutations and, partly, with several individual report-outs. We have been actively marketing previous versions of the test with several other drugs, have approvals in Europe, Japan, and soon in China, and have a high market share in global EGFR testing. In addition, there is a significant body of QIAGEN and third-party licensed IP on this test. The target action date for an FDA submission is in the third quarter of this year.

Afatinib was granted a six-month priority review status, and it also received orphan drug status, meaning that it could have a longer exclusivity period.

The need for new treatment options in lung cancer, especially in the non-small-cell lung cancer area, forms -- that accounts for about 85% of all cases is critical, given the high mortality rate. Lung cancer is the second most common form of cancer in the United States, but it is the deadliest. In fact, as you see on this chart, deaths each year in the United States due to lung cancer are about the same as those for prostate, pancreas, breast, and colon cancers together.

We will be providing more perspectives on the sales of the therascreen EGFR test later this year. In any case, the price is expected to be higher than for KRAS, which is about $200 per reportable, since it is a much more complex test. At the same time, keep in mind that there could be competitive EGFR tests; however, the label of the diagnostic approval typically refers to a specific treatment.

Now slide 18 for a quick update on some leadership changes at QIAGEN. As you saw in the release, we announced that Dr. Tadd Lazarus, joining QIAGEN in the beginning of the year, is our new Chief Medical Officer. Tadd is an experienced physician with a wealth of industry experience. He has a strong track record in clinical trials and product development.

He will be responsible for our overall medical strategy, and this includes the clinical evaluation and the advancement of our portfolio of diagnostic assays. Tadd will lead our team of medical officers, which also includes Dr. Helene Peyro-Saint-Paul and Dr. Masae Kawamura.

Helene is the Chief Medical Officer at QIAGEN Marseille, which is the new name for the Ipsogen subsidiary as for January 1. She will drive the development of biomarkers in cancer diagnostics.

Masae is a global expert on tuberculosis with experience in both the public and private sectors. And she's responsible for the development of our TB portfolio.

I'm convinced that Tadd, Helene, and Masae and the rest of the medical team will play a critical role in advancing our R&D portfolio and creating valuable benefits for patients and physicians.

So now, on slide 19, you have the goals for 2013, and they build on our achievements from 2012. Our top goal is to accelerate growth through expansion of our current business, as well as through targeted acquisitions. The growth drivers that we have assembled in Molecular Diagnostics will be an important contributor in 2013, along with our rapidly expanding business in Applied Testing. As I mentioned earlier, we plan to enter targeted areas of next-generation sequencing with our own workflow, sample-to-result, and also to deliver double-digit sales growth in the top emerging markets.

This focus on improving the top line is accompanied by our ongoing commitment to optimize resource allocation. We are considering additional projects to implement in 2013, and these will be designed to free up additional resources for investment into our growth initiatives. These projects could result in additional restructuring charges.

Among the other goals, we are preparing to soon launch a new version of the QIAGEN Website. Our teams are working to implement this highly interactive site, which will include new e-commerce and social media channels to reach customers.

In summary, we have begun 2013 with a clear focus on accelerating growth, as well as improving our efficiency and effectiveness.

I would like now to hand over to Roland.

On slide 20, I would like to provide you with our outlook for the full year and the first quarter 2013.

For the full year, total net sales are expected to grow approximately 5% to 6% at constant exchange rates with about 4 to 5 percentage points of organic growth and about 1 percentage point coming from AmniSure, which will become organic in the second quarter of this year.

Adjusted diluted earnings per share are expected to rise to about $1.16 to $1.18 for the full year. As I mentioned earlier, this includes a net dilutive impact of about $0.02 to $0.03 per share from a [constellation] of factors. We anticipate dilution from implementation of the US medical device tax to be up to $0.02 per share for the full year and additional dilution of about $0.02 to $0.03 from the higher interest expenses due to the $400 million private placement. This more than offsets an anticipated accretion of about $0.01 to $0.02 coming from the share repurchase program.

The distribution of sales growth during 2013 is expecting to show rates in the first half of the year being below the full year average and then will develop a faster level in the second half. So, for the first quarter, the guidance is for total sales growth of about 2% to 3% at constant exchange rates, and this is a mix of contributions from AmniSure and organic growth. The reason for this sales growth profile includes (inaudible) growth drivers being expected to grow at double-digit constant exchange rates and become an even larger percentage of total sales.

We are again looking for more than 20% constant exchange rate growth from the QuantiFERON latent TB test and also for double-digit growth in Personalized Healthcare and building on the 2012 level. AmniSure remains a significant contributor for full year sales, and we are looking for further growth in profiling, driven by a higher pull-through rate on QIAsymphony. (Inaudible) ramping up our investments in some emerging markets that began in late 2012.

This slide also contains assumptions for the adjusted operating income for the full year and the first quarter. For the full year, we expect share-based compensation of about $30 million to $32 million, about $120 million for amortization of acquired intellectual property, about $25 million to $30 million for business integration, acquisition, and restructuring costs. The adjusted tax rate is expected to be about 20% to 22% for the full year.

With that, I would like to hand it back to Peer.

And now I'm on slide 21 for the summary before moving to Q&A.

We are pleased with the strong performance in 2012 and are building momentum to accelerate innovation and growth in 2013. Now let me review again what we have announced.

We exceeded our targets for the fourth quarter and full year 2012 both in terms of sales and adjusted earnings growth.

We made significant progress on our strategic initiatives while exceeding our target for new QIAsymphony placements and gaining important US regulatory decisions; particularly, the launch of the therascreen KRAS companion diagnostic assay.

We're also advancing a portfolio of more than 35 molecular diagnostic assays, and we have a number of regulatory submissions planned for this year.

We improved our efficiency and effectiveness by reallocating resources, and we improved profitability with a full year adjusted operating margin of 28% and even reaching 31% in the fourth quarter, a year ahead of schedule.

We are actively developing our Company while enhancing shareholder value and, at the same time, maintaining our financial strength and flexibility. Our program to repurchase up to $100 million of shares is set to be completed by the end of the first quarter. This is a signal of our conviction in our future prospects and views that there is significant value potential on our shares.

In closing, we are looking to again deliver on our goals and are optimistic about achieving our targets and delivering a stronger performance in 2013.

With that, I'd like to hand back to the operator to open up for the Q&A session. Thank you.

(Operator Instructions). To ensure we can accommodate as many people as possible, please, limit yourself to only one question and, if necessary, one follow-up question.

Tycho Peterson, JPMorgan.

First, just on margin guidance, you reached your long-term guidance a year ahead of schedule, as you just mentioned. Can you talk about how you're thinking about the runway for further margin expansion versus reinvestment? And are you able to call out the specific investments you'll need to make in NGS over the coming year?

Sure. I'll take the NGS part of the question.

I'd say, just in general, to the first part of the question we are definitely managing the Company for improved efficiency and effectiveness going forward with a tight focus also on the operating margin in particular. So, going forward, we do expect a continued improvement year over year on this trend. We had 28% on an average in the year 2012, and we expect that to move up.

In terms of the NGS investments, it is a significant investment. We have a lot of people working on this across all of our areas -- endermology and the chemistry areas and automation and software. And this has become a significant cross-pillar initiative across R&D teams. This is already baked into the expectations for 2013. We are prioritizing these initiatives due to their significance and look forward to be able to reporting on their success.

Roland, do you want to give more detail on the operating margin?

Yes. I think, as Peer said, we do feel quite comfortable what we actually can achieve for the, I would say, very good level of investing into our R&D partner. You also will see that that amount investing in R&D is actually going up over the course of 2013. At the same time, we will see significant leverage coming out of SG&A so that, all in, we will hopefully achieve kind of a 100 basis points margin improvement for 2013, similar to what we have achieved now for 2012. And we are also committed even beyond 2013, going in the same kind of a direction.

And then just a quick follow-up, Roland. Can you talk about the sustainability of the tax rate here?

Yes. I think we achieved our target. We said early in the year we want to be around 21%. We achieved that. And it's very typical in QIAGEN that you see that the fourth quarter is, clearly, kind of a catch-up quarter, which, again, is quite normal for a European-based company. Nevertheless, we do believe, given everything staying the same, we are being marginally better even in 2013. Depending what is happening in the US around taxes, that might change. But, right now, I think there's no indication around that.

Okay. Thank you.

As a reminder, can participants, please, limit to just one question. Thank you.

Dan Leonard, Leerink Swann.

My question is essentially -- I'm trying to reconcile the first quarter guidance with your guidance for the full year. It looks like you're being much more modest about the Q1. I'm wondering what would enable you to accelerate the business through the balance of the year. Thank you.

First of all, obviously, if you look back, obviously, there's sequential increase quarter over quarter. So it's not really too unusual for us that we have a stronger second part of the year than the first half of the year. I think what is clearly (inaudible) is that a couple of the launches are clearly getting even more effective in the second part of the year, thinking about our KRAS product building momentum, as Peer said before. The same is probably true for the year. But, also, clearly, having the symphony on a much larger base and then having a very strong second part of the -- second half of the year [2011] in terms of placement should be giving us some additional growth for the second part of [2012] as well.

It's a lot of factors, especially around Molecular Diagnostics and Applied Testing. Being at a larger scale is driving them.

Okay. Thank you.

Daniel Wendorff, Commerzbank.

It's relating to the QIAsymphony consumables consumption. And you mentioned that average consumer consumption per year is increasing there. Could you potentially give us a number or a range what the average consumption per machine per year is right now and where you expect it to go over the next two years?

So, I gave you the range of $30,000 to $300,000. It's a broad one. And there are different uses of the system. So, if people buy the system only for sample preparation use, which is the minority, it would be about $30,000 at the low end. If people run the full system -- for instance, blood virals -- then you can go well ahead -- well above $300,000.

I often see reports that the link with the assays is only seen if people buy a full system. This is definitely not true. So, a lot of people just buy an SP system, which is the sample-to-purified nucleic acid system, then have manual pipetters or their own generic liquid handling systems to set up the assays, and then run the assays on the Rotor-Gene again. And the combination of an SP and a Rotor-Gene can provide a significant pull-through of reagents as well. And then some people will have the full lineup, and that would potentially also allow them to go into even higher throughputs. They're looking at more handoff workflows.

So we'd have to go into the individual customer segments, and we'd have to go into the different formats of the systems to give them target numbers. We have very precisely for the different types of segments. And we will probably see significant expansion of that volume as more LDTs are converted with commercial assays and also our menu expands; in particular, in the United States going forward.

Placements in the US are primarily LDTs and ASR placements. Some are running already here with their own validations and then, also, partly FDA-approved products or products in submission. But this will definitely expand over the course of 2013.

Okay. Well, thanks.

I'm wiggling. It's tough for me to give you an exact number without going into the segments. And then it becomes, obviously, very sensitive information. But we're going to see a significant increase of that volume.

That's all really helpful. Thank you.

David Clair, Piper Jaffray.

I'm asking for Bill Quirk this morning. So the first one for me. I recognize you have less exposure to NIH spending than others in the group. But what are you including in your guidance about sequestration?

Right. As you correctly point out, our Academia sales are in the range of 24% of overall sales, and the US is about half that. So we're talking about 12% of sales, plus/minus, just running the straight math, being in direct exposure to that.

As we said also in the comments in the press release, and Roland will give you further details in a second, but we're not including the impact of sequestration because it is still not quite clear where this is going to go. There are different views on this. So we're assuming a very, very modest or a conservative approach to the NIH budget but not the full hit of a sequestration. The full hit of sequestration, however, is muted because it would hit Academia sales to a certain degree, and it would potentially hit some areas of Applied Testing and maybe smaller areas of the healthcare system, as well, in terms of our exposure.

Roland, do you want to quantify that further?

No. I think that was a perfect answer. (Inaudible) Academia not only NIH budget related or to a significant part of the sales coming from other funds, private funds. So I would even argue that the exposure is probably even smaller than Peer's calculation. Nevertheless, in terms of what we incorporated, I think that's absolutely correct the way we did it.

And if I could sneak in one follow-up here -- can you talk about the recent reimbursement pricing in the US for the Personalized Medicine business? The levels are coming in a little bit lower than expected. What, if any, impact do you see on pricing?

We're actually quite pleased with first results coming in. There's a wide array currently, depending on the institution that is setting out the guidance. But the guidance coming in in California, which is a very important state in terms of its signaling effect, is very positive. We're also seeing some very strong trends towards putting an emphasis on using the FDA-approved product, which is giving us additional tailwinds. So there are a lot of numbers that are currently put out, but they're in a quite attractive area.

I think the EGFR will be important. Here we're talking about a 29-mutation test versus now looking at four or seven mutations in other tests or, in some cases, even only one or two. And this will be an important discussion over the course of 2013.

But, in general, we're quite pleased, and, also, our customers are quite pleased with the level of reimbursement that they're getting for some of these newer tests.

Okay. Thanks a lot.

Doug Schenkel, Cowen & Co.

So many of the companion diagnostic tests that are currently working through the FDA are replacing existing -- to some extent, replacing existing RUO kits that you sell today. At this point, do you have any clarity on how much of a price premium that you think would be -- that you think you would be able to get on these FDA-approved products? And what's the assumed rate of conversion to IVDs? And, I guess, if I could add one more component, what's the dollar value of revenue associated today with these RUOs that you think you could convert? Thank you.

Sure, Doug. The data was partly on one of the slides. We showed that we had been running about 20,000 tests under RUO -- with RUO products at least were the universe where we knew that our products were being used in the States for whatever purposes. We obviously are not always privy to that. But we now see that we have more than doubled that in sales of FDA-approved product; i.e., the level of conversion has been very successful.

And we also see, for instance, in Europe, where our solutions are being used at our market shares also against the LDTs are very high. We're 70% or 80% in some cases in terms of -- or even higher in terms of the respective test volumes.

So the fact that you have a regulated and validated product and, especially, the validated part is very important. That is putting a lot of people into using the FDA-approved product. That has helped us a lot.

So, if you look at the price premium, it is a range of 40% to 50% -- in some cases, even higher, above what the reportable was being sold at with an RUO product. And that is a number we're not getting any pushback on.

Okay. That's great. And if I could sneak in one more real quick -- was there any notable flu impact in the quarter? Thanks again.

Flu is definitely very attractive in terms of an opportunity due to the severe flu season at the moment but less so for the molecular assay. Molecular flu is typically not a very significant volume, unless people do a lot of genotyping, like we did in swine flu or others or you need an ultra-sensitivity test. So, in this case, it's not being seen -- we're not seeing significant spikes in the molecular flu assays, at least in any way that would impact materially our overall franchise.

Derek De Bruin, Bank of America.

I know you're going to speak some more about sequencing at the AGBT meeting coming up in February. But can you just give us some teaser in terms of how your platform is going to stack up against what's out there in terms -- just a sense of how you expect to compete.

I'm also curious as a follow-up. You're focusing much more on the clinical applications products. So how do you see sort of building out that pipeline? Are you going to get involved in things like noninvasive prenatal diagnostics? And do you think your advantaged in the platform you're working on versus how those applications are currently being run?

Sure, Derek. As we said before, we see that the market has a significant need for a sample-to-result workflow that allows our customers to go from primary sample to digital output in a way that could routinely be performed in clinics. And a lot of features are currently quite cumbersome for routine applications, as we all know. And I think there are a number of companies also doing a good job in many areas developing systems and solutions for next-generation sequencing. But, in particular, for the clinical applications, there are still some significant shortfalls. And that's what we are trying to address. So we're not going to go into the broad area of next-gen sequencing but are focusing on this area of application.

So sample-to-result workflows, integrated ecosystems, superior chemistries -- endermology to chemistry. Ultimately, also the IT solutions are things that we are working on intensely. And there will be a stream of products that we'll be putting out over the months and even years to come. It's a very exciting area, developing very rapidly.

One area that I think should not be underestimated is the area of content. We today have one of the broadest content portfolios in the industry. We have over 200 panels that are already preformatted and reporting over to next-gen sequencing formats and we'll have available.

What we also think is very important is that our clinical channel and the access to the clinical and regulated and reimbursed clinical diagnostic assays is very important.

So we see next-gen sequencing as a niche application, one of many. So it's not the do-all solution. But it is an important part of a molecular diagnostics franchise and one that we hope to make a difference in.

And just one quick follow-up. You've been successful with the therascreen KRAS, and you're now launching the BRAF assay. How much of your companion diagnostics pipeline are basically products that you just have to develop the assay -- you know, the markers are validated, (inaudible), and you know you're going to get a product out of it versus how much of it is exploratory work with the pharma companies in that you're still doing experimental and stuff and it's not really having to be validated in the clinic? I'm just sort of trying to get a sense of what is sort of like your guaranteed revenue stream. (Technical difficulties).

Right. Good question. By far, the majority, almost everything, that we're doing in the area of personalized healthcare is paired up with drugs and already in a validated format. Everything we would be doing in the pharmaceutical area, supplying the GeneGlobe assays, these 60,000 assays in pre-IVD formats that pharma companies can use, that would be in the Pharma piece. So anything that is pre-validation would be Pharma. Anything that is going into paired development and validation is in the PHC area.

Great. Thank you very much.

Romain Zana, Exane.

I have a question on your guidance because you highlighted your ambition to accelerate organic growth, especially as of 2013. But the guidance sounds comparable to the one you showed last year. So do we have to understand that the guidance might be conservative? Or is it fair to assume that you maybe see you at the end of the year more in the higher or the top range of the guidance?

And a follow-up question, a quick one, would be to see when do you expect the US HPV revenues to stabilize? Thank you.

I would say our guidance -- our listed guidance is cautiously optimistic. We're purely facing volatile times, as we explained on the call, especially around the academic environment. Nevertheless, we are increasing organic growth. If you recall, 2012 organic growth rate was around 4% for the full year. And, again, we are starting from this kind of data point now moving into 2013. If we are able to beat, then we are very, I think, happy about that. Nevertheless, things are moving into the right direction. And, also, as I said in the call, we also expect a good improvement over the course of the year, which then, of course, again, is a basis point for further performance in 2014.

So I would say, given the volatile environment in parts of our business, our guidance is a fair point.

The second question on sales of HPV testing products -- if you look at the way these contracts are typically done, they're multiyear contracts. It will take a couple to three years for that pricing effect to move into the market. We're extremely successful in expanding these contracts. There is some pretty wild pricing by some of the competitors out there. And we're winning a lot of contracts, actually, at significant premiums to offered prices. So I think this speaks for our product.

But, nevertheless, on top of even increasing volumes, we will continue to see pricing pressures, probably, over the next couple of years.

I think the good news is that US sales of HPV testing products is about 12% of our sales base, and, as that -- we're talking about a 1% organic headwind that we have in this area. So it is definitely manageable. It's a fantastic product. It's a great infrastructure supporter for us going forward. And I think it is also a very good addition to our brand equity.

Thank you.

Jon Groberg, Macquarie.

Just one really brief, if I can, clarification on the med device tax. Can you just -- ? You said it was a net number. So I'm just curious if you're trying to offset that with any pricing. It's kind of unlikely, given your comments just now on HPV pricing. But just -- I'm curious kind of how you're calculating that number.

And, just bigger picture, Peer, you add up to 12%, you said, on US HPV, 12% in the US. Pharma doesn't look like it's growing that much. Is there anything you can do in those --? I know you're moving into sequencing? But just big picture, I guess, strategically and internally, is there anything you can do to try and take that whole group of slower-growing businesses and accelerate the growth, assuming an end market that is what it is, as you said? Thanks.

Sure. Jon, I think the market has changed over the last few years. And we have, I think, ahead of the curve spent a lot of time rebalancing where we invest our resources. So it doesn't make sense to invest a lot of growth initiatives in areas that probably won't be able to support a lot of growth going forward.

So we-- in, for instance, Life Science, we're focusing on technology differentiation, in Pharma by linking into our Companion Diagnostics franchise, in Applied Testing, it is on the platform success that we have as a spillover from the Clinical Diagnostics arena. In the diagnostics area, it's around the platform, successes around the QIAsymphony systems and the QuantiFERON success that we have.

These are the delivered growth engines that we've always focused on and characterized as growth drivers. And they are getting premium resources. And, in the other areas, we are investing to hold these franchises and are not trying to push for growth would it will be very difficult.

As we said, over the course of 2013, we're going to see an acceleration over 2012. And the outlook is, most likely, 2014 will then be an acceleration over 2013 as well. And that would be our hope then for the medium-term trend.

And for the medical device tax, of course, it's not only the HPV tests where we have to pay medical device tax for any other products. For example, take the Cellestis franchise. It's clearly affected by that. And I guess it's too early to say if companies in our industry are able to pass it on to customers. I don't think there is a general trend either way today. It's probably what we will see over the course of 2013 and see how it goes.

Okay. Thanks then.

So, with that, I'd like to close the conference call. I know we had a lot of people in the queue. We tried to get to as many as we could today. If you have any questions, please, don't hesitate to give Peter or me a call, or send a note. We'll be in touch.

And thank you again for participating.

Ladies and gentlemen, this concludes the Q4 results 2012 conference call. Thank you for participating. You may now disconnect.