Qiagen NV (QGEN) 2015 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. I am Patrick Wright, your Chorus call operator. Welcome and thank you for joining Qiagen's conference call to discuss results for the first quarter 2015.

At this time, all participants are in a listen-only mode. Please be advised that this call is being recorded at Qiagen's request and will be made available on the Internet site. The presentation will be followed by a question-and-answer session. (Operator Instructions).

At this time, I would like to introduce your host, John Gilardi, Vice President of Corporate Communications and Investor Relations at Qiagen. Please go ahead.

Thank you, Patrick and thank you for all of you for joining us today for our conference call.

We're going to review the financial results we released last night for the first quarter of 2015 and provide a business update before the Q&A session. The speakers today are Peer Schatz, our Chief Executive Officer and Roland Sackers, our Chief Financial Officer.

On slide 2, you will see the customary safe harbor statement explaining that the discussion and responses to your questions on this call today reflect management's views as of today, May 6, 2015. We will be making statements and providing responses to your questions that state our intentions, beliefs, expectations or predictions for the future, and these constitute forward-looking statements for the purpose of the safe harbor provisions. These statements involve risks and uncertainties that could cause actual results to differ materially from those projected. Qiagen disclaims any intention or obligation to revise any forward-looking statements. For more information, please refer to our filings with the US Securities and Exchange Commission.

Also during this call, we will be referring to certain financial measures not prepared in accordance with Generally Accepted Accounting Principles or GAAP. A reconciliation of these figures to GAAP measures is available in the press release and presentation.

I would like to now hand over to Peer.

Thank you, John and welcome to all of you. We are very pleased with our start to the year and have these messages to summarize our performance.

First, we achieved our targets for the first quarter. As you saw in the press release, adjusted net sales rose 2% at constant exchange rates, while adjusted EPS was $0.24, also constant exchange rates and ahead of our target of $0.22 to $0.23 per share. Reported results were obviously and as expected impacted by currency headwinds, but we are currently rather well hedged to try global cost base and Roland will discuss it shortly.

Second, we are moving ahead on transforming Qiagen. Our results continued to be impacted by the sharp decline in sales of HPV products in the United States. And in this quarter, they were down 54% and created approximately 6 percentage points of headwind. This was in line with expectations. The good news is that sales from the rest of our business rose 8% on a constant exchange rate basis in the quarter. The top seven emerging markets were an important incremental growth contributor, rising 22% constant exchange rate as a group and led by China and Turkey both growing at very strong double-digit growth rates in the quarter.

We delivered sales growth in all customer classes. In molecular diagnostics, we saw solid underlying sales gains on the back of contributions from our growth drivers. The applied testing customer class also continued to advance at a high single-digit constant exchange rate pace while academia and pharma showed low single-digit constant exchange rate improvements.

One of the highlights was the expansion of our liquid biopsy portfolio both through the addition of new sample technologies for circulating tumor cells or CTCs and the new co-development collaboration with Tokai for a companion diagnostic in prostate cancer patients, and I will come back to this topic later. We also have a number of important product launches underway in the franchise for our QuantiFERON technology which enables customers to detect very challenging signals not possible with other diagnostic technologies. We have a deep pipeline of test and development using this QuantiFERON technology that builds on the current portfolio to address needs in detecting TB or cytomegalovirus and also QuantiFERON Monitor for use in assessing and monitoring the immune system.

Third, we are reaffirming our full year guidance and we continue to anticipate higher adjusted net sales and earnings at constant exchange rates. Based on current exchange rates, we continue to expect an adverse currency impact on full year results. We also have set goals to deliver improved free cash flow and here you see the 40% gain in the first quarter and for operating margin for the full year.

And I would like to mention a point not on the slide, Ulrich Schriek, a member of the executive committee and the Head of Corporate Business Development for 18 years is moving into a new role as a Senior Advisor. Ulrich has played a profound role in shaping Qiagen and has built a formidable team that has enabled Qiagen to attract breakthrough technologies and top companies. We are very pleased to announce the internal promotion of Jean-Pascal Viola, who is currently Vice President, Global Head of M&A and Corporate Ventures to become Senior Vice President, Head of Corporate Business Development and Intellectual Property & Litigation and report directly to me. JP has been with Qiagen since 2005 and has been responsible for some of our most value-creating transactions, including the acquisitions of Cellestis for QuantiFERON, DxS for our expansion in personalized healthcare and Corbett to gain access to the Rotor-Gene Q for PCR technology.

Moving to slide 5. On the right hand side, you see a breakdown of the sales performance for the first quarter, and the approximately 6 percentage points of headwind from the US HPV franchise. Following the decline over the past few years, as well as in this quarter, it is now down to about 4% of total sales. As for 2015, we continue to expect US HPV sales to create about 3 percentage points to 4 percentage points of headwind for the full year. As other offerings entered the market, we have been successful in maintaining our leadership position in HPV testing, albeit at a substantially reduced price levels induced by these new entrants. What is important here is that we see 2015 as the final year of significant headwinds because most of the contract now reflect the new pricing and this is being annualized. The revenue contributions are often now down to 4%, so it is reaching a level while even significant change would not have a material impact on the overall Company.

At the same time, you see the rising share of sales from our growth drivers and how these products are creating a foundation for the next growth wave. The efforts we have made over the last few years are coming to an inflection point and this is why we changed our strategic framework at the start of 2015, using the Sample to Insight theme. Helping customers gain insights is ever more critical for Qiagen, and this is at the heart of our portfolio spanning sample technologies, assay technologies, bioinformatics and automation platforms. We want to increasingly offer our customers seamless integrated solutions to go from a raw biological sample to valuable insights that can be utilized for clinical decision-making or for scientific breakthroughs.

I'm now on slide 6 to provide some highlights on the growth drivers in the first quarter. I want to start with our latent TB test, QuantiFERON and the European rollout is gaining momentum for the fourth generation version of this modern gold standard test. The US submission is also in preparation. Also of note was the use of QuantiFERON in a groundbreaking clinical trial involving more than 21,000 people in China, and the results were published in The Lancet. Each person was tested with both the old skin test and QuantiFERON TB Gold and the results show that the skin test significantly overestimated the prevalence of the disease in China. The results with QuantiFERON, which is highly accurate, showed the real prevalence and this is at levels where latent screening becomes highly effective compared to just looking for active TB cases. This is why the authors recommended community-based screening using modern blood test technology to detect latent TB with preventive treatment for infective patients who are most addressed for developing active TB. The rollout of QuantiFERON is underway in China and these study results will support our campaigns.

On the QIAsymphony automation platform, we are moving towards our goal of 250 new placements in 2015, which would put us at over 1,500 cumulative placements at the end of the year. We added eight new tests to this portfolio during 2014 including tests for the most common healthcare-associated infections plus new companion diagnostics and we are aiming for further submissions this year. In bioinformatics and next generation sequencing, we are moving ahead to expand our offering of universal solutions while also preparing for commercialization of the GeneReader NGS workflow later in 2015.

As we noted in the release, the integration of the Enzymatics portfolio is moving along very quickly and we are pleased with the customer response. Enzymatics has very high brand awareness among these customers given that these products are used in about 80% of all next generation sequencing workflows.

We're also expanding our bioinformatics franchise through new commercialization agreements. One of the recent deals was with GATC, a leading European sequencing service provider. They are now providing full access to the Ingenuity Variant Analysis solution to GATC customers. And you saw that we just announced this week a very important agreement with BGI under which the data generated for their customers will also go through this Ingenuity Variant Analysis solution. These partnerships are very exciting as they underscore the value of our bioinformatics solutions as a standard for the delivery of valuable molecular insights from sequencing data.

I'm now on slide 7 and would like to provide some deeper insights on the expansion of our position in liquid biopsies, an area with dynamic potential that is getting a lot of mainstream media attention. As a reminder, liquid biopsies involve taking a body fluid, most often blood, to gain access to nucleic acids meaning DNA and/or RNA and making them available for downstream analysis using various technologies, including PCR and next-gen sequencing. But this is why we talk about liquid biopsy as being a type of a biological sample that is opening up new processing techniques.

Three main types of targets are found in blood; free circulating nucleic acids, exosomes and circulating tumor cells. With solutions addressing all three of these targets, which also involve the use of our Qiagen automation platforms, we have built a substantial market share lead in this fast growing area, and this obviously also builds on our overall leading market share in sample technologies.

As an example, liquid biopsy solutions are enabling new users for established biomarkers. And here, you can think of the therascreen EGFR test for used as a companion diagnostic. This test is available for use with tissue samples, as well as also for liquid biopsy samples. Another example is enabling new users for new assays and here you could think of non-invasive prenatal screening and the emergence of new oncology tests.

These tests are also offering new ways to expand and improve care along the patient care continuum. Think of caring for a cancer patient and being able to use liquid biopsies starting with disease screening through to diagnosis and then on to recurrence monitoring. Another key advantage of liquid biopsies is that you can get both tumor related and normal DNA from a patient with one blood drop. And furthermore, you can also distinguish between somatic or acquired mutations from germline or hereditary mutations based on the Allele frequency obtained through deep sequencing.

There are also obviously some disadvantages at this time with this technology, such as the need for high sample volumes, as well as in terms of the results with current sensitivity levels, and also in some cases, specificity, but these will be addressed as liquid biopsies develop.

On slide 8, you see an overview of the categories for liquid biopsies in our offerings. Personalized healthcare is clearly the hottest area for liquid biopsies and we are building on our leadership in the use of our sample technologies for liquid biopsies to set new standards in non-invasive prenatal testing. This is reflected in the fact that we now have five pharma projects in place based on this new sample technology.

During the first quarter, we added the AdnaGen portfolio of sample technologies for use in gaining access to circulating tumor cells. And as part of that agreement, we signed a new co-development collaboration agreement with Tokai for their late-stage investigational drug for castration-resistant prostate cancer. And as you know, in January, we also launched the first ever regulated CE-IVD for a liquid biopsy companion diagnostic in lung cancer with AstraZeneca and their therapy, IRESSA.

One of the most interesting developments was based on data that researchers presented at the European Lung Cancer Conference in Geneva in April. The ASSESS study used Qiagen sample technologies to gain access to 1,162 match tissue and blood samples from lung cancer patients. The comparison of EGFR testing of the sample showed an 89% agreement between the blood and the tissue tests. What is remarkable is that this study was not performed in specially selected central labs, but instead in local labs that are used to daily clinical routine and show more a real world situation. One of the study [hospitals] said cell-free DNA detected in the blood stream of cancer patients represent an excellent tool to examine genetic alterations that are usually found through tissue tumor testing. This represents one of the most astonishing phenomena in biology.

As we have said before, we see liquid biopsy as a very important trend that will further develop this leadership position. At the same time, it may take some time to see this technology become more standardized in clinical diagnostics and that will require more studies like these, one to considerably open up the opportunity.

With that, I'd like to hand over to Roland.

Thank you, Peer. Good afternoon to everyone in Europe and good morning to those joining from US.

I'm on slide 9 and we'll begin with an overview of our financial performance for the quarter. In terms of adjusted net sales, we delivered on our goal for 2% growth at constant exchange rates and the currency headwind of about 8 percentage points was more than our estimate in January for 6 points to 7 points. This led to a 6% decline in reported sales compared to the fourth quarter of 2014. The acquisition of Enzymatics, which was completed in late December and BIOBASE in our bioinformatics franchise provided about 2 percentage points of growth, while the underlying organic growth of about 6% in constant exchange rates was essentially offset by headwinds from US HPV franchise. Consumables and related revenues were up 2% in constant exchange rate in the quarter and provided 88% of sales and absorbed the lower US HPV sales. Instruments kept up a solid pace with 9% constant exchange rate growth in the quarter and provided 12% of sales.

Moving down the income statement, adjusted operating income declined 10% and adjusted operating margin declined to about 23% of sales from 24% a year ago. As for the cost areas, the adjusted cost margin improved by about 60 basis points due to improving product mix and efficiency gains. At the same time, we increased the incremental investments to support the growth drivers, in particular next-generation sequencing and bioinformatics as we have also stepped up investments in our commercialization activities and e-commerce initiatives. These led to a higher SG&A expenses as a percentage of sales and this was the main reason for the decline in the adjusted operating margin.

To address the issue of currencies, based on the rates we saw during the quarter, we actually had a slightly positive impact on the margin from the currency movements. This was due mainly to the weakening of the euro against the dollar and the fact that we have a cost overhang in euros, which means more cost than sales in this currency. So based on the current constellation of currencies, we are not seeing an adverse impact on the operating income margin. For the full year, we have a goal of operating income margin improvement of at least 50 basis points from the 25% margin in 2014 that excludes the restructuring charges taken in the [first] quarter and this is also at actual FX rates.

Adjusted net income fell 4% and this included the benefit of a lower adjusted tax rate of 19%, which was the guidance rate we had given for the quarter compared to 22% a year ago. In terms of adjusted EPS, which was $0.24 per share at constant exchange rates, we exceeded our goal by $0.01 and reported results were reduced by about $0.02 due to exchange rates. We will see a reduction in the share count of about 5.5 million shares compared to the first quarter of 2014 and this included the repurchase of some convertible bonds in 2015 as well as the impact of some ongoing share repurchase program over the last 12 months.

Another metric is cash flow generation and we had a strong quarter with a 40% improvement in free cash flow. This shows we are generating an increasing level of cash from the business and starting to see more benefits from our efficiency programs.

Moving to slide 10, I would like to provide you with a quick overview of results for the four customer classes. As noted earlier, the results in these customer classes included contributions from the Enzymatics and BIOBASE acquisitions. Molecular diagnostics continued its growth pace even in the light of US HPV headwinds. And here you'll see the core MDx portfolio grew about 14% at constant exchange rate. The biggest contributions came from the growth driver. We saw ongoing double-digit constant exchange sales expansion for the QuantiFERON latent TB test and also achieved solid consumer growth from our portfolio of artus assays for infectious disease testing for which the QIAsymphony system plays a critical role. Our personalized healthcare franchise also recorded gains in the quarter on higher sales of the therascreen and ipsogen companion diagnostic kits and the pharma co-development project also generated higher revenues.

In the life science, applied testing grew in line with our high single-digit constant exchange rate goal with the strongest gain coming in human ID and forensics and across all reagents. The performance in the pharma customer class has to be seen against a very strong 8% constant exchange rate growth in the [first] quarter of 2014, but was largely in line with the full year trend seen in 2014.

Academia growth came on the back of improving demand in the US and Europe. For this quarter, we saw some softening of trends in the Asia-Pacific region and Japan. For 2015, we expect customer sentiment in the US and Europe could be equal to or better than in 2014, but for funding levels, to still be below levels seen a few years ago.

I'm now on slide 11 to review our adjusted sales in the first quarter on a regional basis. The top seven emerging markets returned to their old stronger form, generating 22% growth at constant exchange rates in the quarter and providing about 12% of total sales. China showed a dynamic performance with growth rates above 20% constant exchange rate and the same was also seen again in Turkey. On the other hand, Russia continues to be very challenging.

In terms of the region, the Europe/Middle East/Africa region continued to deliver robust gains with 9% constant exchange rate growth and contributing about one-third of our sales. I already mentioned Turkey, but we also saw improving trends in Southern Europe and also some important incremental growth from the Middle East. Molecular diagnostics saw sales grow at a double-digit pace and applied testing added to the overall regional gains, while pharma had softer results.

The Americas grew 8% when excluding the headwinds from US HPV sales and this was due to growth in the US and Brazil followed by rest of the portfolio. The Asia-Pacific/Japan region also had a solid performance with 7% constant exchange rate growth and contributing about one-fifth of our sales. Even though, sales in Japan were stable year-on-year, we again benefited from a robust performance in China.

Moving to slide 12. I would like to briefly touch on our strong financial status and how we are using it to support the business expansion, while increasing returns to shareholders. On the right side of the slide, you see our leverage has now increased to about 1.5 times net debt-to-EBITDA, which is the target we had given you in January. And we continue to have good liquidity and a manageable net debt position. A key reason for the increased leverage was our decision to repurchase 2024 convertible notes at a cost of $250 million. About $190 million of this was paid in the first quarter and the final payment of about $60 million was made in April. But remember that we have removed about 10 million shares of dilution risk.

Also, we plan to soon resume the third $100 million share repurchase program. We still have about $50 million remaining in this tranche. We also intend to ask as usual for the standard shareholder approval at the upcoming Annual General Meeting in June for authorization on further share repurchases.

I'm now on slide 13 to provide some comments on the full year guidance which we have reaffirmed. We continue to expect full year sales growth of about 4% at constant exchange rates. Through this pace, I'm generating about 7 percent points to 8 percent points of constant exchange rate growth from our core portfolio against a final year of significant headwinds from our US HPV products. We have taken a conservative view with our expectations for about 3 percentage points to 4 percentage points of headwinds for the year. For adjusted EPS, we continue to expect about $1.16 to $1.18 per share on a full year basis at constant exchange rates. These expectations also take into account the contributions from Enyzmatics acquisition and [the risk for] about $20 million of incremental sales in 2015.

Moving to slide 14, here you see the details of our guidance for the full year and also for the second quarter. About 2% constant exchange rate growth in the first quarter, our outlook for the second quarter is 4% growth at constant exchange rates. This takes into account about 4 percentage points to 5 percentage points of headwinds from the US HPV franchise compared to about 6 points in the first quarter and for the rest of the portfolio to continue growing at about 8% constant exchange rates. In terms of adjusted EPS, we are expecting $0.26 to $0.27 per share also at constant exchange rates for the second quarter compared to $0.25 a year ago.

The [top] question is obviously our view on currency impact. As you have heard from other companies, the headwinds became evident at the end of 2014 and got worse during the first quarter. Given the volatility, this is why we are providing guidance at constant exchange rates for this quarter along with some FX indications based on currency rates for the period. For the second quarter and based on the rates as of April 30, the headwinds are expected to become more severe at about 10 percentage points. So given the outlook for 4% constant exchange rate growth, this implies about a 6% decline in reported sales. As for adjusted EPS, we noted in the release that exchange rates are expected to reduce at constant exchange rate results by about $0.02 per share and no adverse impact on the adjusted operating margin is currently expected.

This slide also contains adjustment assumptions for the year and for second quarter, and they are largely at the same levels we provided for the first quarter of the year, especially on the adjusted tax rate at 19% and about 236 million shares.

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

Yes, thank you, Roland.

I'm now on slide 15 for a quick summary before we move into Q&A. Let me review what we have announced. First, we delivered a solid overall performance in the first quarter of 2015 having achieved our targets for improvements in adjusted net sales and earnings per share at constant exchange rates by successfully executing on our strategy focused on delivering innovation and growth.

We're also moving ahead on initiatives to transform Qiagen through our growth drivers. We had some important new product launches in the quarter, particularly in the QuantiFERON franchise and we are working on a number of new product launches and market expansion opportunities to further strengthen our portfolio. All of this is in line with our ambitious target to offer Sample to Insight solutions to our customers. The benefits of these efforts will become more apparent during the course of 2015, which is shaping up to be a good year.

And as Roland just outlined, we are reaffirming our guidance for the higher adjusted net sales and earnings per share at constant exchange rates. As with other companies, reported results were adversely affected by currency movements.

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

Thank you. Ladies and gentlemen, at this time, we will begin the question-and-answer session. (Operator Instructions) Derik de Bruin, Bank of America Merrill Lynch.

This is [Ann Augustine] calling in for Derik. Just a few brief questions maybe on some of your growth drivers like the bioinformatics platforms actually in light of the two announcements you made this quarter. So maybe just -- how do you think about the clinical opportunity as you move the bioinformatics platform from the research academic setting into the clinic?

This is clearly a big initiative that we currently have underway. We have a phenomenal franchise used by double-digit thousand user base in the research area for tools including real-time PCR and next-gen sequencing. That knowledge base however is universally applicable also into clinical applications and we therefore have a fantastic opportunity now link that also some of our diagnostic activities and we have increasingly actually started to bundle also in the companion diagnostics area, but also in routine clinical diagnostics, bioinformatics solutions with assays with lab works. This is ultimately part of a package.

So we have a very good access to the user base that's clearly in pathology but also across the areas of molecular diagnostics and with such a powerful knowledge base and now new tool emerging, our clinical decision support tool, we have a very unique opportunity to be the first mover with a very widely adopted tool already into research markets into this new emerging area of complex genomics interpretation and analysis.

So this is within the bioinformatics area, which is one of our five growth drivers. This is one of the most important initiatives for 2015 to continue to roll this out. The preliminary testings have been very positive and the feedback has been fantastic. It is something we're very much looking forward to report on as it further unfolds.

Tycho Peterson, JPMorgan.

Just two quick ones, if I can. First on QuantiFERON, can you maybe just give us a sense of how we should think about the ramp of the fourth gen test, any [update] on timing for the Gold Plus US submission and then QuantiFERON Monitor, you kind of introduced that as a concept last quarter, just wondering if you could kind of talk about timelines and then bigger picture, just stepping back, I mean just kind of trying to get people comfortable to the underlying growth in the business ex-HPV.

So Peer, maybe based on what you laid out, do you see a path to kind of sustainable high single-digit organic growth and call it 2016 and beyond, and what in terms of the pipeline is a big swing factor there? Is it sequencing, is it liquid biopsy, I'm just trying to get comfortable with the longer-term trajectory beyond the HPV headwinds?

So, the first is -- question was around the QuantiFERON launches. We launched fourth gen in Europe, also some other countries this has been CE marked and the uptake has been very good. Clearly, it's something that takes time. There is a well-established base of QuantiFERON-TB Gold users, the TB Gold Plus features which include user workflow, include higher specificity, include also features that we're currently validating to give indications on risk of progression into active TB. These are very, very unique features and giving us a significant competitive advantage and making it much easier to also convert skin test users into our product. That is something that is -- just takes time. It needs conversion, it needs education on these new features and further clinical studies and also supported by the research and clinical communities. So this will be an ongoing effort over the next few years and you'll see both product partly working in parallel also in the markets for some time.

We wouldn't necessarily see that that would be something that you would see on the revenue base, creating significant blips or jumps in terms of sales, but you'll see this trajectory that we currently have, which is a good double-digit growth in the QuantiFERON franchise, which is north of $100 million in sales already continue for the foreseeable future.

Monitor has also been CE marked in Europe and this is such a fundamentally new concept. It's quite revolutionary that we've seen enthusiastic by first key opinion leaders on the capabilities of this product. This is something that we are bumbling with our transplant and our immunology targets that include molecular and QuantiFERON assays. And that bundle has been working very well, actually a trade show just this week, we have received phenomenal support by the transplant community.

In terms of sustainable growth going forward, we've been recording high-single digit, even double-digit growth for the past, quite a few quarters already ex the HPV headwind. We've maintained our leadership position in HPV, albeit at lower revenue base and that headwind from the pricing -- primarily the pricing declines have dissipated. With that the Company will have its much higher growth rate on the rest of the franchise exposed, and we believe that the nature of the growth drivers, which is very long-term sustainable growth will therefore impact the overall growth rate significantly meaning, yes, we are definitely poised to move up the top line growth significantly. It doesn't depend on any specific pillar, but we have five pillars and they all are long term trajectories; QuantiFERON, QIAsymphony, personalized healthcare, bioinformatics and next-gen sequencing; all have a strong contribution to that long-term growth. This is not a one-product story, but we are a very well established company that builds insights -- contributes to insights for our customers and this is across different pillars and product areas.

Scott Bardo, Berenberg.

Thanks very much for taking my questions, just two please, quickly. Firstly, financial question just relates to the operating margin in the quarter, which is around 23% and probably a little bit weaker than we were anticipating, appreciate the comments around 25.5% adjusted operating margin flow for 2015. But I just really wanted to get a feel for how you're thinking about 2016, I think you had some long standing targets out there for around a 27% margin, implying then a 150 basis points expansion on 2015. I'm just wondering if you could square some of the comments you made about increasing investments in liquid biopsy clinical trials potentially with such a spot launch costs for next-gen.

Second, a quick follow-up was just on the GeneReader platform pretty encouraging to see you hit some various development milestones. Just wonder whether you could share some light on when we likely to understand a little bit better about this project, when will you showcase it, how far along are you within the commercial business plan, such that we can start seeing revenue contribution from this product?

Let me take the first question and yes, as I said on the call, we've felt also during the first quarter that we had a very good start into the year and at the same time, we were quite excited about the pipeline we are having, so we thought it was onetime and at the same time also to prepare ourselves for all the activities once that get our -- [seems] on our way. So we invested quite significantly on one hand side and sales and marketing activity and launch activities, but also at the same time, especially on bioinformatics, NGS has a lot of additional requirements for example IT infrastructure.

So we are able to accomplish a lot of this in the first quarter, at the same time, I would like to reconfirm that we feel also quite strongly about margin improvement for 2015 that only for the mid and long term. So given the actual FX environment, we do believe that we should be at least able to improve our overall EBIT margin around 50 basis points hopefully more and midterm, we feel quite comfortable, we can reach up to 100 basis points growth year-over-year, again this is of course without any currency impact which is always hard to predict.

Operational efficiency, you could see not only in the [aerial] level, but also in the gross margin level. A lot of the things which we did over the last 18 months are now also trickling through and giving us not only benefits on the P&L side, but also on the cash flow side. So I'm feel quite optimistic that we are able to improve our overall profitability quite nicely going forward.

Your question on the GeneReader, we did say today that the development is progressing as planned. We're targeting launch later in 2015. This is all reiterating what we previously said. The performance specs in many ways are already visible kind of today because we have panels already in the market. There were new studies that came out in this first quarter that showed that our panels hands down and beat the current gold standard in the market in terms of ease-of-use and coverage, specificity and sensitivity.

The goal of our development programs is not to develop a sequencer, but to make sure that customers who want to use our panels will have a sample to insight workflow, and the goal is to make sure that the performance that they're used to seeing on another platforms today can be replicated in our workflow with world-class bioinformatics and interpretation solutions to create the icing on the cake. This state is already visible today and what -- so it gives you a pretty good hint where we think we will be able to be later this year.

Brian Weinstein, William Blair.

Wanted to go back into bioinformatics a little bit. Can you give us some idea about the dollars that that is generating right now and are there other areas that you need to round out, obviously, you've made a number of acquisitions there, but just any updated thoughts on that. And then, can you talk about within the various product lines there, how you're getting paid today?

Good questions, the easy one is, what is the revenue base that we currently have, it's approximately 4% of our sales base and seeing significant growth. The growth is really across all customer classes, a very strong base in the research areas clearly through the legacy products, [ITA], also Ingenuity Variant Analysis or the CLC workbenches. But we're seeing very strong adoption in the meantime in the clinical markets and that is driving a lot of the growth, actually across all customer classes but in particular, clinical will be 2015's strong growth contribution.

It's very difficult to -- we have everything we need in such a dynamic and fast-moving environment, but if we look at what we're out to do is to create solutions that'll allow our customers to create valuable insights from complex molecular data, not only with the wet lab, but also with the so-called dry lab or bioinformatics solutions. We have a very, very strong pipe today already that we can put onto our wet lab solutions to create exactly that experience. So if we take a very focused or narrowly focused view, yes, we have everything underway for what we need, not in the near term, but it's obviously dynamic market with new potentials emerging and we are assessing these opportunities as part of our overall strategy.

Jack Meehan, Barclays.

I just wanted to get any commentary on the HPV market internationally and just your outlook there, sort of the opportunities for greater penetration versus how the competitive environment looks and any changes there?

It's almost -- they are like two heads of the HPV story. One is the story in the United States. There the story is against all expectations and I think against everything that you normally would expect, the incumbent product, namely our product, is a very strong market leading solution with the majority of the market and has transitioned this now into a new pricing level, which is clearly lower than -- substantially lower than what we saw a few years ago.

And this story is very different ex-US. We are hands down beating competition in almost every large screening program because if you look at competing products, the specifications -- the headline specifications just don't live up to the requirements of a primary screening campaign in large populations. And we're in the meantime undertaking several national screening programs. We haven't really announced this, and frankly because there is a lot of emotion around this whole portfolio in the United States. We've refrained from creating a lot of announcements of actually tremendous success that we're having outside the US, winning and implementing national screening campaigns even in very sizable countries, where we're talking about millions of women being screened. So this is a continued long and bright future that we have with this portfolio and we're continuing to invest in it. As the leader, we also see the responsibility to do that.

Story in the United States will start stabilizing later this year. We have, therefore, I think an interesting situation next year where we're going to be talking about growth rates in HPV and not HPV headwinds that were due to some irrational behaviors in the market.

Dan Arias, Citigroup.

Peer, on the liquid biopsy portfolio or business, is it your impression that there is basically a large group of companies that are putting together strategies here for liquid biopsy diagnostics or is it at this point are really the big cancer players that are pushing hard here and maybe as a follow-up to the bioinformatics discussion and as it relates to BGI, is BGI looking to incorporate Ingenuity Clinical or is it pretty much fairly into the research projects at this point?

So the first question, liquid biopsies, there are two pillars of our strategy. The one pillar is that we are enabling almost every player in the market with liquid biopsy solutions on the front end. So every time you read about liquid biopsies being used in novel tests and new companies emerging using this new approach to it to create new types of tests, you will almost always see our sample technologies either the manual solutions on QIAamp, on QIAcube, or also now on QIASymphony being used on the front end. They are pretty much ubiquitous. Our market shares on the front end are staggering and that's something that we're investing in heavily actually and you see also the breadth of solutions we have in the meantime. There is no other company that can easily jump between exosomes and circulating tumor cells and cell-free DNA, because the battle is not which of the three is better, but the ultimate value proposition is we're going to create most value for patients and that often depends and the ability to move to different sample technologies or use different approaches, [and seem] very valuable by our customers. So that's one strategy, absolute leadership in sample technologies for liquid biopsy.

The second strategy is that we're selectively integrating that into horizontal workflows combining with some of our tests as well and benefiting just like we're enabling other customers as well, benefiting from this new approach for our own tests and this includes existing tests like the EGFR portfolio. There are many others that we're using in the meantime. It includes for instance the compatibility of all of our liquids -- all of our next generation sequencing panels are liquid biopsy ready, and this is quite unique and while others fiddle around with different reagent combinations and different workflow combinations, we've immediately created compatibility for both FFPE, primary sample type and liquid biopsy solutions for our GeneReader workflows. And we see a tremendous amount of momentum in this market.

I think it will take some time to make sure that we are creating the right performance specifications in those markets to really replace some of the existing assays or some of the new promises, because early diagnostics very often looked good and the proof is in the quoting and extensive validations and this will be very, very important here because we're talking about diseases that are in many cases life threatening.

Jeff Elliott, Robert W. Baird GmbH.

First one here is on the (technical difficulty). In light of all the assays you've been adding to that over the past couple of years, can you give us an update on where the installed base is at in terms of the (inaudible) molecular diagnostics and applied customers and what they have reported right now on that platform?

It's interesting to hear that Baird just turned into a GmbH, are you inverted into Germany?

The QIAsymphony portfolio is about two-thirds the clinical and a third, life sciences. The majority of the life sciences placements are however in the area of applied testing, in particular forensic. We have some very interesting solutions for forensic customers. So, almost all of them are industrial and we are increasingly seeing a strong uptake in next-generation sequencing labs because the QIAsymphony has unique capabilities to do high molecular weight nucleic acid purifications, which is very difficult to do. And we have some unique protocols that are in the QIAsymphony where exactly that purpose. In addition, we have the ability to run also the liquid biopsy technologies on the platform as well. So the breadth and the quality of these sample types is very amenable to next-generation sequencing and we're seeing good uptake there as well. And that is both clinical and life science, but again the majority clinical -- two-thirds, clinical and a third life science, the majority of that Applied.

The menu breadth in Europe is very significant, and we are continually upgrading it. We had big upgrade last year in hospital acquired infections, have the full menu there. Actually some very novel tests that are not available from any other player in this market and have seen very good traction there as well.

In the United States, the menu remains very limited. We'll continue to put menu on to the platform, but we're more integrating select FDA approved products with broader use within the laboratory developed testing where the breadth and the flexibility of the platform is unrivaled. And this is giving us good traction in the US. If you look at the placements there, they are actually significant, it's approaching 50:50, I guess US and the rest of the world. And this trend will probably continue that way.

The pull through is something that depends very much on the -- the market we're seeing very strong growth in the consumable and assay pull through, very high double-digit growth rate in this space, but on the overall franchise, pull through is still south of [100,000] which considering that there is a big [crowded T base] is actually very good.

Dan Leonard, Leerink Partners.

So Peer, just hoping you could offer some color on what you're seeing in the pharma market that was the slowest growth of your customer classes this quarter, but it seems like many of your peers are talking of pharma as a source of strength, so hoping you could help me reconcile?

Yes, it's a good question and to understand that the first part of the answer will be that there are different parts of supplies into pharma. So one is for instance in the (inaudible) and quality control where we're starting to see good ramp ups of biologics and also therefore good expansion of the use of these tools and this is an area that we have some exposure to, but not really a lot. Our primary exposure is into the early stage research and/or pre-clinical research and the other half is in the area of clinical research, and clinical research is continuing to do very well. We're seeing good growth rates, but preclinical is very, very compressed due to cost saving measures and that trend that started almost 10 years ago, that's just continuing. In addition, we're seeing some lumpiness. There are quarters where you have a big clinical trial and then you have big orders coming through and then that can impact the quarter in $1 million or $2 million in sales on that percentage of revenue will have a big impact.

We are very committed to this because of the porosity into the clinical world especially through the companion diagnostics franchise, it's sometimes difficult first to allocate between these two areas. But the expectation is that we're going to see lower to mid-single digit growth in the pharma market probably over the -- as a long-term trend.

Doug Schenkel, Cowen & Company.

I have three, let me just rattle through them real quick. First, I believe you previously guided us to expect 60 basis points to 70 basis points of operating margin expansion for the full year, net of 30 basis points to 40 basis points of FX. I believe guidance is now for 50 basis points of operating margin expansion for the year. In your prepared remarks you indicated there will be no incremental impact of FX on margin, if I have all these observations accurate, what's the change here? That's the first question.

The second question is on the last quarterly call you indicated that FX would reduce EPS by -- I think it was about $0.05 to $0.07 on a reported basis for the full year, based on current rates would the impact on EPS now be about $0.10 to $0.12 on a reported basis?

And my third question is constant currency consumables growth was about 2% as we try to assess the puts and takes. Can you breakout what the growth rate was for bioinformatics and M&A. I'm just trying to get that organic consumables growth excluding HPV, M&A and bioinformatics.

Let me try the first ones and (inaudible) took my brain as I will do the third one.

On profitability, I think -- at end of the day nothing really has changed if it comes to operating margin. If you look at the final outcome what I think -- what we said earlier this year is of course it is hard to predict the currency is going to go and therefore we strongly stick to our constant exchange rate guide in terms of revenues, as well as in terms of EPS and what we did is giving all this indication for the next quarter.

Having all said, what we have seen now in the first quarter, at the end of the day that, on one side we actually got some tailwind in terms impact on our margins and that was mainly driven by the relationship between euro and US dollars. On one hand side as we do have a cost overhang in euro that is actually beneficial for us.

At the same time, what we have seen which is clearly a quite significant change [while this probably is that] currency relationship between US dollar and Swiss franc. Swiss franc improved, which is also important one for us. So that was the reason -- we ended on our Q1 results.

If you would take now the April currency rates, actual currency rates of April as a given for through rest of 2015, we do believe that we will have an actual rate that's probably a 50 basis point improvement for the full year of 2015. And therefore, I think we're very well in line on what we said on our mid and long-term guidance. Again, we're right now running on full steam and that is driven by a couple of significant launches Peer described before.

On the EPS side of things, even I would say have improved for us compared to what we have seen and said during our January call and then guidance, because what we've said today is that we have seen around $0.02 EPS impact for the first quarter on currency and we expect around $0.02 EPS impact for the second quarter, but of course, if you look on the currencies and how they moved in 2014 in the third and fourth quarter, this impact is going to diminish in a larger way. So the overall impact is probably coming down quite a bit and again I don't want to get to precisely because nobody knows exactly how currencies are moving, but again using April rates, we probably have some around $0.02 for the second six months of 2015 on currency impact.

So then on one hand side if you look down that our guidance is somewhere between $1.16 and $1.18 EPS for 2015 on constant exchange rate and I've given you right now let's say around $0.06 to $0.07 EPS that is clearly better than quantums right now as I see the list.

The third question on the revenue growth rate, as we said [or scripted], at the end of the day, we had an overall growth rate of 2.3% for the quarter and at the end of the day, we had a contribution from the acquisitions of around 2% as well and that was less that includes of course HPV franchise or ex-HPV. The organic growth rate was around 6% and going over the cause of 2015, we do expect that it's going to incrementally to improve. Bioinformatics has a solid growth rate so far, as Peer indicated before and obviously now being around 4% of total, so we feel quite strongly about that as well.

William Quirk, Piper Jaffray.

Two questions. First one is giving the experience that Qiagen has in diagnostics and certainly in sample prep, where do you see the greatest uptake in the near term for liquid biopsy and then what applications do you think will take longer to develop?

Good question, Bill. It's something we're thinking a lot about, because there are a lot of applications that look kind of interesting but we'll probably require a lot of validation and as (inaudible) a lot of money and a lot of the time and ultimately not lead to the results that we all expect. We see the market currently by far dominated by pre-natal testing. This is the earliest form of high volume liquid biopsy testing that emerged and that will -- this is clearly a growth driver and will continue to be a growth driver for many years and that will probably be the largest in terms of volume for quite some time.

The next that is emerging is -- are not these very complicated fancy new tests or -- but are actually existing tests that have been well-validated in controlled clinical trials using primary tissue. And where we can then do a side by side like we did with study with the ASSESS study with AstraZeneca, where you basically have the tumor and the liquid biopsy sample run in parallel and can do concordance studies. That is going to be much stronger, I think that is underestimated in the public that's actually where there's a bigger trend a right now.

And the third area I think is, these are very complex new tests that are emerging for indications that previously were not testable or only very difficult to do. That is going to take some time to validate and to become high volume routine tests over time. So commercially, by far the largest existing tests is prenatal, moving into liquid biopsy.

Daniel Wendorff, Commerzbank.

One follow-up question on the liquid biopsy test development. Can you comment on how many developments like percentage-wise, which I assume is the broad indication in oncology and what other indications are being pursued?

And second question on the QuantiFERON-TB test, on the back of what you've said in the call, would you be comfortable to achieve more than 20% growth for this test in sales in 2015 again?

The first question, this is follow on to what we just talked about before with Bill is -- again the majority is currently prenatal testing in the various step tests that are emerging out of that. In the secondary area are the existing tests, very often single marker tests, but also next-gen sequencing panels in the meantime. And the newer test will take some time to emerge probably, because so it's oncology is by far the most that we're seeing right now but also starting to see some other indications emerge but it's -- the majority is oncology.

The QuantiFERON franchise, the revenue base that we have today, it's over $100 million. It's continuing to grow very rapidly into the market with new products coming. We would not put any expectations of prior growth rates, but the market is biased and this is not a market that will suddenly snowball and start accelerating in growth rates. As we've seen with other similar tests in the past, you'll probably see a trajectory -- a long-term sustainable trajectory of penetration into the market, over 50 million skin tests being done a year. The market starts to expand it with higher prevalence countries not suddenly becoming economically and clinically very viable areas to implement latent TB testing that significantly expands the market size. And with that, the growth rates are -- definitely have a lot of support in terms of the environment. The market opportunity to just be able to show a very strong double-digit growth, they wouldn't want to put out a number right now. We're going to do that every year. But the long-term trajectory is definitely -- I wouldn't expect this to suddenly decelerate or suddenly accelerate, but pretty much continue like this.

So with that, I'd like to end the conference call and thank all of you for your participation. If you have any questions or comments, please don't hesitate to contact me. Thank you very much, bye-bye.

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