Thierry Bernard: Well, I wouldn’t say, Patrick, optimistic or pessimistic, I would say coherent. We keep saying the same thing since 2023, where we said that we would never expect the Chinese market to bounce back any time soon. And we always said, at least not before end of 2024 and probably more 2025, and we maintain that position. The Chinese market is in a transition phase post COVID that is impacting both life science and clinical diagnostics. QIAGEN has a relative limited exposure, it’s 6% of our revenues. And we have, I think, the strategy that is needed to tackle the need of the Chinese market, which is, first, investing into local R&D and manufacturing any time this makes sense. Second, having a double brand or second brand, which is serving exclusively the Chinese customers with Chinese product.
We are obviously monitoring all the initiatives taken by the Chinese authority to try to boost their market, especially the recent capital investment initiative. It’s too early to say what’s going to be the impact, but we are fully and closely monitoring it. So for us, China in 2024 is on track with our expectations. We don’t see any bounce back. And as I said many times before, starting 2025, this market should represent a mid-single-digit growth opportunity for a company like QIAGEN.
Patrick Donnelly: Okay. That’s helpful. And then, Roland, maybe one on the margins. You obviously had a pretty healthy ramp throughout the year, which is pretty typical with you guys. But can you just talk through the moving pieces as we work our way through that higher exit rate on the margin side and the key variables and visibility into the execution there? Thank you guys.
Roland Sackers: Yes. Well, I think overall, as you said, a good start into the year. We also expect already that the second quarter has another ramp in terms of operating income adjusted, clearly going nicely to the 27% range. So I do think there’s a good ramp. And therefore, I think also visibility for the rest of the year that we make or at least 28%. While we believe that R&D investment stays around about 10% for the full year, probably a bit lower relatively in the fourth quarter, there’s still leverage opportunity around SG&A, where, again, we clearly still utilization come from our digitalization efforts, but also scale, of course, is going to help there as well. So overall, we continue to see margin improvements options, not only for 2024, but also beyond.
And of course, we’re going to talk about that on our Capital Markets Day. Tax rate was a bit higher in Q1. I would assume that normalized over the rest of the year as well. So as I said so far I would say the start was quite healthy for us.
Patrick Donnelly: Thank you.
Operator: Next, we go to Jack Meehan with Nephron Research. Please go ahead.
Jack Meehan: Thank you. Hello everyone. Maybe just to start, I was — I want to dive into the genomics results. Can you talk about visibility in the QDI contract timing you called out in the release and just the path to getting back to growth for that business for the rest of year, what your visibility is?
Thierry Bernard: So Jack, it’s very simple. The Q1 was mainly due to a timing of revenue recognition. And basically, it’s even for one contract, that in this QDI business sometime we have last contract, especially with pharma. That doesn’t question at all. First of all, the investment plan that we explained to the market six months ago. And that doesn’t question at all, our goal for double-digit growth for the rest of the year. So it’s just a question of timing of recognition.
Jack Meehan: Okay. Great. And then on QIAcuity, can you talk about a little bit more on some of the key menu that you expect to roll out throughout the year? And just like what that should mean in terms of the pace of growth within the PCR line? Thanks.
Thierry Bernard: Well, we believe, as we said many times, Jack, that this solution has a double-digit growth potential. I’m referring to the digital PCR QIAcuity line. And when I say double digit, it’s much closer to the 20% than the, let’s say, low double digits, number one. Second, as you know, we have an extremely differentiated company, we offered many workflows and systematically, since the last — or for the last 3 years, we developed a menu first for life science. And it really made a difference, started 1.5 years ago when we started to have biopharma implication. Now we are moving also to cell and gene therapy application and QC control for pharma. But remember also that we remain committed to launching this solution for the clinical market.
We want QIAcuity to be FDA approved. We expect this — the platform to be FDA approved. We expect that for — this for 2024. And then the plan is to launch menu around hemato-oncology panels like BCR-ABL, for example. So that’s the plan that we confirm. And this is where we want to go, both life science and research and clinical application.
Operator: We’ll go next to Catherine Schulte with Baird. Please go ahead.
Catherine Schulte: Hey guys, thanks for the questions. Maybe first on the academic side. You mentioned the NIH budget came in, in line with your expectations. We have seen a slowdown in NIH outlays in the last two quarters. So could you just talk to what you’re hearing from customers in that end market?
Thierry Bernard: Well, as we said before, Catherine, if you compare, for example, 2023 with 2024. In 2023, we did budget for roughly a 3% increase of the NIH budget, and we were right. This year, we were more cautious for different reasons, the economic context, the political context and we said flat, and we were right as well. We continue to have extremely active collaboration with the NIH in the sense, for example, that you have heard about the recent detection, for example, of H5N1 in milk, for example, this is a field where we collaborate with the NIH. You have seen also the previous discussion, especially in February around the detection of Clade I and Clade II for monkeypox decision of the field where we collaborate with the NIH.
We have an amplitude of arrays of fields where we can collaborate with this major research from components, oligos, enzymes to finished product, whether it is PCR or digital PCR. So it fits what we planned for the year. We believe that I cannot speak on behalf of the American authorities, obviously, but it’s a kind of a transition period. And it’s clear that I haven’t seen the U.S. authorities saying that they don’t want to invest in high-value technologies or research and development for the future. So we are still confident that this funding will bounce back at a point.
