Qiagen N.V.
Q3 2018 Earnings Call Transcript

Published: 30 Oct 2018

[Operator:]

Ladies and gentlemen, thank you for standing by. My name is Emma, your Chorus Call operator. Welcome, and thank you for joining QIAGEN's Conference Call to discuss the Q3 2018 results. 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 their Internet site. The presentation will be followed by a question-and-answer session. 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, sir.

[John Gilardi:]

Thank you, Emma, and welcome to our conference call today. The speakers today are Peer Schatz, the Chief Executive Officer of QIAGEN; and Roland Sackers, the Chief Financial Officer. Also joining us is Dr. Sarah Fakih from our IR team. Please note that this call is being webcast live and will be archived in the Investors section of our website at www.qiagen.com. A copy of the press release is also available in the same section. Before we begin, let me cover our Safe Harbor statement. The discussions and responses to your questions on this call reflect management's views as of today, Tuesday, October 30, 2018. We will be making statements and providing responses to your questions that state our intentions, beliefs, expectations, or predictions of the future. These constitute forward-looking statements for the purpose of the Safe Harbor provisions. These 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 U.S. Securities and Exchange Commission. We will also be referring to certain financial measures not prepared in accordance with generally accepted accounting principles. You can find a reconciliation of these figures to GAAP in the press release and to the presentations for the call. With that, I'd now turn over to Peer.

[Peer Michael Schatz:]

Well, thank you, John, and thank you to all for joining us for this call today. Our results for the third quarter of 2018 confirm the solid performance our teams are delivering during an exciting year of growth. They also show the progress we are making on building a unique and differentiated portfolio of Sample to Insight molecular testing solutions across the continuum of customer needs from basic research to clinical healthcare. We are on track to achieve our targets for higher sales and adjusted earnings in 2018 along with a significant increase in cash flow. I have these key messages for you today. First, QIAGEN exceeded the target set for the third quarter of 2018. Total net sales were $377.9 million, rising a solid 6.5% at constant exchange rates and above the target we had set for about 6% CER growth. Adjusted earnings per share was $0.35 on a reported basis and they were $0.36 at constant exchange rates; this was ahead of our outlook for about $0.33 to $0.34 per share on a CER basis and reflect the significant efficiency gains our teams have achieved. The improved profitability was also reflected in the adjusted operating income margin, which rose 1.5 percentage points on a CER basis and was 28% of sales on an adjusted basis. Second, we are advancing our Sample to Insight portfolio to address opportunities across the continuum from basic life sciences research to routine clinical healthcare. Among the highlights, sales of the QuantiFERON-TB test grew at a solid mid-teens CER rate, achieving the target we had set for QuantiFERON growth. A key development during the third quarter was the European launch of our strategic collaboration with DiaSorin and the new automation option for customers to use the LIAISON system for the test readout. We believe this partnership, along with the new pre-analytical workflow option with Hamilton will enhance growth and give us additional confidence in achieving the 2020 target of more than $300 million in annual sales. As another highlight, our teams are establishing a European footprint for the QIAstat-Dx system, which is gaining recognition as the next-generation solution for providing accurate insights into complex disease syndromes, such as respiratory and gastrointestinal conditions. We are on track for the U.S. regulatory submission and market entry next year in time for the fall 2019 respiratory season. We're also moving ahead with new placements of the QIAsymphony automation platform and are set to soon reach more than 2,300 cumulative placements during the fourth quarter. QIAsymphony has become the most highly versatile and modular automation platform in our industry, and we continue to look forward to a solid placement rate in the coming years along with solid growth for the related consumables. In next-generation sequencing, we are on track to achieve our goal this year of more than $140 million from this portfolio, up from about $115 million in 2017. QIAGEN recently launched a breakthrough technology for RNA sequencing on any platform. Meanwhile, the GeneReader NGS System is growing in placements and consumable sales, and we're launching new assays, further expanding the available menu. Third, QIAGEN is emerging with the leading portfolio of disruptive new molecular diagnostic technologies addressing very large market opportunities. The strategic partnership with NeuMoDx announced in September added two new fully integrated testing platforms. NeuMoDx is a highly synergistic platform with our portfolio and shares the sales channels with QIAstat-Dx and QIAsymphony. This new partnership will enable us to offer the ease of clinical chemistry testing automation now to molecular diagnostic laboratories. I will come back to this topic later. First, based on the solid performance in the first nine months of the year, we are reaffirming our sales guidance for 2018, while raising the target for adjusted EPS. We continue to expect about 6% to 7% CER total net sales growth. This outlook includes about $7 million of first-time sales from QIAstat-Dx weighted into Q4. It also assumes about 1 percentage point of headwind from reduced U.S. HPV test sales and also absorbs the adverse impact of the recent product portfolio changes. For adjusted EPS, we have raised our outlook to $1.33 to $1.34. This is an increase from the prior range of $1.31 to $1.33 per share at constant exchange rates. So, as a quick summary, we are pleased with the progress QIAGEN has made in 2018 and the progress we are making toward our mid-term 2020 targets. I would now like to hand over to Roland.

[Roland Sackers:]

Thank you, Peer. Good afternoon to those of you in Europe and good morning to those of you in the U.S. I will first review the financial results for the third quarter of 2018 and later provide you with an update on our guidance for the fourth quarter and for full year. As you saw in our press release, we had another strong performance in the third quarter as we exceeded the targets set for sales and adjusted EPS. Furthermore, free cash flow for the first nine months of 2018 was up 21% to $176.7 million and this was after taking into account the $30 million of prepaid royalties for the Natera partnership announced earlier this year. The net sales growth of 6.5% CRE, exceeded our target for about 6% CRE growth. On a reported basis, net sales was 3.8% to $377.9 million and this includes the adverse currency headwinds compared to $364 million in the year ago quarter. As expected, the launch of the QIAstat-Dx system provided initial revenues amounting to less than 1 point of incremental growth. The rest of the portfolio showed solid organic gains and this was particularly impressive given that the results absorbed the negative impact from the disposals of several product portfolios. These changes included the divestment of a veterinary testing portfolio announced in early 2018 as well as a structural change in China announced in late 2017 to sharpen our (00

[Peer Michael Schatz:]

Yeah. Thank you, Roland. I'm now on slide 9 to give you an overview of key developments in our Sample to Insight portfolio. In the intro, I mentioned our QIAstat-Dx system for syndromic testing, which we discussed in detail during our last quarterly call. We are rapidly expanding our placements in Europe, Asia and Africa. In addition to our focus on placements, we are also working on a long-term plan for a significant menu expansion, and as part of this plan recently added a new very comprehensive gastrointestinal panel. Our flagship QIAsymphony automation platform continues to show a robust placement rates and solid consumable pull-through. Our leadership in differentiated technologies continues to produce growth in areas, like processing samples, for microbiome research or in liquid biopsy. Now, let me go into more detail on the other four areas, including NeuMoDx, our newest molecular platform technology; QuantiFERON-TB; next-generation sequencing with our GeneReader NGS System and universal NGS solutions; and our Personalized Healthcare franchise. I'm now on slide 10 to give you an overview of QIAGEN's comprehensive portfolio of automation systems, how it addresses the majority of the Molecular Diagnostics market and how NeuMoDx Dx (00

[Roland Sackers:]

Thank you, Peer. I would like to now review our targets for the fourth quarter and our updated outlook for 2018. For the full year, we continue to expect total net sales growth of about 6% to 7% CER. This is based on the broad business expansion continuing into the second half of the year, along with about $7 million of first-time M&A contributions from the launch of QIAstat-Dx. This outlook also absorbs the change to our business portfolio and also about 1 percentage point of headwind from reduced U.S. HPV sales. For adjusted EPS at constant exchange rates, we have raised our outlook to about $1.33 to $1.34 and this compares to the prior range of $1.31 to $1.33. This is due to the significant efficiency gains we have been able to realize, while at the same time making significant investment in the launch of QIAstat-Dx. As for currencies, based on rates as of October 26, 2018, in terms of net sales, we expect a currency headwind of about 1 percentage point on results at reported rates. For adjusted EPS for the full year 2018, we now expect a currency headwind of about – of up to $0.02. For the fourth quarter, our guidance is for total net sales growth of about 6% to 7% CER, and this includes about $5 million of M&A contribution from QIAstat-Dx. This outlook also absorbs the sales loss to (00

[Peer Michael Schatz:]

Yeah. Thank you, Roland. Here's a quick summary before we move into Q&A. Let me review what we announced. First, we had the third consecutive quarter of solid 6% CER growth in 2018 with adjusted operating income continuing to grow at a faster rate than sales and leading to adjusted EPS of $0.35 per share, which was above our target. Second, we are advancing our Sample to Insight portfolio across the continuum from basic research to routine clinical healthcare. We continue to deliver double-digit CER growth from our top products like QuantiFERON-TB test or QIAsymphony automation system and differentiated technologies like liquid biopsy, microbiome and NGS solutions. We are also excited about the European footprint we are establishing for the new QIAstat-Dx platform and the growth potential in syndromic testing. Third, QIAGEN is emerging with the leading portfolio of disruptive new molecular diagnostic platform technologies addressing very large market opportunities. The strategic partnership announced in September with NeuMoDx bringing us two new fully integrated testing platforms is highly synergistic with our portfolio, channel and footprint. Finally, as a last point, we are on track to achieve the sales outlook we have set for 2018 and have raised our outlook for adjusted EPS due to the significant efficiency gains our teams have achieved. We feel very good about our 2018 and are looking forward to executing on our strategy in 2019 as well. With that, I'd like to hand back to John and the operator for the Q&A session. Thank you.

[Operator:]

Ladies and gentlemen, at this time, we will begin the question-and-answer session. To ensure we can accommodate as many people as possible, please limit yourself to one question and if necessary one follow-up. First question comes from the line of Patrick Donnelly with Goldman Sachs. Please go ahead.

[Patrick Donnelly:]

Great. Thanks. Peer, maybe just recognizing you're not guiding for 2019, but it feels like a lot of investor focus has shifted that way and you guys are uniquely positioned and most are actually expecting an acceleration in growth for next year or so. Maybe just with HPV coming in maybe not as big of a headwind as originally anticipated this year, QuantiFERON, a nice stable growth backdrop. Can you just walk through some of the moving parts and upside drivers at a high level for next year relative to 2018?

[Peer Michael Schatz:]

Sure. Thanks, Patrick. So, we are indeed quite pleased with the progress we are seeing towards our ambitions for faster growth. And if you look at the recent years, we have consistently been delivering or over-delivering on our targets. For 2019, we will provide our formal outlook as usual in January when we provide a wrap-up of 2018 and give formal guidance. As we look into the New Year, it's clear that there are – it has the potential to be a quite exciting year for us. In terms of sales growth, we're looking for continued expansion of our portfolio, which is currently on track for 6% to 7% growth. And clearly also with good growth on QIAstat-Dx, which we guided for about $30 million of sales in 2019 versus $7 million in 2018. NeuMoDx will take a little bit longer to ramp, because the lead times are a little bit longer on that one, so that's more a 2020 impact. But indeed, we're looking quite positively into 2019, for that matter also into 2020 and 2021. And there is a pretty good trajectory from the foundation that we've created in 2018. But again, formal guidance will be given in January. That will also allow us to have the benefit of the additional ramp, for instance, in QIAstat in the fourth quarter and we'll be able to give a little bit more detail then around some of these growth trajectories that we expect for 2019.

[Operator:]

The next question comes from line of Tycho Peterson with JPMorgan. Please go ahead.

[Tycho W. Peterson:]

Hey, thanks. Peer, I'll start with NeuMoDx. I just want to understand a little bit more of the strategy here. The automated PCR space is fairly crowded with some entrenched players. So can you maybe just talk a little bit more about how you think the platform is truly differentiated? Are you expecting any cannibalization around QIAsymphony given some overlapping applications, and then how much incremental R&D is going to be required to clear the assays in development? And then as a follow-up, just on guidance, I'm just trying to understand for the fourth quarter as well, is there anything baked in? I mean, you are guiding EPS a bit below the Street. Anything baked in in terms of QuantiFERON? You have had some competitive moves in terms of Quest acquiring Oxford's lab business. So is there anything there factoring in? And then anything on Palmetto, the final LCD for QIAstat? Thanks.

[Peer Michael Schatz:]

Sure. So first on the – I'll take the three strategic questions, and then I will hand over to Roland for the guidance. So first on NeuMoDx, integrated real-time PCR testing is by far the largest segment of Molecular Diagnostics, and it's a market segment where we are actually in those laboratories on a daily basis with our offerings. With QIAsymphony, we have a fantastic offering, which will continue for many years to show good growth. But it is more of the modular PCR market, which is a smaller sub-segment of Molecular Diagnostics, I showed (00

[Operator:]

The next question comes from the...

[Roland Sackers:]

And in terms of – just (00

[Luke Sergott:]

Hey, guys. This is Luke on for Ross today? Just two quick ones, following up on Tycho's with the QuantiFERON. You talked about it in your presentation about the vaccine test and how it's associated with that. Can you just give an idea of the timing and the sizing of this and what that would mean – how would that change the outlook for the overall market size for you guys. And then I guess on the – the second one will be on NGS portfolio, solid growth there. But can you unpack any of that where you're seeing the majority of the growth from a product perspective, geography or a specific application? You talked about the RNA-seq, et cetera.

[Peer Michael Schatz:]

Great. So well, the treatment of latent TB is antibiotic regimen which takes a few months. There are several approaches to take it down to a few weeks. But it is still a longer process that a patient has to go through. It is obviously much more attractive to address the latent pool in eradicating TB than going after the actives (00

[Operator:]

Next question comes from line of Bill Quirk with Piper Jaffray. Please go ahead.

[William R. Quirk:]

Great. Thanks. Good afternoon, everybody. First off, Peer, can you help us think a little bit about the risk elements to the NeuMoDx story? If my memory is correct, they were able to develop this system in a fraction of the time of most of the instruments on the market. So I'm wondering what's left to do here before we get to commercialization? Also maybe a word on the initial menu. Certainly, some of their science to-date would suggest they're heavily focused on the viral load space. And then lastly, just some color on the U.S. TB testing trends. Just kind of excluding the whole questionnaires that has (00

[Peer Michael Schatz:]

Sure. Well, the latter, I'll start with that first. I saw a commentary on that. The interesting thing is the U.S. is growing very rapidly in QuantiFERON. We are seeing north of 20% growth in QuantiFERON North America. We are aggressively expanding also our channel in this space and then pushing very hard into this market. The 2019 DiaSorin option is very attractive. The front end Hamilton systems, I'm here in Maryland, we had several accountants yesterday looking at the complete workflow automation. And it's a real game changer in terms of what we had previously and, now, the new level of automation. So that is the – that's a trajectory that we expect also to continue into 2019 and thereafter. So the $300 million target that we have for 2020, while it sounded like a pretty bold statement a few – a couple of years ago when we put it out. If you look at where we are today, we're getting – and it's getting – it's very likely that we will be able to make that target. In terms of the NeuMoDx technology, just as a note, the system is already FDA cleared. So it's not in a research stage or a lot of hurdles. It's already being applied in laboratories and first customers are already using it. You will see some customer presentations also at AMP and the system will be available for visits, and we are already taking orders for the system in Europe. So this is not a development stage technology. We've been minority investor for quite a few years just like in QIAstat and when we saw the technology then past certain hurdles, we acquired it. The reason why the development timelines are shorter is because the core technology is really a shoe box size module that integrates all the microfluidic processing and that is placed on standard liquid handling instruments that have the robustness of systems, of which thousands have already been placed. So you actually have a significantly easier development timeline. This is why two systems are now launched concurrently with very good meantime before failure rates systems that are extremely reliable and have been tested for years in the market. So, the menu is going to expand all across what you would expect in this area. And obviously, the viral load is part of that plan also going forward, but the first assays that are on the market are in the area of women's health and we will also see then transplant. And the interesting thing is you can also random access LDTs into it in an unprecedented way, not a separate channel but completely integrated. So it has a very fast pathway to a broader menu including also LDTs.

[Operator:]

Next question comes from the line of Doug Schenkel with Cowen. Please go ahead.

[Doug Schenkel:]

Hi, good morning, good afternoon, everybody. Just starting on companion diagnostics, you had another really strong quarter with co-development payments. Can you talk about what's driven the strength this year? How are you thinking about Q4? And how we should think about 2019 for co-development payments given the result of your strength this year as a tough comparison?

[Peer Michael Schatz:]

Thanks, Doug. Yeah. It's indeed a franchise which is doing very well. We always said that our goal was to keep that number pretty stable. But we've seen a remarkable inflow of new partnerships, in particularly around immuno-oncology. And we hope to be coming forward soon with some next-generation immuno-oncology testing solutions. So it's difficult for us to model these things. It's milestones-based. And we are running dozens of programs. And – but our goal would be to keep this pretty stable at this level that it is. And we're running somewhere in the – we detailed at one somewhere between $35 million and $40 million. It's a little bit more than that now. But that's about the level that we would be continuing going forward. This is just reimbursement for research and development expenses. And that's probably our best assumption for now. We're a little bit above that in 2018. But it could very well be that this continues – that this is just very difficult to predict.

[Operator:]

Next question comes from the line of Scott Bardo with Berenberg. Please go ahead.

[Scott Bardo:]

Yeah. Thanks for taking my question. And obviously, a busy strategic year in molecular, and you've given some explicit targets for QIAstat-Dx. I think you've seen a couple of million thus far and expectations for a major step-up towards $30 million or so next year. So I just wonder if you could give some comfort around achieving this, what needs to happen from a manufacturing, regulatory and commercial perspective. And following-up from this, I think you value the NeuMoDx business some 50% higher than you paid for cost at Dx (00

[Peer Michael Schatz:]

Yeah. Thanks, Scott. Yeah. So, the valuations are also some way a function of what the hurdle is to get into this business. And the investments to develop a platform for the integrated market is very high and especially it's a scalable technology, where we're really acquiring distribution rights now in the first phase to two systems. And there, obviously, it could scale even further than that. But the module development was indeed quite expensive to do and that was now achieved successfully. And so, that is also partly reflected in that. But the market size is also large. As we all know the syndromic testing market is about $800 million in size. We're looking at it substantially, three times the size more than that in the integrated segment. And so from that perspective, I think we do have expectations. But this is not an easy – a fast cycle like we would have with the QIAstat, where we literally have trade shows customers who basically purchase it pretty much. There, we're definitely going to look at six-month cycle there and increasing also validation required, also third-party validation. In terms of the QIAstat ramp-up, yeah, definitely, the manufacturing, the menu expansion, phasing these all into the QIAGEN processes is a big challenge, but we kind of like this model of going in, in a stepwise approach and actually having had a good piece of equity and also a discussion years before we entered into the transaction with QIAstat was a benefit. We also have a good stake in NeuMoDx today. And, if we trigger the acquisition, then that would be a very similar process to what we saw with QIAstat.

[Operator:]

The next question comes from the line of Daniel Wendorff with Commerzbank. Please go ahead.

[Daniel Wendorff:]

Yes, good afternoon and thanks for taking my questions. Two if I may, the first one is on your actually quite good adjusted EBIT margin expansion we have observed to fund (00

[Peer Michael Schatz:]

Roland, do you want to take the margin question first?

[Roland Sackers:]

Yes. Sure. I think Daniel, you're absolutely right. I think we have seen a very strong margin improvement this year. And we are clearly also a little bit ahead of what we thought we are. Nevertheless, I think this is a very good news in general, because I think all the drivers and all the leverage we were able to achieve over the last few months are also drivers we believe are going to stay and continue also going forward. And again, I'm not going to repeat what I said before. So overall, I think it's a sustainable profitability, and we do have a mid-term goal out to an overall EPS growth, and that is something where we're aiming to.

[Peer Michael Schatz:]

Good. And the first question was around QuantiFERON in China. So it's a little bit of wildcard. It obviously represents a very large market opportunity. There are rumors of several dozen million skin tests being performed in China. And just to remind you, we see the global market, it's somewhere in the range of 80 million skin tests at the moment or latent TB tests of which by far the majority of skin tests still. So – but obviously, the system is a little bit more tiered in China and so we are currently already approved in China where our product is being widely used. And we are, however, primarily targeting centralized screening centers and some of the Tier 3 hospitals that are at higher levels of healthcare standards and quality. And so it will be important to see the importance of TB eradication move up. And with that, we would then scale stronger into the broader healthcare market in China, and this is obviously what we're working with Chinese agencies towards. So it represents a little bit of wildcard. It's not a yes/no for us to be able to make our target market. If you look at where we are today and the momentum we're showing, the trajectory clearly points to the $300 million and China would be a nice wildcard, but it's not a necessary big bang that is required there.

[Operator:]

And the next question comes from the line of Steve Beuchaw with Morgan Stanley. Please go ahead.

[Steve Beuchaw:]

Hi. Good afternoon to you guys and thanks for the time here. One quick one for Roland and one quick one for Peer. Roland, you gave currency guidance top line, bottom line for the fourth quarter. Is that a reasonable barometer for what we should expect for the first two or three quarters of 2019? And then, Peer, I wonder if you could speak just about prospectively your expectations for the moving parts in the applied business? I know human ID and forensics has been very strong. It seems like you're gaining share there in the U.S. Then there are a couple of other parts of the business that have been growing as quickly. And I wonder if you can just help us understand the puts and takes there and how are you thinking about that going forward. Thank you.

[Roland Sackers:]

Yeah. Let me kick it off. And we said for the fourth quarter it's about 4 percentage points of effect in terms of net sales and about $0.01 for EPS. Again, as you know, a lot of the impacts are going reverse next year because it kicked in over more or less in the mid of this year, sometimes even in the second quarter particularly Turkey. So clearly we will have some time next year (01

[Unknown Speaker:]

In Applied Testing, it's a – the big piece of those 9% of our sales is indeed human ID, as we call it, or forensics. And we are taking share there in that segment, in particular on the assays that we launched a few years ago and that are doing very well. But we're also seeing now GeneReader placements with some of the protocols that we also discussed in previous calls, the ICMP and other protocols, we're seeing the first placements there. So what we are really doing here as a company, we're focusing on areas where we can create the highest degree of synergy and scale. And this is also why, an example for the NeuMoDx and QIAstat transactions (01

[Operator:]

The next question comes from the line of Jack Meehan with Barclays. Please go ahead.

[Peer Michael Schatz:]

Hello, Jack?

[Jack Meehan:]

Portfolio additions you've had, how do you feel about the durability of the QIAsymphony placements and consumables growth from here? And then for Roland, on the margin front, as you think about balancing some of those investments in molecular against the cost initiatives you have underway, do you think 75 to 100 basis points of margin expansion is still a good run rate from here? Thank you.

[Peer Michael Schatz:]

So the first question is on QIAsymphony, which as we said before will probably break through its target now in the fourth quarter. We feel pretty good about that. Placements are expanding. There are two applications of QIAsymphony. One is, as the portal through which samples move into molecular testing, so we can – with hundreds of protocols on the QIAsymphony, we can process any type of primary sample for any type of downstream testing pretty much, that in a very high quality and that is something that is increasingly growing and liquid biopsy is one such example but many other such segments exist. That will lead to continued growth of QIAsymphony also in the future. It's a – there's still tremendous opportunity out there as customers are today using smaller systems and they're scaling up the entire throughputs. The European market had much more focus on the integrated workflows where people were doing HIV and hepatitis, and that was very little visible in the U.S., so people went to the U.S. labs only, they didn't see that. But if you went to European labs, that's where you saw very large laboratories doing (01

[Roland Sackers:]

In terms of margin expansion for the rollout costs, we are very pleased with the performance we have on margins now since more or less couple of quarters. In the same time, I think we also feel very comfortable looking forward that there's still a lot of things which we believe we can improve which are already kicked off but for no ways we have reaped in the all the benefits. So I have less doubt that we are able to expand our margins also going forward, particularly on a constant exchange rate basis. And that I think it's also an opportunity we're having right now is that – as Peer said before, we have a couple of incremental growth drivers for 2019 and 2020, which is really QIAstat-Dx on the short term and the mid-term, and in incrementally NeuMoDx is kicking in. So, yes, there is some investments to make. Nevertheless, I think the direction is straightforward for us.

[Operator:]

And the next question comes from the line of Dan Arias with Citigroup. Please go ahead.

[Carolina Ibanez Ventoso:]

Hello. This is Carolina Ibanez Ventoso on for Dan. Thank you for the question. What is the status of the development of the – of a liquid biopsy assay for the GeneReader?

[Peer Michael Schatz:]

Yeah. Thanks, Carolina, I think what is unique is that all of our assays have – on GeneReader have two uses, they can be used with solid tumors or they can also be used with liquid biopsies. We made sure that the – there's panel compatibility and informatics compatibility for the two different uses. So as such, all of the panels that you see here already are prepped and are being used for liquid biopsy in addition to solid tumors.

[Carolina Ibanez Ventoso:]

Okay.

[Peer Michael Schatz:]

Thanks.

[Operator:]

The final question is from the line of Derik de Bruin with Bank of America. Please go ahead.

[Derik de Bruin:]

Hi. Good morning and good afternoon, everyone. A lot of my questions have been answered but let me ask the following. On the consumables business in Academe and Pharma, up modest single digits in Academe, mid-single digits in Pharma. A little bit lower than some of the peers. I'm just wondering can you sort of talk about some of the trends going on there in the research markets. Is there – I mean, I know you've seen some pickup in your academic business. I'm just very curious, can you talk about any incremental headwinds or anything that you're seeing that's different? Thanks.

[Peer Michael Schatz:]

Yeah. Derik, indeed, we are on an upward path in terms of growth in the Academia and Pharma areas. As we detailed in earlier this year is we made significant shifts in the commercial channels, created dedicated sales channels into Academia and Pharma. We, for instance, created also hotspot coverage, for instance, at NIH where we're now growing well in the double digits following these changes. And we're also supporting these initiatives with strong digital firepower in terms of preparation follow-up and also marketing support. So the performance, as I outlined in a few conference calls already, between 2015 and 2017 in Academia and Pharma was okay, but it was not really where we would like to see it, where we think we deserve to be and where we put in place a number of initiatives and a lot of focus. There was also leadership change in this space and we are now starting to see this move up again. And hopefully at 2019, we'll start seeing this – put this more to numbers.

[John Gilardi:]

Okay, thank you, Peer, and thank you, Roland. And with that, I'd like to close out the call and I appreciate all of you and your time. If you have any questions please do not hesitate to contact us. Bye-bye.

[Peer Michael Schatz:]

Thank you.

[Operator:]

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