John Gilardi - VP of Corporate Communications & IR Peer Schatz - CEO Roland Sackers - CFO Sarah Fakih - IR.

Michael Ryskin - Bank of America Merrill Lynch Jakob Berry - Berenberg Doug Schenkel - Cowen and Company Brian Weinstein - William Blair & Company Daniel Wendorff - Commerzbank Jack Meehan - Barclays Isaac Ro - Goldman Sachs Daniel Arias - Citi Vijay Kumar - Evercore.

Thank you very much, and we appreciate you taking the time to join us today for this call. Our 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.

On slide two, you'll see the safe harbor statement explaining that the discussions and responses to your questions on this call reflect management's views as of today, May 3, 2017. We will be making statements and providing responses to your questions that state our intentions, beliefs, expectations or predictions of 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 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 the presentation for this call.

With that, I'd like to now hand over to Peer..

Yes, thank you, John. And I would like to welcome you all to this conference call. QIAGEN has made a good start to the year as evidenced by our performance in the first quarter of 2017. And this reaffirms our confidence in achieving our full year goals for strong gains in adjusted sales and earnings for 2017.

These results reaffirm our progress in expanding QIAGEN's position as the global leader in Sample to Insight solutions for molecular testing. We are capitalizing on our competitive advantages, in particular our ability to support more than 500,000 customers worldwide along the continuum from basic research to clinical health care.

First, as you can see in the press release and our presentation, we delivered on our financial targets for the first quarter. Adjusted net sales rose 6% at constant exchange rates.

And this was ahead of our guidance for 4% to 5% constant exchange rate growth while adjusted earnings were $0.22 per share on a constant exchange rate basis when excluding the restructuring charge. And this was at the high end of our guidance for $0.21 to $0.22 CER. Second, we are capturing growth opportunities across our Sample to Insight portfolio.

Our performance in 2017 is an important step towards achieving the mid-term goals that we announced in November at our Investor Day. We are committed to generating a 7% to 9% CER compound annual growth rate in sales from 2016 to 2020 as we accelerate the expansion of this portfolio.

And for adjusted earnings per share to grow at about 12% CER or faster compound annual growth rate over the same period. Among the most important areas of our portfolio, QuantiFERON latent TB test is on track for achieving more than 25% CER sales growth in 2017.

Our strong conviction is based on the ongoing market conversion to QuantiFERON as the modern gold standard for latent TB testing in the U.S. and Europe, along with recent national tender wins in the Middle East and Asia.

We're also pleased with the customer demand for the GeneReader NGS system, which is the only truly complete Sample to Insight solution for labs wanting to take advantage of powerful and highly accurate next-generation sequencing technology.

A key milestone was the recent AMP Global conference in Berlin, where new independent studies highlighted the system's strong analytical performance and ease of use. Our engagement in NGS goes far beyond GeneReader. And we have seen robust double-digit CER growth in sales of our solutions that can be used by customers alongside any NGS sequencer.

The foundation is our leadership in sample technologies, our advanced assay development capabilities, resulting in the industry's highest-performing gene panels and the seamless integration into our bioinformatics franchise, which is by far the market leader in this emerging market.

As a last point, in January, we announced the acquisition of OmicSoft, a privately held company in the United States that offers tools enabling customers to analyze and manage very large NGS datasets. The integration has been going very well. And we look forward to expanding OmicSoft beyond the research settings to other customers.

Third, we are reaffirming our outlook for 2017, along with our commitment to increasing returns and creating greater value. On a full year basis, we continue to expect adjusted net sales to grow about 6% to 7% CER as we build momentum during the course of the year.

We also continue to expect a significant improvement in profitability compared to 2016 with a 2017 target for adjusted earnings per share of about $1.25 to $1.27 constant exchange rates. And this is excluding the anticipated $0.03 of restructuring cost for the year.

As a signal of our conviction, we announced plans in mid 2016 to return $300 million to shareholders by the end of 2017. During the first quarter, we completed the first tranche with the return of about $245 million through the synthetic share repurchase. And this reduced the share count by about 4%.

And we intend to complete the remaining balance of our commitment this year. I would now like to hand over to Roland to review the financial performance for the first quarter..

Thank you, Peer. Good afternoon to those of you in Europe, and good morning to those of you in the U.S. I would like to review our financial performance for the first quarter. And I will also later review our guidance for the second quarter and for the full year.

As Peer mentioned, QIAGEN performed very well in the first quarter in terms of sales and adjusted net earnings. And we are particularly pleased with the solid increase in free cash flow, which was 46% to $44.2 million for the first quarter of 2016. For the first quarter of 2017, adjusted net sales rose 6% at constant exchange rates.

And we are up 3% at actual rates to $308.3 million. At the start of this year, we had expected about 2 percentage points of currency headwinds, but it was slightly more 1 to 3 points. We had strong adjusted net sales due to the acquisition of OmicSoft.

And this is in line with how we have presented bioinformatic deals in the past to fully reflect the revenue contribution.

So, in terms of total CER adjusted net sales growth, a full 3 percentage points came from organic business expansion while another three points of contribution came mainly from the acquisition of Exiqon, which was acquired in June 2016, and to a much lesser degree, from the OmicSoft acquisition in January. The expected decline in U.S.

HPV test sales created a very strong one percentage point of headwind for total underlying sales growth of 7% CER. Our expectations are still for about one percentage point of headwind on a full year basis and for U.S. HPV sales to be well below 2% of total sales in 2017. Moving down to income statement. Adjusted gross margin was 70.5% of sales.

This was an increase of 1 percentage point from the same period in 2016 due mainly to a higher percentage of sales from consumables. We also had incremental benefits from bringing the manufacturing of the QuantiFERON-TB test sales in-house to our site in Maryland.

Adjusted operating income was $63.8 million before the pretax restructuring charge of $3.8 million. This means the underlying adjusted operating income margin rose to 20.7% of sales. And this was an increase of 2.4 percentage points from the level of 18.3% percentage in the first quarter of 2016.

This reflects the impact of our targeted investments in the first half of 2016 to enhance growth opportunities as well as the initial benefits from cost savings generated from the recent efficiency initiatives.

On an adjusted basis, sales and marketing as well as research and development investments were lower as a percentage of sales compared to the first quarter of 2016 while general and administration expenses were up about 2%. Moving further down to income statement.

Adjusted diluted earnings per share, excluding the restructuring charge, were $0.22 at both actual rates and constant exchange rates. These results included about 2% -- $0.02 per share for the charge. The share count was 234.9 million for the first quarter of the year, which was in line with the assumption we had given for about 234 million.

The adjusted tax rate was 18% of sales when excluding the charge. And this was higher than our assumptions for about 17%. I would now like to provide you with an overview of the performance among the product categories and our four customer classes.

Among the product categories, we saw strong trends in consumables and the related revenues, which include sales of our kits as well as bioinformatics. These sales rose 7% CER and provided about 89% of sales. Instrument sales declined 3% CER in the first quarter.

And this was due to cautious purchasing trends among customers in the Pharma and Academia customer classes. At the same time, we saw instrument sales growth in Molecular Diagnostics and a double digit CER case in Applied Testing.

We were very pleased with the outstanding placement rate for the QIAsymphony automation system, which tracked ahead of the strong placement levels in the first quarter of 2016. Our teams also saw good momentum for the GeneReader NGS system. Before I go into a review of the performance, we've reviewed the classification of customers in early 2017.

As a result, the allocation of customers representing about 1% of total sales were shifted to the customer classes for the years 2016 as well as 2017. Therefore, the impact on the growth rate for 2017 should be not material.

So among the four customer classes, sales of our products to Molecular Diagnostics customers rose 3% CER and were up 6% CER when excluding the headwinds from lower U.S. HPV test sales.

The Life Science customer classes rose 8% CER in aggregate, led by the 21% increase in Applied Testing sales that were driven by the uptake of new Human ID forensic solutions launched last year. In Pharma, we continue to have a modestly positive outlook on growth trends. And this was underscored by sales rising 8% CER in the first quarter of the year.

We saw double digit CER growth in consumables and related revenues. And this more than offsets lower instrument sales. In Academia, we saw some positive trends among customers in the U.S. while customers in Europe continue to show an ongoing cautious sentiment.

Sales rose 3% CER in the first quarter, thanks to higher consumable sales against weaker instrument sales as Asia Pacific, Japan and Europe, Middle East Africa regions grew while the Americas were largely unchanged on a year-on-year basis.

As a last part, the acquisitions of Exiqon and OmicSoft supported the performance in all of the customer classes. I would now like to review our performance across the regions in the first quarter of 2017. The fastest growth came in the Asia-Pacific/Japan region, where sales rose 10% CER, led by double-digit CER expansion in South Korea.

In the Europe/Middle East/Africa regions, sales rose 7% CER. Even so, we continue to take a more cautious view on Life Science funding in the region. Sales in the first quarter of 2017 were helped by overall improving Life Science trends in Germany and the United Kingdom.

We also saw a double-digit CER growth in Turkey as this helped to overcome slower growth trends in the Middle East, which were affected by the timing of national orders. The Americas region showed 3% CER growth in the first quarter and grew at a faster 6% CER pace when excluding U.S.

HPV headwinds, thanks to double-digit CER gains in Brazil, along with sales improving at a single-digit CER rate in the U.S. and Mexico. As a last point, we had ongoing good growth trends in the top seven emerging markets, which were up 15% CER for the first quarter and provided 14% of sales.

I would now like to provide an update on our financial position. Our balance sheet remains very healthy and has enabled us to increase the tranche while supporting the business expansion with targeted M&A opportunities.

During the first quarter of 2017, we completed the synthetic share repurchase, which involves returning about US$245 million to shareholders and reduce the total number of shares by about 9 million. We also completed the acquisition of OmicSoft in January.

And these two factors were the key drivers in the leverage ratio rising to 1.7 times net debt to adjusted EBITDA. And this reflects the synthetic share repurchase and OmicSoft acquisition at the beginning of 2017. Group liquidity stood at US$273 million. And this is more than adequate, given our strong cash flows.

We may decide to raise funds during the year with some longer-dated debt offerings and take advantage of the low interest rate environment in Europe and the U.S. These funds would also help to support some upcoming refinancing activities with shorter-dated maturities.

As I mentioned before, we had improving cash flow trends in the first quarter with cash flow from operating activities rising 24% to US$60.2 million. Keep in mind that this was after cash outflow of about $20 million related to the efficiency initiatives started in 2016.

This strong performance helped to support the 46% increase in free cash flow to US$44.2 million. Also supporting the increase in free cash flow was the reduction in the purchases of property, plant and equipment. And this reduction was in line with the expectations provided to you.

We continue to pursue a disciplined capital allocation strategy to support the business expansion through targeted acquisitions while also increasing the tranche with share repurchases. Our view continues to be that QIAGEN shares are undervalued. And we view repurchases as one of the ways to create value.

I would like to now hand back to Peer for a strategy update..

Yes. Thank you, Roland. I'm now on Slide nine to give you an overview of key developments within our Sample to Insight portfolio during the first quarter.

Following the recent boost in support from international guidelines, the QuantiFERON latent TB test is rapidly expanding its leadership as the modern gold standard for latent TB testing and has expanded its position as the solution of choice for large tenders around the world.

Also during the first quarter, new studies reaffirmed clinical utility of this test and suggested additional clinical benefits that are driving further awareness and the need for TB screening to prevent spreading of this deadly disease.

For the GeneReader NGS system, a number of new and independent validation studies were introduced at the AMP Global conference in Berlin. And the system continues to gain momentum. As Roland has already highlighted, we saw very strong QIA symphony demand in the first quarter.

And we are on track to reach our target for more than 2,000 cumulative placements at the end of this year. I'd now like to review some selected highlighted areas in more detail. I'm now on Slide 10 to review the progress being made with QuantiFERON-TB, the world's leading interferon gamma release assay for detecting latent TB tuberculosis.

Among recent developments, new independent study suggested that extended clinical utility and applications for QuantiFERON-TB Gold, the FDA-approved third-generation version of this test.

Furthermore, studies also supported additional clinical value of the CD8+ technology that forms the basis of QuantiFERON-TB Gold Plus, the fourth-generation version of this test that was launched last year in Europe and overall, more than 60 countries. And that was recently submitted also to the U.S. FDA.

Among the studies, a milestone study in The Lancet Respiratory Medicine demonstrated for the first time the potential to use the quantitative QuantiFERON-TB Gold test results to assess the risk for young children to progress to active TB.

Additionally, two studies were presented in the European Respiratory Journal and the Journal of Chemical Microbiology that support the increased clinical relevance and accuracy of the combined readouts for the CD4+ and CD8+ technology markers in the fourth-generation version of our test, and also the significantly enhanced potential to monitor disease progression to active TB.

Now, the ability to measure these types of risks for progression could represent a very important new dimension to the clinical utility of this test. And studies are underway on this topic.

While QuantiFERON is widely approved by regulatory agencies and also reimbursed, we continue to gain important new reimbursement support just a few weeks ago in France.

On Slide 11, I'd like to update you on the recent developments of the GeneReader NGS system, our complete Sample to Insight next-generation sequencing solution for clinical research panel testing.

In April, we gained important momentum for the system through strong support of a number of third-party validation studies that were introduced at the AMP Global conference on molecular pathology.

Five independent studies from prestigious institutions, such as Dartmouth-Hitchcock Medical Center and Cornell were represented and highlighted the strong analytical performance, accuracy and flexibility of the GeneReader system.

And as strong performance data is now being confirmed by third parties, we will today share some of the performance metrics with you later in this call. One of the key advantages of GeneReader's fully integrated NGS workflow is the ability to get up and running with new systems and also new assays very quickly.

We recently launched a program called "NGS Live in Your Lab in 30 Days". This program ensures that customers have the complete Sample to Insight workflow fully operational, including full validations and ready for routine use in their lab with 30 days of installation time.

This compares to the typical four to nine months required for the implementation of other systems. To help you better understand the power of the fully integrated Sample to Insight GeneReader workflow, we wanted to take this opportunity now, about a year after launch, to provide additional context on the NGS market and our overall value proposition.

However, it is critical to first scope the market because the concrete and distinct needs for the target segments will define the roster performance criteria.

Within the overall NGS market, clinical research represents about 20% of the overall market and is a segment with a superior growth potential fueled less by large panels, exomes or whole genome sequencing but rather by the fast growing market for targeted gene panel testing.

This specific market segment, clinical research panel testing, is very different to other market segments. The average lab has about 10 samples per week or about 500 samples per year. And there are many of them that have limited sample volumes.

So larger systems that have tens or hundreds of gigabytes of data output would either require the lab to wait weeks until enough samples are accumulated, and then run them in batches or be forced to run batches far below minimum efficient sample load, thereby driving up the cost of processing.

The GeneReader NGS system was purpose built for a targeted competitive positioning in this highly attractive clinical research market and seamlessly executes on all the critical demands of this market, showing you why clinical customers are responding so favorably.

With its customer centric design and flexibility, we can address the needs of this market very well with the superior competitive profile and generate very attractive consumable throughputs.

I'm now on Slide 13 to provide additional insights into the performance specifications of the GeneReader NGS system at the level of individual key parameters that represent critical factors for clinical customers and their decision making process. We are very pleased that the market has recognized the value of our Sample to Insight value proposition.

While we and our customers are focusing on that integrated value, you can see that the individual parameters are such that we could compete on most of the technical specifications, such as Q scores and read lengths, very well.

When you consider that competing systems have seen many iterations of performance upgrades, we can note that we have not only caught up very quickly but now lead on key performance parameters, such as accuracy of results, and expect to further speed the improvement curve going forward as well and see next improvements across all areas, such as output and speed.

We have chosen a very targeted segment and are delivering a very targeted value proposition that is meeting the requirements of that customer segment in a very unique way. Leveraging our deep expertise and capabilities in clinical testing solutions, we are helping customers to achieve maximum actionability from NGS.

And we will continue to set new standards for the use of NGS in the clinical setting. I'm now on Slide 13 to highlight selected product launches in our Sample to Insight portfolio for the Life Sciences, which are propelling our presence in exciting and fast growing fields of research.

Liquid biopsy remains a key differentiator in cancer and also other clinical research applications.

We continue to set the pace for the industry in unlocking insights from easily accessible samples, such as blood, by improving our gold standard sample technology kit as well as broadening our automation offering with new automated solutions for ultrasensitive isolation of circulating free nucleic acids, for instance, also in our compact and highly robust benchtop EZ1 automation system and instrument system, which is part of a PMA FDA approval process and of which thousands are already in the market.

Turning to microbiome analysis.

While biotechnologies are now fully integrated with our core sample technologies, creating the most comprehensive microbiome portfolio available for difficult sample types, together with our universal NGS and microbial bioinformatic solutions, these technologies are being brought together to form efficient Sample to Insight workflows.

Our universal NGS offering was strengthened by the launch of the QIAseq miRNA Library Kit, which enables the next evolution in NGS RNA discovery by reducing PCR and sequencing bias on the basis of unique molecular indices technology. A higher number of sequencing reads create a multiplex and hence, more accurate datasets.

With that, I would like to hand over to Roland..

Thank you, Peer. As mentioned earlier, based on the good start to the year, we are reaffirming our full year guidance for 2017 and are taking an increasingly positive view towards the goal we have set. We continue to expect about 6% to 7% CER sales growth for the full year.

This is based on about 5 to 6 percentage points of organic growth and about 1 percentage point of combined sales from the Exiqon acquisition, which will become organic after the second quarter of this year, and the OmicSoft acquisition that was completed in January.

For adjusted EPS, we continue to expect underlying adjusted earnings of about $1.25 to $1.27 per share, excluding the restructuring charge and again also at constant exchange rates. This target represents a significant increase from the underlying $1.11 per share for 2016.

This outlook also includes some initial contributions from the efficiency initiatives and about $0.03 of benefits from the commitment to return $300 million through buybacks during this year.

The full year guidance is also based on an anticipated 18% adjusted tax rate and excludes the expected $0.03 of dilution from the after-tax cost of restructuring charges in 2017.

In terms of currency impact, based on rates as of April 30th, we continue to expect pressure of about 2 percentage points on the full year's CER sales growth target and about $0.02 per share on the full year adjusted EPS guidance at CER rates.

You can find further information on our latest currency expectations for 2017 in the appendix of this presentation. I'm now on slide 16. And you will find detailed information on our guidance and related assumptions for the full year and also for the second quarter of 2017.

In terms of adjusted net sales, for the second quarter, we have set a target for about 5% to 6% CER growth. This is based on about 3 to 4 percentage points of organic growth and about 2 percentage points from the Exiqon and OmicSoft acquisitions.

Our guidance for adjusted diluted EPS in the second quarter of 2016 is about $0.28 to $0.29 per share at constant exchange rates. And this excludes about $4 million of pre-tax or about $0.01 after tax of cost related to the restructuring charges planned for the year.

So we expect the vast majority of these restructuring charges to be done in the first half of this year. Also for the second quarter, the adjusted tax rate is expected to be about 18%.

And we expect a further drop in the weighted average share count to about 232 million due to having a full quarter year-on-year impact of the synthetic share repurchase.

In terms of currency expectations for the second quarter, based on rates as of April 30, 2017, we anticipate about 2 to 3 percentage points of headwinds on adjusted net sales at actual rates and up to about $0.01 on adjusted diluted EPS. With that, I would like to hand back to Peer..

Yes. Thank you, Roland. I'd also like to update you on an addition to the Supervisory Board with the appointment of Dr. Håkan Björklund, who joined as a member in March. This means we are now eight members in the Supervisory Board and six of the members have been appointed since 2011.

This is a further signal of the active evolution of the board over the last few years. Also five of the eight Supervisory Board members are based in the United States. And by the way, four of the seven Executive Committee members are also based in the U.S. Dr.

Björklund brings an extensive international and life sciences background to QIAGEN through his current role as Operating Executive at Avista Capital Partners as well as his previous roles as CEO of the global pharmaceutical company, Nycomed, a great success story, and as a Regional Director of Astra and President of Astra Draco, which are now both part of AstraZeneca.

He also currently serves as Chairman of the Board of Swedish Orphan Biovitrum AB, which is a publicly listed Swedish biotech company. Dr.

Björklund has built a strong reputation for shareholder value creation through these roles and also previous roles as Chairman of the Board of Directors at Lundbeck A/S plus a Member of the Board of Directors of Alere, Coloplast, Atos Medical and Danisco A/S. Our next Annual General Meeting will be in June.

And all current members of the Supervisory Board are expected to stand for reelection. I’d now like to provide a quick summary before we move into Q&A. Let me review what we have announced. First, we had a good start into 2017. And this reaffirms our confidence in achieving our full year goals for strong gains in sales and adjusted earnings.

Second, we are capturing growth opportunities across our Sample to Insight portfolio and we're moving ahead on a strategy to strengthen QIAGEN as a differentiated leader in supporting customers along the continuum from basic research to clinical health care.

And as a last point, we are reaffirming our full year guidance for 2017 as our teams execute on actions to deliver strong growth in sales and adjusted earnings this year, complemented by a commitment to value creation for shareholders and disciplined capital allocation. And with that, I'd like to hand back to the operator for the Q&A session.

Thank you..

Thank you. Ladies and gentlemen, we will now conduct question-and-answer session. [Operator Instructions] The first question comes from the line of Derik De Bruin of Bank of America Merrill Lynch. Please go ahead..

Hi. Thanks. This is Michael Ryskin on the line for Derik actually. Congrats on the quarter. Just first question real quick off the bat, given what do you reported in 1Q for MDx sales and particular HPV headwinds both U.S.

and OUS, it sort of looks there's a -- and especially with the 2Q guide, there was a bit of a back half ramp that's a little accentuated, especially given the tough comps that you have from 2016. Part of that, I'm guessing, is obviously Exiqon going into the organic numbers in the second half of the year.

But can you still talk about what you're seeing in the MDx business in particular that gives you confidence that you can deliver on those numbers to hit the full year CER and organic guide? And then I've got a quick follow up on the margin profile..

Sure. So I'll take the first one first, and then the second one for Roland. The situation that we are seeing for 2017 is pretty similar compared to what we saw in 2016. There's slightly different reasons why we see the distribution of the revenues across the quarters of the year.

So if you look at the trajectory over the next few months, the difference between what we would consider an underlying normal trend and the plan that we have for 2017 is pretty easily explainable through the timing of tenders and other larger deals that we either closed already or have a very high level of confidence of seeing it happen.

In addition to that, we're seeing strong trajectories of, in particular, QuantiFERON, GeneReader and also other areas across the company. So it's similar, again I don't want to point back to 2016, where we had similar comments in terms of the distribution of revenues, first half and second half.

This is not unusual for us based on the timing of larger transactions and other anticipations of momentum that we expect to unfold over the course of the year.

Roland?.

The second question on margin? He got cut off..

Okay, we'll pick that one up later..

Next question comes from the line of Mr. Peterson of JPMorgan..

This is Steve [Greenman] on for Tycho. Just one on European academic. There's obviously been a lot of political uncertainty over the last few months.

So if you can talk about the degree to which this is impacted academic demand and have you seen any improvement since some of these have concluded? And on a related note, any updated thoughts on the impact of Brexit on academic spend given the Article 50 was recently triggered?.

All good questions. It's actually interesting to see that we've seen some improvement in the European markets while uncertainty still exits, obviously. And it's regionally extremely different.

We have seen actually more uncertainty in the United States in the academic community considering some of the very strong statements that have come out in terms of changes to the budget. And we just got further updates earlier this week.

The -- we don't really see that the political changes are really trickling down to science yet, I mean, it's much less of a topic as it was for instance here in the U.S. during these election campaigns. So we have not really seen that as significant discussion point yet.

In terms of the Brexit, clearly there were the implications there, but it's going to probably take at least 12, 18, maybe even 24 months before we really know what the implications are. The U.K. is an important market for us, but it's only in the mid single digits of the overall revenue base. And so we think also very well manageable..

The next question comes from the line of Scott Bardo of Berenberg. Please go ahead..

It's actually Jakob Berry dialing in for Scott. Just on the first question, I was wonder if you could briefly talk through the merits of the Maccura JV in China you recently announced, whether you intend on manufacturing domestically.

Perhaps you could outline some of the differences and challenges in tailoring panels for the Chinese market? And whether there are any local competitors attempting to do what you're doing? Maybe in addition, you could outline some revenue and profit expectations from the JV and say why you couldn't do it alone?.

Good. Thanks, Jakob. I think a very important question. And I am extremely excited about this joint venture, it took us a long time to think through this and also prepare. And we gave a lot of thought to it. We clearly see China as an extremely important market for us.

Is the second largest IVD market in the world and it is one that this facing a lot of changes.

And it is quite clear that there is a significant number of benefits to be a local company in the Chinese IVD markets, in particular, in terms of the ability to interact with regulatory agencies, the speed of the regulatory approvals and ability also to participate in tenders where there's a benefit for local companies.

And so the ability to accelerate the already very strong demand in China for the GeneReader system is very important for us.

And with Maccura, we found an extremely aggressive, well-managed, extremely well-managed and successful company that has been moving very well in the, thoughtfully, but aggressively in the Chinese market and is a partner that shares many of the values that we as a company have.

So the ability to pool their capabilities with ours, we think will significantly accelerate the entry of GeneReader into the Chinese market. And on the net have a significant benefit for us in both top line and bottom-line contribution. That's the reason why, obviously, we selected this type of structure.

There's flexibility in this structure, but we are very committed to this joint venture, and see this as the best route for it. We have owned operations in China and have been in China for many years, and it's a large organization, about 500 people, that we have there.

But for the GeneReader marketing, we are convinced that this is the better route forward..

Next to the line of Bill Quirk from Piper Jaffray..

It's actually Bill on for Bill today. A couple of questions for you. First off, on QuantiFERON. Peer, in the release it's talking about strong double-digit. You had mentioned in your comments about hitting the 25% target for the year.

Was, did it grow at the 25% pace in the quarter and/or it sounds like you may have some, because those tender wins may be accelerating in the back of the year.

Is that the right way to think about the pace?.

Right, as you corrected point out, we have large tenders that are coming through, not only from Korea, we've announced only a few tenders so far, but we're actually participating in dozens of these types of programs, where national large screening programs are being conducted very often by everything from national health care systems through to the military.

And the fact that we have this very robust product that can be automated very well and give superior results has been resonating very well with these types of tenders. So, there is a certain volatility in the numbers, so we're always looking on the annual number.

The first quarter was as anticipated, and the trajectory for the second half of the year is looking very good. So, there is no reason for us, at this point, to put in a number of above the 25%, but let's put it this way, we feel very comfortable with that number..

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

Hi. Good morning and good afternoon guys. And thank you for taking my questions. [Technical Difficulties] Can you hear me?..

I'm sorry, your line is very bad, sir..

Okay. Maybe we should get back in the queue, and we'll dial back in to digital that line. ..

Doug, now it's better. Go ahead..

We can hear. Thank you. Please go ahead..

Sorry about that. First question is how does the China JV impact your thinking on the outlook for GeneReader placements, consumables utilization per placement and overall revenue growth in the context of the medium to long-term financial targets outlined at your most recent Analyst Day? My second question is U.S.

-- I'm sorry, MDx grew 6% in constant currency terms, excluding U.S. HPV. It seems like if you also exclude QuantiFERON that overall MDx growth may have been in the low-single-digit range.

I was curious if that was consistent with your expectations and if the expectation is over the balance of the year for that to improve? And my last question is just a housekeeping question for Roland. You indicated that FX rounded to 3%, to slide deck says $6.8 million as a headwind which I think is a 2.3%.

It's a finer point, but just for modeling purposes moving forward, I just want to make sure we're not missing anything here. Thank you..

Okay. First question, Doug, the China JV is a very positive contribution to our five year plan. But, we would not want to change any of the expectations at this point. Remember, it takes at least one, if not, two years for a regulatory approval in China, and we are moving ahead very aggressively on that.

Obviously, we will be starting with the REO versions that are already widely used, and we'll further expand on that. But if -- we already know the NGS market in China is about $1 billion market, and there is a lot of clinical use already starting to emerge.

So, we are early in the market and we’re moving ahead in a very targeted way also here and so no short-term changes here to that five year trajectory, other than further confirming it. And again, I think there's a range and different estimates in that 5-year plan that we also gave. Number two, is the MDx number.

We said QIAsymphony is doing very well, and remember that's a sizable piece of the MDx franchise. I think the one piece that you're missing is that there's also actually more -- there is significant revenue in HPV x-U. S. compared to in U.S.

and while normally this is a good growth contributor, due to tender timing and regional changes we had a weak first quarter in terms of x-U. S. HPV as well.

The product is clearly a superior product for such regions where no liquid cytology is being performed, and sample preparation therefore is not required at the level of complexity as you'd, for instance, have in the United States.

So we're very, very, very strong preference of the hybrid capture solutions in most markets where primary screening is being performed on the large level. And then secondary typically then reflects to cytology. So that's one piece that's probably missing for your analogy.

And yes, we are actually doing quite well in both QuantiFERON and also in the QIAsymphony portfolio. And those are the large pieces in addition to the personalized health care franchise, which is continuing to do also quite nicely. So ex-U. S. HPV is the number that was missing in your equation.

So Roland?.

Yes, that's correct. And just to add to that, if you look at MDx TB and x-global HPV it's actually a mid to high single digit growth rate in general. And so I would say that this business is doing quite well and also compared to our own expectation we are well on track for the rest of the year.

Yes, but the issue with rounding it's unfortunate this quarter, as we said it rounds to 3% actual sales and with the actual rates and 6% CER growth rate. But you see that we also provided the actual numbers behind to come out so that's the way it works, unfortunately. It's a larger gap this time, but it is still the rounding.

But we do have the actual numbers in the appendix..

The next question comes from the line of Brian Weinstein from of them there. Please go ahead..

I'm not sure if you're going to be willing to update sort of placements and revenue run rate on GeneReader, but if so, that would be great.

But even beyond that, can you talk about utilization that you guys are currently seeing? How that's trending on GeneReader? And also can you talk about what you're seeing as far as the funnel that's building there? Is this any kind of a replacement of people maybe using something or is this just labs that are mostly new to sequencing that are starting to come on board?.

Thanks, Brian. Well, the last question first. As you see here from the performance specifications, we are highly competitive, and in many cases, also quite superior to existing solutions.

And we are seeing almost all wins being very openly competitive wins where we are winning primarily in terms of the robustness and integrativeness of the workflow, and in particular, also the accuracy of the results. And so it's all head to head against the obvious suspects.

The -- as long as a product portfolio is in the single digits so far of our revenue, it's really tough to single that out and to put that on the standalone. I think we wouldn't be fair to also other larger parts of our revenue base that are also growing quite nicely.

But the transparency we gave last year and also the expectations going forward that might have you probably assume that there's a very strong growth that we're seeing in 2017. As well, the applications are across the board high-volume labs. There are labs running 1,000, several thousand panels a year, which is very, very high.

So I think we have a totally different market than the typical HiSeq or Proton customers. These are very targeted sequencing laboratories with specific applications that we are targeting and there, these could be large volume labs, these could be new entrants.

We can really span the complete universe as shown also in that one market segmentation slide where we can make it economical for a very low volume lab, even at a couple hundred samples a year, and this is not unusual, up to several thousand samples a year. That is a very, very high volume lab.

Probably you could count 5 or 10 labs basically doing these types of high thousands of samples per year. So that would be quite rare. So that funnel is building very nicely.

And obviously, we did a re-launch in early April, late March here in the U.S., which went extremely well, and the new chemistry is also being very well adopted, and the data speaks for itself.

And so we thought this was a great opportunity to give you also the performance specs, while customers are typically looking through that, they're looking more at workflow and total cost of ownership and speed to validation and these types of things.

We understand that there's sometimes the desire to look at the more traditional and more Life Science research type scores, like the read length, and the Q-ratios and you see in those performance metrics that we are very competitive already there..

Next question comes from the line of Daniel Wendorff from Commerzbank..

It's Dan Wendorff of Commerzbank, indeed. Two questions, if I may. The first one on your Applied Testing product portfolio, which has shown again a very nice performance in the first quarter. Can you talk a bit more what is driving this and is this sustainable? And the second question, what would be on the QIAsymphony platform.

Where are we now in terms of consumers, consumption per machine per year? And any update there would be helpful..

Good. The second question, I'll hand over to Roland. In the Applied Testing number, that's actually a pretty, that was pretty much anticipated that we would have a good growth in the first quarter. If you remember in the first quarter of 2016, we had a very soft Applied Testing quarter, so there was a bounce back.

And these are often also very large orders. We're looking at in some cases, multi-million dollar, multi-year tenders coming in. And with the business at this size as it is, it quickly can move a few percentage points in one way or the other. So Applied Testing remains a very attractive market for us, we have a very strong position in forensics.

And we entered into the assays and forensics just a couple of years ago, if you remember, and this is a very sizable market opportunity and our assays are now considered performance leaders in many categories. And therefore, we're seeing competitive wins also in terms of customers moving to our assays.

So, it's a -- was a very nice number, and one that we definitely see as indicative of this market being able to grow in the high single-digit, low-teens for a very long time into the future.

Roland?.

Sorry, I do have issues with my headset. I didn't get the second question.

The QIAsymphony pull-through Roland..

Okay, sorry. So right now, we are in the range of $80,000 per incident per year. It's a very nice number for us. We have seen also just from 2016 to 2017 and double-digit growth whether on the consumable growth and whether demand and we do believe that is also going to continue in terms of growth rate..

Next question comes from the line of Jack Meehan of Barclays. Please go ahead..

Hi. Thanks. I wonder, starting with the commercial efforts. Are -- do you feel like most the commercial investments for GeneReader and QuantiFERON are complete at this point? And then related to that, for the restructuring, just want to ask about the sales force numbers from the appendix.

It was down a little bit sequentially, is that restructuring related? Is that the right base to build off? Just any color would be great..

Okay, I'll take the first question, and hand the second one to Roland. So, the commercial initiatives around QuantiFERON, they were obviously a significant focus in the second half of 2015 and into 2016. We're starting to see very good productivity, we're tracking it very carefully.

And this includes both clinical demand generation, but also lab support to customers going online. I think the growth rate speaks for itself, we're going to continue to fine-tune and adjust here and there. But in general, the large body of resources have been built and are being managed very effectively.

It could very well be that certain countries open up more, like we just saw France, some important new steps, but also other countries that we also implement similar programs there, but they would also be much smaller than what we saw in the United States.

In terms of GeneReader, that's an area of continued expansion, and we're not really -- we don't have a sales channel around GeneReader. What to do is we focus on molecular pathology accounts.

And there's a significant synergy also with our therascreen and Ipsogen portfolio because most of these customers are using these products are ready, so there is a natural integration into next generation sequencing.

And we have a very capable team there who are able to cross sell and up sell and combine these products into a very efficient offering for molecular pathologists. It's a very targeted group round of the world, it's very different to the classic geneticist or large hospital network laboratory that is doing more also clinical research.

So, those efforts have pretty much been put in place and they're more in the fine-tuning mode.

Roland?.

And then in terms of the headcount, you actually see that sales headcount is slightly up compared to year-over-year. And on the marketing side, it is actually slightly down as well.

And the reason behind -- beyond that is that we clearly had as one part of our whole restructuring efforts last year an initiative to have more ability on the streets and having more even straight customer contacts. And you could see that from the evidence on the initiatives we did around QuantiFERON.

At the same time, of course, we were working strongly on improving, I would say, the efficiency around our back office structures, on the sales support side. There we have sort of seen a certain consolidation, which is impacting -- as well as the impact you have seen that they are referring to.

And on top of that, there is clearly also an ongoing initiative within QIAGEN in also strengthening our digital channels and I would say that it's a combination of reflecting in the -- our employee numbers..

Your next question comes from the line of Isaac Ro of Goldman Sachs. Please go ahead..

A couple of product questions. First off, on instrument sales you guys did point out a little bit tough weakness in Pharma and Academic.

Can you give us sort of color what went on there and what's the basis for your expectations for the rest of the year?.

Sure. So there was some uncertainty, especially in the academic markets in terms of instrument sales. We were doing well with certain products that had a focus, but in other areas, we're definitely seeing uncertainty in some of the markets.

The Pharma piece was a little bit unclear to us what we were seeing, and we are implementing a higher degree of focus on the pipeline management in that area, where we probably also see some improvements that we can do in terms of the resource allocation to that pipeline management. But there is no change to the outlook.

The instrumentation is, in general, doing very well, in particular driven by QIAsymphony. I think it's one of the extremely underestimated value proposition for QIAGEN. We're going through 2,000 cumulative placements this year, which makes it one of the most widely placed molecular platforms.

And in the medium throughput area, certainly the most widely placed such system. So we are doing extremely well there and always finding new applications for it. So this is a new product, which is still early in its life cycle, if we just look at the growth rate.

So there's no change to the instrument outlook, and we feel confident that this is going to be a number that we should be able to deliver on..

The next question comes from the line of Dan Arias of Citi. Please go ahead..

Just wanted to ask, one, on TB, and then a follow up on sequencing, if I could. Roland, on the TB outlook, just wondering if you can talk volume and price there.

The ASP assumption basically flat and so test growth is expected to be up 25% this year? Or are there areas where you're seeing pricing pressure or pricing power that factor into the equation? And then Peer, maybe just on sequencing side, and your comments on how happy you are with the metrics there.

Are you aware of any labs are doing direct head to head studies that are comparing the performance and the cost of the GeneReader to what you get from a MiSeq, NextSeq or a PGM Proton?.

Yes, on the QuantiFERON side, I think it's actually combination of both. We have clearly seen, as you know, a good momentum on QuantiFERON, and it's also clearly driven by strong positive price development we have seen in some areas. So it's, overall, a combination of price and volume, there was a little cost, but majority comes from volume growth..

Okay, then on the sequencing side. Yes. If you go to some of the posters that were released, also the papers that were released, they were typically all side-by-sides. And if you then look at statements in detail in the papers you'll see also cost of ownership references and other benefits that we can offer.

So it's a different value proposition with others offer and what we offer. Ours is a much more customer-centric, workflow-centric and insight-centric value proposition versus a more research specification driven approach. And the posters and presentations are available on our website or also in, we can send them to you if you send us a request.

So increasingly, we're seeing most of these placements, in particular in Europe, they're all tenders, there are competitive tenders and we are just reviewing one tender this morning where we won by a large margin overall computing systems. And that was an accuracy play.

So the ability to create accurate and reproducible results was just outstanding in their evaluation. And so this is, obviously, extremely important in clinical research, and then also diagnostics. And that's something that we are currently leading with..

Next question comes from the line of Vijay Kumar of Evercore..

Maybe a couple of follow-up questions on the guidance front. Roland, does the second quarter, as you have a similar M&A contribution, I think it was 2 percentage points in Q1, any change there? I think the annual OpEx guidance was down 200 basis points year-on-year. So any change on that front? And the last one was free cash up really nicely at 20%.

Should we assume free cash for the year is up 20%?.

I think free cash flow, I think we have now seen a couple of quarters with a very strong momentum, and I don't see any particular reason why that should change over the course of the year. Second quarter probably you'll see the last odd post from our delivery project of our restructuring project out of '16.

And therefore, I think the second half of the year might be even better. In terms of overall growth rate, I would say it seems are moving very well in terms of revenue growth related to the size to pick the free growth rate for the second quarter is clearly majority coming from the organic side.

OmicSoft is just ramping up, actually climbing the ladder, similar contribution in what we have seen in the first quarter. On the margin side, as you know, we set forth for the full year, is probably roughly x currency at a 150 basis points improvement.

We will see also in the second quarter probably somewhere around, again x currency probably around 25 to 25, around 25% adjusted EBIT margin. And therefore, I would say, in general, a very nice improvement quarter-over-quarter also from the first quarter. As Peer, I think, alluded to before, we had a very good start to the year.

And if you see more or less to compare 2017 what we have delivered in 2016, I would say that there's a lot of similarity.

I think the difference is that, as of today, we have a lot of incremental deals on hand, which I would say wasn't the case in 2016 if you just refer to the -- for example, things we are now on the QuantiFERON side, and all the tenders we have won in different jurisdictions. The same also to a personal healthcare environment.

So, there's a lot of positive momentum on Symphony and others which I think it's nicely together..

So thank you, Roland and Peer. And with that, I'd like to close the call here for today. And if you have any questions or comments or follow up issues, please don't hesitate to give Sarah or me a call. Thank you very much..

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