Ladies and gentlemen, thank you for standing by. I am Patrick Wright, your Chorus Call operator. Welcome, and thank you for joining Qiagen's Conference Call to discuss results for the Quarter 2 of 2014. [Operator Instructions] Please be advised that this call is being recorded at Qiagen's request and will be made available on their Internet site. [Operator Instructions] I would now like to introduce your host, John Gilardi, Vice President of Corporate Communications at Qiagen. Please go ahead.

Good afternoon, and welcome to our conference call today. Our speakers today are going to be Peer Schatz, the CEO of Qiagen; and Roland Sackers, our Chief Financial Officer. A copy of this announcement and the presentation for this call can be downloaded from the Investor Relations section of our website at www.qiagen.com. On Slide 2, you'll see the customary disclaimer. The discussion and responses to your questions on this call reflect management's views as of today, July 30, 2014. We will be making statements today and providing response 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. They involve risks and uncertainties that could cause the actual results to differ materially from those projected. Qiagen disclaims any intention or obligation to revise any forward-looking statement. For more information, please refer to our filings with the SEC, also can be found on our website. I would like to now hand over to Peer.

Thank you, John. Hello, and welcome to our call today, where we will be discussing our results for the second quarter and first half of the year, and update you on the progress we are making to further accelerate innovation and growth. We have 3 messages for you today. First, we are reaffirming our full year guidance for improved sales and earnings based on our achievements in the first half of 2014. As you saw on the press release, adjusted net sales in the second quarter rose 4% at constant exchange rates in line with our communicated targets and were up 5% at actual rates due to some currency benefits. When you exclude the U.S. HPV test portfolio, the rest of the Qiagen portfolio delivered 7% constant exchange rate growth. In terms of earnings, adjusted EPS was $0.26 per share at constant exchange rates, and this was above our target for $0.24 to $0.25 per share at constant exchange rates. And Adjusted EPS was $0.25 at actual rates. For the first half of the year, adjusted net sales were also up 4% constant exchange rate, and this included about 4 percentage points of headwind from lower U.S. HPV test sales. So that means net of the U.S. HPV test portfolio sales, Qiagen grew about 8% on a constant exchange rate basis in the first half of the full year, and this is in line with our communicated full year target for about 8% to 9% constant exchange rate growth. Second message, our 5 growth drivers are gaining momentum and are growing at solid double-digit pace. Among the achievements in the second quarter were 2 PMA approvals from the FDA: one for our therascreen KRAS companion diagnostic kit paired with Vectibix from Amgen; and also our artus CMV kit for the…

Thank you, Peer. Good afternoon to everyone in Europe, and good morning to those joining from the U.S. I'm on Slide 6 and would like to first review in more detail our financial results for the second quarter. Adjusted net sales were at USD 331.2 million in the quarter, rising 5% at actual rate and 4% at constant exchange rates. We saw some currency benefits on sales from the strength of the euro and the British pound against the dollar. Our reported currency, which has more than compensated for headwinds from the yen and other currencies. About 2/3 of the sales growth came from the bioinformatics acquisition, and about 1/3 came from the rest of the portfolio. And as mentioned earlier, the 4% constant exchange rate sales growth included about 3 percentage points of headwind from lower U.S. HPV test sales. Adjusted operating income rose 10% in the quarter, at a much faster pace than sales with adjusted operating income margin, improving to 25% of sales compared to 23% a year ago. It is worth noting that the adjusted gross margin at 72% reflects a shift towards more consumables, which made up 88% of sales in the quarter compared to 87% a year ago. It's a high margin bioinformatics sales helping to offset reduced U.S. HPV sales contributions. In addition to the gross margin gains, operating margin improvements came from sales and marketing, as well as general and administration expenses declining as a percentage of sales in the quarter. And this together more than absorbed higher R&D expenses, which were about 11% of sales. The leverage is coming through from the efficiency project we completed in 2013, in particular projects in accounting, IT and procurement to gain more flexibility and skills for our new shared service center. I also want…

Yes. Thank you, Roland. I'm now on Slide 10 to provide an update on the progress we are making on initiatives among our 5 growth drivers. Our strategy is anchored on expanding our leadership in Sample & Assay Technologies that address the rapidly evolving needs of customers to transform biological samples into valuable molecular insights. The 5 growth drivers are delivering strong double-digit constant exchange rate sales gains and currently provide more than 1/4 of sales. We expect this share to increase as we reallocate even more resources to further accelerate their momentum. With the QIAsymphony automation platform, we are moving ahead towards our goal of 250 new placements in 2014, building on the more than 1,000 installed systems at the end of 2013. We already have 4 FDA approvals this year: 2 large PMA approvals in May alone; and plan for more in 2014. QuantiFERON is set to break through $100 million of sales in 2014 and has already surpassed the size of a U.S. HPV franchise, providing more than 8% of total sales. Personalized Healthcare is growing on a base of $100 million in annual sales, thanks to higher assay sales and growing revenues from the companion diagnostics co-development agreement. Bioinformatics is an important incremental contributor this year as we create an industry-leading portfolio anchored by the combination of teams and products from Qiagen, Ingenuity, CLC Bio and BIOBASE. And on NGS, we are launching new Sample Technology kits, as well expanding our offering in combination with bioinformatics. Together, we see these activities as having had more than $50 million of annual sales in 2013. Our teams are also moving ahead on development of the GeneReader NGS workflow, and as we announced with the first quarter results, market entry is anticipated in the second half of 2015. I'm…

Thank you, Peer. I'm now on Slide 16 to review our guidance for the third quarter of 2014 and also to reaffirm the various points of our full year guidance. For the full year, we continue to expect total sales growth of about 4% to 5% constant exchange rate. This includes a headwind of up to about 4 percentage points from declining U.S. HPV test sales and for the rest of the business to grow about 8% to 9% constant exchange rate. Adjusted operating income is expected to grow faster than sales and generate at least 100 basis points of adjusted operating margin improvement. We also continue to expect adjusted diluted earnings per share of approximately $1.07 to $1.09 at constant exchange rates for full year 2014 compared to $1.02 in 2013. These expectations do not take into account any further acquisitions that could be done in 2014. We have given these targets for adjusted EPS at constant exchange rates since we continue to expect a modestly positive currency benefit on sales but an adverse currency impact on earnings. For the third quarter of 2014, adjusted net sales are expected to again rise about 4% to 5% constant exchange rate and we expect about $0.26 to $0.27 of adjusted EPS, also at constant exchange rate. This slide also contains assumptions for adjusted -- adjustments to results for the first quarter and the full year. For the full year 2014, we continue to expect about $120 million for amortization of acquired intellectual property and about $10 million to $15 million for business integration and acquisition items and an adjusted tax rate of about 20% to 21%, and this is expected to be at the higher end of this range. With that, I would like to hand back to Peer.

Thank you, Roland. I'm now on Slide 17 for a quick summary before I move into Q&A. We're moving ahead on initiatives to accelerate innovation and growth during 2014 while also increasing returns to shareholders. Let me review what we have announced. First, we achieved our targets for the second quarter and based on the performance for the first half of the full year, we are reaffirming our full year guidance for higher adjusted net sales and earnings. Second, our 5 growth drivers are gaining momentum. We have made significant progress with 4 positive FDA regulatory decisions so far this year and are seeking to deliver 250 new system placements. We are signing new co-development agreements in Personalized Healthcare and these include, for the first time, the use of liquid biopsies also in formalized large programs to gain access to valuable molecular insights, as well as analyzing DNA and RNA simultaneously from Sample. We're also driving the expansion of the QuantiFERON latent TB test towards $100 million of sales this year, and we are developing our capabilities in bioinformatics, a next-generation sequencing technologies, and in particular, through the addition of BIOBASE, the leader in hereditary disease analysis to our portfolio, as well as through the launch of highly competitive gene panels for use on any sequencer. Third, we are committed to disciplined capital allocation through targeted acquisitions, as well as by increasing returns to shareholders through share repurchase programs, and today, we are launching our third $100 million program. In closing, we are well positioned to achieve our goals for 2014. And with that, I'd like to hand back to the operator to open up for the Q&A session. Thank you.

[Operator Instructions] And our first question today comes from the line of Daniel Wendorff from Commerzbank.

Daniel Wendorff from Commerzbank, 2 if I may. One broader question also with regards to your guidance and the weakness you saw in -- or you saw with academic-research customers as well as with Pharma customers in the second quarter. Is that something we are going to see in the second half as well? And if you see an improvement there, what would that mean in terms of potential full year performance for these 2 customer classes? And second question would be on the QuantiFERON-TB test. I mean, it sounds all great and -- what you're telling us and the best test for different reasons, limited competition in huge market. And what would you expect -- potentially wrong way of asking it, where do you see in this test in 3 to 4 years' time in terms of sales? I mean, the overall market potential in theory might be $1 billion. Of course, there might be additional competition. There is one additional test. But where do you see the really truly addressable markets? And what area we would find this test in 3 to 4 years' time?

Sure. Thanks, Daniel. I'll address the second question first and then the first one afterwards. So you address the potential market for QuantiFERON-TB Gold, 50 million skin tests performed approximately a year in the western -- or ex-China world and this would calculate to about the numbers you described before. And we're moving very rapidly in penetrating into that market. Our primary competition is the skin test where we have enormous advantages but also against the older competing test that is quite cumbersome to use and currently only available as a service in the United States. We are definitely outperforming and have been seeing some very good success and also gaining share even against that. But our primary competition is clearly the skin test. And this is a very core theme of all of our growth drivers. We see these as having very long trajectories of growth opportunity, and in this case, we see no end to this very good, very strong double-digit, high double-digit growth rate. And as we note, there's also portfolio expansion that we're working on. So there are a number of additional products coming out that we're very much looking forward to report on around the QuantiFERON franchise to further create new opportunities. So I think the easiest probably now is just to assume that we are expecting a similar, very strong trajectory for many years to come. In terms of the second quarter performance in Academia and Pharma, Academia was definitely disappointing, the performance there. It is about 1/5 of our sales base but still clearly very important to us. We had a base effect from 2013 sequestration kicked in over the course of the second quarter into the third quarter last year. So we're -- we have a strong base effect that is factoring into the growth rates. At the same time, we're seeing more positive funding environment in the U.S. in addition to the base effect possibly kicking in, in the second half of the year. In addition, we're obviously focusing more on this market, in particular, in instrumentation where we were focusing on some strategically important product areas and are now expanding the focus also across the full instrumentation line. The majority of the impact, as you see, was in instrumentation, and we would expect Academia to, on an annual basis -- multiyear basis, to be on that trajectory in the low- to mid-single-digit numbers.

Our next question comes from the line of Dan Leonard of Leerink.

Peer, could you give us an update on your ability to convert -- now that you have additional FDA approvals, your ability to convert the lab-developed test market to your FDA-approved products?

Sure. Well, the C. diff was approved as -- in the first quarter and now CMV in the second quarter. We have a number of other assays coming forward. We talked about in the HAI area but also other areas that we see as cornerstone to creating more placements for QIAsymphony RGQ in the U.S., and thereby seeing this conversion happen. The important thing is to have a cornerstone menu of critical assays that are of certain significance, clinical significance or of a certain throughput to create a cost of ownership proposition for the QIAsymphony RGQ and then selectively convert the LDTs to these assays or even further support the LDTs but now for use on QIAsymphony. If we take the European market as an example, the -- we should never forget, 60% of the diagnostic market is ex-U.S. and the example here for Europe is that we have over 20 assays, approved assays, cleared assays in Europe, CE-marked assays, and they are typically very selectively used to create a cost of ownership proposition to customers. They buy, let's say, on blood virals, some will be HIV/hepatitis accounts, others would be HAI accounts, others women's health accounts. And then we start expanding the menu off that initial proposition. So having several of these footholds is important for us. We have HAI and transplantation now coming forward. These are probably 2 of the most interesting products to disseminate. And so we will then look at selectively converting LDTs or even porting them over to QIAsymphony because the system is clearly also equipped to run both approved and LDT assays.

Our next question comes from the line of Tycho Peterson of JPMorgan. Tycho W. Peterson - JP Morgan Chase & Co, Research Division: Two just quick ones here. I just want to make sure I understand your comments on Pharma and Academic, Peer. You're certainly a little bit more subdued than your peers, and obviously, you have the tough instrument comp for Pharma. So can you maybe just talk about the order trends exiting the quarter? And are you in fact expecting a recovery in both of those segments in the back half of the year? And then secondly, on the liquid biopsy platform, can you maybe just talk about the pipeline of interest beyond the AstraZeneca deal and how you think about commercializing that more broadly?

Sure. Thanks, Tycho. I think the first question, there are 2 answers to that. First is there's a base effect that will kick in on the second half of the year, primarily in Academia. So we continue to see a soft trend in the first half. And many peers have also seen something similar. So Life Sciences is very often reported as a group at many peer companies. But if you go into the Academic piece, I think the market was continued to be soft in the second quarter, at least in terms of growth rate because of the sequestration base effect that we had. So that base effect should then annualize in the second half of the year, thereby driving up the growth rates up as -- due to that annualized base effect. And on top of that, the funding -- our committed funding for 2014 was actually quite favorable and we haven't seen a lot of that come in yet. And that we hope on top of that base effect could provide further growth stimulus. In Pharma, it's a little bit more choppy. It's a smaller piece of our revenue base, and individual programs can move up or down. So I wouldn't factor too much into that performance in the second quarter. So we had quarters with high single-digit growth rates and now low single-digit or flat sometimes. It typically averages out to the mid-single-digit numbers. It can jump around a little bit based on larger programs. And the second question was the... Tycho W. Peterson - JP Morgan Chase & Co, Research Division: On liquid biopsy.

Liquid biopsy, extremely important area for us, Tycho. The liquid biopsy's success is defined by the quality of a sample processing, and this is an area of unrivaled leadership for us. We clearly have extremely strong capabilities in franchises and also leadership positions in how samples can be collected, how samples should be stabilized, processed, enriched, isolated, purified, stored. And that's where the success of liquid biopsies are typically created. Isolating that extremely rare target nucleic acid from highly complex biological specimen is extremely important for us. So we have a broad array of products already out there on the market, and are, by far, the leader. Be it in prenatal testing, be it in cancer testing, our products are the standard solution of choice. The -- in the cancer area and the link to companion diagnostics, we are creating additional utility because we can think about much easier screening programs to identify candidates for certain drugs without having to need assays or access to tissue samples. And we can also create monitoring tools to monitor the success of the drug and also potential recurrence. So we're creating a complete continuum, a cancer-care continuum versus just a stratification. And the assay might be a real-time PCR, it might be a next-gen sequencing assay, it might be a small panel, but the sample processing will typically define the success of the downstream analytical result. And we're trying to create from many programs that we currently have with Pharma, not only a stratification companion diagnostic, but also the flanking products as well, and this is getting a lot of traction. So many of the programs now see this as an integral part of the clinical roadmap for the drug or the companion diagnostic. That, by the way, leads to much higher assay sales, obviously. Instead of just doing a onetime stratification to stratify patients into a drug, we can create recurrence monitoring, almost like PCR-able where -- and certain intervals, retesting would occur. This is obviously also in our commercial interest for the assay sales.

Our next question comes from the line of Brian Weinstein of William Blair. Brian Weinstein - William Blair & Company L.L.C., Research Division: Peer, can you comment a little bit as to whether or not you feel bioinformatics has what it needs at this point? Or are there other opportunities for acquisitions? And then what does the pipeline look like for nonbioinformatics deals? You guys have had success, obviously, with Cellestis and then also, to some extent, with Amnisure and deals like that. But is there an opportunity to go back into some more kind of product-type of acquisitions going forward?

Absolutely. So bioinformatics remains an area of key focus for us. We have a very strong lead in this space, and we are very successful in our formed teams and organization structures that are integrating these capabilities that we have into a very strong and grace of unit. We actually have created a known business area within our organization, lifting this to a direct report to me, and we're spending a lot of time and focus on this area. We see this as an area of growth that is attractive for us. It is value-creating for us and we see this as a long-term competitive advantage that we're creating in select areas of bioinformatics. So the growth trajectory, we expect will continue for quite some time both organic and also strategic. In terms of the deals that we see at the moment, yes, we are -- we're clearly looking out there. It is a very -- the market has clearly moved in other directions than it was, let's say, 5 years ago. But if we look back at the transactions we did over the last 5 years, they were with hindsight now incredibly successful. And we -- starting with Ipsogen, we're the absolute leader in hemato-oncology testing and both in next-gen sequencing now and also in real-time PCR. With the acquisition of Cellestis, we have created tremendous value. This is a great growth driver for many years for us now. With the bioinformatics franchises, this is now quickly becoming the leading or it is already today, the leading unit for next-generation sequencing bioinformatics with extremely strong leadership positions. And what we're looking for and continue to look for and we're extremely selective in this area, are franchises that can deliver many, many years of growth trajectory. So we're not simply looking at filling holes right now. We have enough on our plate but we're trying to identify areas that are synergistic and have long trajectories of growth that can contribute to our company.

Our next question comes from the line of Scott Bardo of Berenberg.

Peer, I have 3. Yes, just picking up on your comments that you made about you realizing something like $50 million worth of revenues in next-generation sequencing in 2013, I just wonder if you can give a little bit more clarity there. Were you also sort of referring to the $25 million or so of bioinformatics revenues that you acquired actually throughout the course of the year, so that your underlying was around $25 million consumables? Just wondering if you can then elaborate upon that a little bit. Obviously, we see some quite interesting technologies coming through from your V2 gene panels. Can you give us a sense of how you see that unfolding in the sense of revenue potential for those consumables over the next year or 2? Just to give us a feeling for your non- -- if you like, your Platform-Agnostic-related business with consumables in next gen. That's question #1 then please. The second question, obviously, very pleasing to see strong progress with QuantiFERON as expected, certainly by your initial guidance. Can you share some thoughts as to why you're comfortable that the competitive environment for this technology is stronger than perhaps the HPV testing modality? I guess, obviously, group exposure to this one single test is becoming more and more. So I just want to get a sense over stability of that franchise. That's it and I have one follow-up.

Sure. Okay, so the first question was on the next-gen portfolio. There, I'd like to maybe clarify that not all of the bioinformatics revenues that came in through acquisition are actually next-gen sequencing related. So Ingenuity also had a very sizable franchise that works with gene expression data from arrays of real-time PCR. So the percentage of consumables and assays in that $50 million number is actually much higher. The CLC bio franchise was predominantly a next-generation sequencing related, but that was substantially smaller. The growth trajectory there, we expect to continue to be extremely strong because we really just started. And the portfolio started developing -- over the course of 2011 and '12, we started a lot of the developments. Consumables have shorter development cycles. We started launching in '13, and now very significantly in '14. And the portfolio is getting a lot of traction. So the capabilities that we have upfront in sample processing, enriching of genes, content-specific enrichments, I would say, are almost second to none here in this space. And we have, in the meantime, a very sizable revenue base that we expect we'll be able to continue for a very long time. Your second question was related to QuantiFERON. Every product has a life cycle, but this product is very early in the life cycle. The product has a very long trajectory of growth in front of it because the development of an assay like this is extremely tricky, and it needs access to a number of different technologies that are quite visible in the market. And so if something would occur in terms of new development, it would be a multiyear development process. The validation of a technology like this is extremely challenging. Also, this is a very large clinical trial that would be required to validate this technology because you're actually detecting something that is very difficult to detect with other technologies. In particular, skin tests, there's a lot of holes in terms of its performance. So our capabilities there are -- to see into the future are very strong. And that said, we're also developing -- and we'll talk about that very soon, we're developing a lot around that portfolio. The current product is extremely strong and beats anything hands down, actually, in terms of performance validated by many, many peer-reviewed journals. But we're also on top of that continuing development. So there is one older product out there that was -- that's a little bit older than ours and represents maybe a first-generation product that, however, is extremely cumbersome to use and has significant workflow disadvantages. So our product is really tailored here to extremely slick and easy processing. And it almost can't get easier. And that is something that is giving us a significant competitive advantage over the competition.

Our next question comes from the line of Doug Schenkel of Cowen and Company.

So I think I have just, I guess, 3 cleanup questions. The first is, weather negatively impacted you in the first quarter. I was just wondering if there was some recapture of those lost revenue in the second quarter. The second question is, Japan revenue dropped a bit sequentially, which is, of course, a typical seasonal phenomenon but it grew very nicely year-over-year although that was in part to the base effect. So cutting through that and keeping in mind the tax changes, it does seem like the second quarter was probably better than expected. I'm just wondering if you would agree with that. And then the third question is just whether or not you would be willing to provide a status update on the commercial rollout of QuantiFERON in China, as well as your efforts to recapture latent TB share in Japan.

Okay. So I'll take the second 2 and Roland, if you could take the first one. So in terms of Japan, the team did a very good job in Japan in the second quarter. As you correctly point out, there were some significant tax changes that led to quite some volatility around the first and second quarter change, including also the fiscal year impact. So good performance. Everybody's a little bit cautious right now to see what is going to happen with Japan in the second half of the year. And the team is going to continue to execute very well like they did in the second quarter. I'm confident of that. The -- it's a little bit early to make a prediction. Does it have a meaningful impact on our overall members. No, not really. It's a sizable piece of our revenue base, but Japan is not a fast-growing country and, therefore, will not have a meaningful impact in particular in terms of its Academia portion. The rollout of QuantiFERON in China is going very well. We're seeing great uptake. We're seeing a lot of new publications come out, many exclusively calling out our product now. And the uptake is fully in line with our expectations that were very strong uptake and expansion of the market. As we all know, it's a huge opportunity in terms of numbers. The pricing in certain segments even is very attractive, and we're going after those first. In terms of Japan, yes, we've been able to roll that back. And as many of you know, we had some delivery problems in Japan last year due to some import challenges that were related to quality cut offs. That was alleviated now and we are seeing a very good rollback of the market. It is just very, very difficult to run high numbers of tests on any alternative products, be it skin test or competing products. And so that has given us a good catch back of the -- recapturing of the market share.

And in terms of question #1, I'm not sure if I understood correctly, otherwise, please correct me. But I would say weather didn't have too much of an impact. I would say, generally, we are quite pleased with the performance in the second quarter. I would say, the single biggest negative surprise for us actually in the second quarter was the performance of Russia, which clearly was something what came in negatively for us. But all in, we made our guidance in terms of sales growth. We actually were better than expected in terms of profitability, again, a 10% rise in profitability with the 5% sales growth is something we were quite pleased with. And we do believe that we have a good basis here to move into the second part of the year.

Our next question comes from the line of Isaac Ro of Goldman Sachs.

Question, Roland, for you on the numbers here, just on your guidance. Organic growth, looks like it should improve a little bit in the back half of the year. So I'm curious if you could maybe talk a little bit about the range of what you think is reasonable for incremental margins, just what's implied in the guidance that you have given the portfolio evolution that you've made and the -- in the restructuring that you've done in the company.

Yes. Thanks for the question. First of all, I think the second quarter clearly shows the direction, which we can go a good margin improvement and our overall guidance still remains at least 100 basis points for the year. And that is also what we believe we can do midterm. So it's clearly something what we believe is also achievable on a period longer than just 12 months. Same is true for cash flow. You have seen a very nice pick up in the first 6 months in terms of cash flow. We do believe that's going to continue, not only in the second part of the year, but also going forward. So clearly, profitability is in a much faster growth rate right now.

So thank you, Roland with that answer. With that, I'd like to close the call, and thank you for your participation. If you have any questions or comments, please do not hesitate to call us, and thank you for your time today.

Thanks. Bye-bye.

Ladies and gentlemen, this concludes the Qiagen's Conference Call. Thank you for joining, and have a pleasant day. Goodbye.