Ladies and gentlemen, thank you for standing by. I am Audrey, your PGi call operator. Welcome, and thank you for joining QIAGEN's Q2 2019 Earnings Conference Call Webcast. [Operator Instructions] Please be advised that this call is being recorded at QIAGEN's request and will made available on their Internet site. [Operator Instructions] At this time, I would like to introduce your host, John Gilardi, Vice President of Corporate Communications and Investor Relations at QIAGEN. Please go ahead, sir.

Thank you, Audrey, and welcome all of you to our conference call today. The speakers for our call are Peer Schatz, the Chief Executive Officer of QIAGEN; and Roland Sackers, the Chief Financial Officer. Also joining us today is Phoebe Loh 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, Wednesday, July 31, 2019. 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 the reconciliation of these figures to GAAP in the press release and the presentation for this call. As a last point, I just wanted to provide some context as to why we made the pre-announcement on July 24. This was due to the requirements of Germany securities law and the ad hoc system that we have in this country that requires companies to make a public disclosure once there's a material news development. So that material news was the change in our China partnership for our next-generation sequencing in the clinical area and the impact for the 2019 outlook. And we thought it would be helpful for analysts and investors to see this information as well together in one package with the financial outlook and the update from the second quarter. With that, I'd like to now hand over to Peer.

Well, thank you, John, and thank you to all of you for joining us for this call. I have the following key messages for you today. First, we achieved our outlook for net sales growth and adjusted earnings per share. Net sales were $381.6 million and rose 5% at constant exchange rates. Adjusted earnings per share were $0.34 at CER and $0.33 on a reported basis. Second, we shared some important updates while we continue advancing our Sample to Insight portfolio. We announced on July 24 our decision to restructure the current format of our clinical sequencing joint venture in China, which has an impact on our outlook for 2019. The joint venture has been formed and announced in the middle of 2017. After a review period and discussions with our partner, we believe this decision is the best solution. A key factor was the slower-than-expected progress in bringing in vitro diagnostic clinical sequencing to customers in this country. We had been anticipating about $30 million of sales from this joint venture in 2019 and for about $20 million in the second half of this year. This involved primarily revenues for the services provided by QIAGEN to develop in vitro diagnostic assays on behalf of the joint venture as well as the sale of GeneReader NGS System in China and other consumables and products to the joint venture at transfer prices. At the same time, it is important to note that our universal NGS portfolio in this country is not run through the joint venture but has always been commercialized directly by QIAGEN. These universal NGS products are independent from GeneReader and have been performing very well in China and also on a global basis. So we continue to believe in the promise of NGS technologies in China, and we…

Thank you, Peer. Good afternoon to those of you in Europe, and good morning to those of you in the U.S. Let us first review the financial result for the second quarter and later provide an update on the outlook. Net sales in the second quarter of 2019 were $381.6 million and rose 5% at constant exchange rates and in line with our outlook for 5% CER growth. Sales growth on a reported basis was 1%, and this was due the significant adverse currency headwinds that were in line with our outlook for the period. The acquisition of N-of-One, which was completed in January 2019, contributed very modest sales for the period. For the first 6 months of 2019, net sales were $730.3 million and also rose 5 percentage points CER and were up 1 percentage point on a reported basis due to 4 percentage points of headwinds. About 1 percentage point of sales growth came from the launch of QIAstat-Dx, which was acquired in April 2018, while the rest of the portfolio provided a solid 4 percentage points of growth. These results also absorbed a combined 1 percentage point of headwinds from the ongoing decline in revenues from third-party instrument service contracts and the divestment of the veterinary assay portfolio that we did in 2018. Moving down the income statement. The adjusted gross margin was 70.8% of sales in the second quarter of 2019 compared to 71.5% in the year ago quarter. For the first half of 2019, the adjusted gross margin also declined slightly to 70.3% of sales from 70.8% in the same period of 2018. Adjusted operating income declined 2% to $99.1 million from $101.1 million in the second quarter of 2018, absorbing the investments for the development, production ramp-up and commercialization of new instruments. The adjusted…

Yes. Thank you, Roland. I'm now on Slide 9 to give you an overview of key developments in our Sample to Insight portfolio. I'd like to point out 2 highlights here before going into greater detail on some areas of this portfolio. First, our flagship QIAsymphony platform continues to show strong placement rates and good growth in related consumables. And we are on track to reach our target for more than 2,500 cumulative placements at the end of 2019. Additionally, we reached an important milestone in surpassing 1 million patient tests analyzed with QIAGEN Clinical Insight. This is a significant number. This proprietary informatics solution pulls information from over 40 clinical and scientific knowledge bases, including many proprietary ones such as the vast and continually updating QIAGEN Knowledge Base, and this is playing a key role for our customers in enabling and advancing the practice of precision medicine. On slide 10, I would like to provide more details on our portfolio for next-generation sequencing. As mentioned earlier, we have decided to restructure our clinical sequencing joint venture in China. Sales from this joint venture were planned to be approximately $30 million in CER for the full year 2019 and weighted to the second half of this year. This involved primarily revenues for the services provided by QIAGEN to develop in vitro diagnostic assays on behalf of the joint venture as well as the sale of GeneReader NGS Systems and other consumables and products to the joint venture at transfer prices. I want to note that sales of the larger NGS revenue component, the so-called universal NGS solutions, in China are handled directly by QIAGEN in this country, and QIAGEN is experiencing strong growth in this portfolio. We intend to review various options on how to further add from the growth…

Thank you, Peer. I would like to now review our outlook for 2019. As noted earlier, we have updated our outlook for total net sales growth of approximately 5% to 6% CER growth, reflecting the lower sales growth due to the restructuring of the clinical sequencing NGS joint venture in China. We have updated our outlook for adjusted diluted EPS to $1.42 to $1.44 per share also at CER. As for currencies, based on rates as of July 29, in terms of net sales, we expect a currency headwind of about 3 percentage points on results at actual rates. For adjusted EPS for the full year, we expect a currency headwind of about $0.03 to $0.04 per share. For the third quarter, our outlook is for total net sales growth of about 4% to 5% CER. And this includes adverse impact of the changes in China but also for QuantiFERON-TB to grow above our full year target for at least 50% CER growth. Adjusted diluted EPS is expected to be about $0.35 to $0.36 per share and at constant exchange rates. In terms of currency impact for the third quarter, based on rates as of July 29, 2019, we expect headwinds of about 2 percentage points on net sales growth and about $0.01 on adjusted EPS. With that, I would like to hand back to Peer.

Thank you, Roland. So here's a quick summary before we move into Q&A. Let me review what we have announced. First, we achieved our outlook for net sales growth and adjusted EPS in the second quarter of 2019. Second, we are focused on advancing our Sample to Insight portfolio and have had some important developments. We announced a change in our clinical sequencing strategy for China and the intent to review ways to capture growth opportunities in this important market. In other areas of the portfolio, we are moving ahead, especially with the QuantiFERON latent TB test, our expanding portfolio of automation systems and renewed focus on growth in the life sciences. We are in a heavy-lift phase with new product launches that are set to help accelerate our performance in the coming years and are very proactively reallocating resources to support the most attractive opportunities. Third, we have updated our full year 2019 outlook after the decision on the China joint venture. And fourth, we are determined to execute on our strategy to maximize the value of our portfolio with a disciplined focus on capital allocation involving acquisitions to support our portfolios as well as increasing returns to shareholders through buybacks. These actions are aligned with our strategy to strengthen our position for more growth in 2020 and the coming years, in line with our new midterm targets out to 2023. And with that, I'd like to hand back to John and the operator for the Q&A session. Thank you.

[Operator Instructions] We'll go first to Tycho Peterson at JPMorgan.

So on the China NGS decision, curious if you could provide a little bit more color on what caused the partnership failure. Was any of this as a result of competitive pressures given the BGI/ MGI launch? And then when was the decision made? Obviously, you reiterated the guidance at the June 20 Analyst Day. So I'm curious when you made this decision to break up the partnership. And then as we think about guidance, you talked about a $20 million contribution in the back half of the year, which is about 1.3% growth. You're taking down guidance by 2%. So is there something else to the guidance reduction? And then lastly, looking ahead, what would you look for in a new partnership on the NGS front in China? And has your long-term outlook on GeneReader in China changed at all?

Great. Thanks for asking these questions. So first, the, China is definitely a market which is quite complex. And we're kind of, we're offering something different to most other companies in this space in the sense that the joint venture was focused on an integrated solution, Sample to Insight, including everything, pre-configured approved assays, bioinformatics, the whole workflow. And turned out that it became very difficult to align a lot of these components into this integrated workflow and bring them through their respective processes to become available in China. This is a market that is still in a very dynamic mode and with somewhat changing goalposts. And we're just about to enter into a ramp-up phase in the second half of the year for the assay development as indicated also before. And we just didn't feel comfortable with the risk/reward profile on this. The market for NGS in China is more an open market. You see definitely a lot of research being done. There are clinical activities being done but in a slightly more, less integrated and more open formats. And this is also reflected by the very strong growth that we're seeing in the UNGS portfolio in China as being used across the board there and, as we said previously, growing at very high growth rates. So this was an important decision for us to make, in particular in light of the second half of the year, and also had to be done together with our partner obviously to align both of us. And for the guidance question, I'll defer to Roland.

Yes. Yes, I know, I think it's very straightforward that of course, we have to look on the full year if we talk about the full year guidance. And there clearly is also a certain impact. It's quite obvious that we also had a certain impact in the second quarter. Nevertheless, I think we were able to make our guidance here as well. But as I said before, I think at the end of the day, the $30 million on a full year basis is the right number to look at, and it's quite obvious that the rest is just in a certain range.

We'll move next to Jack Meehan at Barclays.

Was hoping you could give a little bit more color on the QIAstat launch to start the year. I think it added 1 point, I saw in the release, to first half growth. Just what's your level of visibility into the $30 million target for this year? What are some of the initiatives you have in place to drive placements? And finally, is there any timing update you can give on the GI approval in the U.S.?

Thanks. Yes, good questions. The QIAstat approval came in a little bit earlier now in the second quarter, which was good. And you saw that we immediately started the launch initiatives in the United States, which, as you know, is by far the majority of the market. 80% of the global market is, for syndromic testing is currently in the United States. So this was obviously an important event. And we were also actively looking at ensuring that we get broader coverage than we can have with our teams that are very well positioned in molecular testing laboratories. But there's also a big syndromic market outside of those molecular testing laboratories. And that's why we signed up McKesson as a [indiscernible] partner for the smaller hospital area. So we have quite a few people on the ground in the base. We've seen a lot of interest around the QIAstat platform. And right now, the focus, you've also seen the numbers on the instrument placements in the second quarter start moving up. And so this is important because we want to have as many placements out there as possible for, in preparation of the fourth quarter. So depending on when the flu season starts or the respiratory season starts, we want to make sure that people have instruments available and can start ordering the consumables to be able to address their testing needs in the respiratory season. So the gastrointestinal panel is in development. We said it would be sometime in the, later this year, earlier next year, that we would get the clearance. And we feel good about that time line. We also feel good about the time line, and this is important, of the meningitis panel, encephalitis meningitis panel in Europe because that is an important cornerstone assay for us to have there as well. So you got the menu road map with, as we showed it here again. And we are committed to making that one happen.

We'll go next to Patrick Donnelly at Goldman Sachs.

Peer, maybe just one on the trends in Europe. it sounded like some softness in Western Europe for you guys. It seems to be weak across the industry with the general noise over there. Can you just give a few more details on what you're seeing there and then also just your expectations going forward in the region?

Sure. It's a good observation. Europe is generally a little bit puzzling at the moment. We are definitely seeing, in particular in core European countries, that the large markets, we're seeing quite soft growth. And this despite the fact that there are commitments to academic funding and also long-term commitments, we talked in the last call about the Horizon programs being approved and obviously quite aggressive funding coming in from the EU, which is an important cornerstone funder in public research over the coming years. So the academic markets are, and, or life science markets more broadly, are indeed quite soft in Europe. And there is a lot of caution. And it could be political uncertainty. There have been a lot of elections going on, a lot of changes in the political landscape and a lot of noise. And that instability is certainly not good for predictability of funding, and that always, there's a long lever typically that the life science markets have. So if there's uncertainty in the future, it will have an impact. So this is our assumption of what is happening right now in Europe, and the fundamentals, however, are generally quite good. So we're watching it very closely.

Next, we'll move to Ross Muken at Evercore ISI.

It's Luke on for Ross today. Just quickly, did you guys say 50% of TB in 3Q growth, if I heard that correctly, Roland? And then I guess just more on the TB and the strategy, can you give us an update on the details with the DiaSorin and the contract terms and how that will flow through and contribute to growth in the back half and even into 2020? And then lastly, if, was the TB shortage or antigen shortage in the U.S. compensated when you guys came up with that 15% guidance? Just trying to get a sense of upside there.

Great. Yes, good questions. So the 15%, sorry for the pronunciation, is indeed 15% in the full year guidance. So our target for the full year 2019 is more than 15, 1-5, percent growth. And obviously, the second quarter was a little bit slower. So we'll see faster growth in the second half of the year as we now have much less of this inventory base effect that we had in the second quarter. The DiaSorin partnership is quite simple. The distribution of the detection assay goes through DiaSorin. The distribution of the assay itself, which is contained in the collection tube, goes through QIAGEN. The 2 products are in about a 60-40 split. So if it's, let's say, $20, to take a round number, you'd see $12 going to QIAGEN channels directly. That would be down from the $20 that we had as an overall package. $8 would be distributed through the DiaSorin revenue line. But there are royalty rates and also purchases of components that, where QIAGEN would be getting income that would, to a very significant degree, compensate for that $8 going away. So the difference is really only a few dollars. And that, however, is still a very attractive deal for us because the EBIT impact is quite positive. So strategically and also financially, we have a big interest to migrate over to the DiaSorin platform. And this is obviously what we have been able to do quite successfully already in early phases and want to ramp further in the, in particular, after the launch, in the United States as well. The antigen was not, we have had this in the past before. This is now a little bit a longer one. So we'll have to see what the impact is. It is more the adoption of new testing that would be done. We'll see what it means. I wouldn't want to call out that this is now a big impact for the year yet. We'll see what it effectively means and in particular also in other countries around the world that are starting to call out tuberculin shortages.

We'll go next to Daniel Wendorff at Commerzbank.

It's Daniel Wendorff from Commerzbank. My question is more a general-tone question, I guess. And if you look back the last 3 years, you have shown constant exchange rate growth of 6% annually and with basically your growth drivers gaining traction. You did the right acquisitions over that time in my view. 2019 is now another year further out, and it looks as if you fall into the same ballpark again. So my question would be, what do you say to those who question that QIAGEN will be able to grow above this rate of 6%, which somehow has to be, turn out to be a sort of hurdle over the last years?

Sure. It's, Roland, maybe you want to add something to that afterwards. I think it's a fair question. I think the important, and first answer I would give, we've actually been sharing a lot of activities at the same time. And what you're seeing here is a company that is fully committed to ensuring that our focus and our resources is dedicated to high-growth opportunities. I think we all agree that with QIAstat, we have a very attractive platform and one of the highest growth areas of today's molecular testing. And with NeuMoDx, we have a next-generation platform that has the potential to address the $3 billion market. And we are committed to fueling that. On top of the growth of the QIAsymphony, the strong strategic and also the competitive position of QuantiFERON, we have some really, really important differentiating products out there. And therefore, if you look at the prior years, it's important not just to look at the headline number, but we have been actively spinning off businesses that we, this year, are now calling out as we're calling them into an overall growth number. And therefore, that is what you were observing here. Roland, do you want to add anything?

Yes. No, I think that was about that. And I think just to add, it's clearly that we did a lot of our homework over the last couple of quarters. And we see no certain traction with product launches in Europe, no more in the U.S. We shouldn't forget that also next year, with digital PCR and other important launches coming up for QIAGEN, we see in particular that some of the instruments are gaining traction. So we talked about it today on the QIAcube side, typically something where people are not focused. Nevertheless, it is an important franchise for us, as we all know. Yes, absolutely, I think we all would love to see that it grows faster than what we see right now. And nevertheless, I think we are on the right track in the right direction.

We'll move next to Doug Schenkel at Cowen.

I want to start on GeneReader, the instrument itself, and your strategic vision from here. On the day you disclosed the change in your guidance outlook related to the JV, yes, I, we caught up with Roland and John. And based on what we ran through it, it's pretty clear that GeneReader generated, the instrument itself, generated about $10 million in 2018 sales, excluding Maccura. Recognizing the cost of the acquisition and R&D investment, it seems fair to assert that you probably spent in excess of $100 million to $200 million on this over the past 7 years going back to the IBS acquisition and subsequent development and commercialization efforts. I may not be precisely right, but I mean even if I'm in the right neighborhood with these numbers, it clearly hasn't been a great ROI, and that's going to happen from time to time. And so with that in mind, you got a lot of other exciting opportunities, as you've discussed on this call. And at this point, is it fair to say that you're redirecting investment to the other areas of next-generation sequencing where you're competing more effectively today and also to other growth opportunities that we've talked about instead of continuing to invest in the instrument itself?

Yes. Thanks, Doug. So I won't comment on the numbers. GeneReader is actually a solid niche product. It was developed for sequencing of smaller gene panels and primarily in oncology. As we all know, that market has changed dramatically in the last 3 to 4 years, in particular through the emergence of immuno-oncology. And assays like TMB and others, they require larger flow cells particularly because these assays cover hundreds of genes. And the GeneReader is targeting obviously very fast turnaround, multiple samples, high flexibility and, as a part of that, is using multiple flow cells where each flow cell is up to 3 gigs. And this is still a very attractive market in many countries, and, but a lot of the laboratories have been starting to use concurrently TMB and other larger panels. So either they have larger systems next to a GeneReader or they have the largest systems altogether. And while some of these larger-panel assays are not yet broadly used in other countries of the world, we're starting to see these mixed environments being used more. But it is in a stable life cycle, and we continue to play systems but primarily in Europe and Asia. And that was important for us to do. A lot of that research that you see that we did around next-generation sequencing is really not the development of the instrument itself but creating a competency around next-generation sequencing. And I think we have to also acknowledge that approaching $200 million in sales in next-generation sequencing, this is one of the largest entities outside the 2 market leaders in this space in next-generation sequencing, and it's growing at 30%. So if you look at the overall investment we're still doing in the GeneReader system that we launched in 2016, '17, that was, that is really more on the stable life science investment burn. And so even double-digit revenue numbers can make that a product worth carrying. Roland, do you want to add to that?

No, I think you said it.

Okay.

We'll move next to Romain Zana at Exane.

Two question if I may. The first one will be on the guidance. If we look at your QuantiFERON-TB growth guidance of more than 15% growth for the full year, it implies around 20% in H2. And this would already drive almost 4 percentage point of growth for the group. So while, this is actually the group guidance for Q3, so is that fair to assume that the China JV headwind will be offsetting the growth of the rest of the portfolio? And second question is on cash flow, maybe more for Roland. If you could just clarify to what referred the $41 million increase in accrued liabilities that hurt the free cash flow in Q2.

Excellent. You want to take both, Roland?

Yes. In terms of guidance, yes, I think it is quite obvious, as we said before, that we feel quite comfortable in expecting a QuantiFERON ramp-up in terms of revenues for the second part of the year. Again, it's not different than what we have seen for the full year. Last year is no different than what we have seen for the full, for the first quarter this year. We should have in mind that the second quarter had a special event last year, and therefore, I think that is, more than offsets the numbers we use for our models as well. On the cash flow side, in general, I would say we clearly have seen a couple of investments which we had to make in terms of equipment. And for the ramp-up of the QIAstat production, I think that was a big driver of an impact for us right now on the cash flow side. Other than that, we had a couple of one-offs, as we talked about earlier, in the first quarter this year where we paid some tax audits that got accrued before. Other than that, I would say it's rather normal underlying business, as we said before.

We'll go next to Steve Beuchaw at Wolfe Research.

I'd love just to get some granularity on the trends in instrumentation. Maybe it's a 2-parter. I think first of all, you had 2 events in the quarter. So you had presumably some stocking into McKesson and then with Stat-Dx system, and of course, you had the initial launch of the cube. And as you pointed out, there are 8,000 systems out there that could be upgraded or replaced. So could you give us a sense for how much of an impact those 2 items had on revenue in the quarter? And then just following on that, what's your assumption for instrumentation growth for the second half of the year?

Roland?

In terms of instrumentation, of course, overall, in terms of placements, we expect a very good quarter. I think that's very straightforward, particularly with [ramp-up] in QIAstat and our NeuMoDx launches. I think the one question which is still a little bit early to answer for us is how much for the wage and rentals, how much for the straight sales. That is already something we are, understand where we are,, where we need a certain run rate, and QIAstat is still early in terms of lifetime. Nevertheless, overall, if you, if I just would focus on what we've placed, I would say there is a significant ramp-up to be expected for the second part of the year, driven by generally these 3 important launches. QIAstat, NeuMoDx, both are much more facing the first quarter than in the third quarter, of course, and ongoing on QIAcube Connect. And the first part of your question, sorry, I didn't catch that. It's hard to hear.

And he has removed himself from the queue.

Okay. Sorry.

Okay. We'll catch up with him afterwards.

Okay. Later on, yes.

We'll go next to Dan Brennan at UBS.

I joined a little bit late. I had a 2-parter if you don't mind. I know NeuMoDx is really going to begin to hit next year, but just wondering, guys, just an update on kind of what you're hearing from kind of customers' confidence towards kind of achieving some of the revenue goals that you've set out, number one. And then number two, unrelated, but I know there was a question obviously that started the call off, I believe, on Europe. But just specifically, just kind of what's baked into your guidance in the back half of the year in terms of European growth?

Thanks, Dan. Well, yes, indeed, we are getting first feedback in from the installed base, some in quite routine testing now already. And this with current, a current menu of only 6 assays, which is obviously being broadened and more completed over the second half of the year and into 2020. The feedback we're getting from customers is indeed extremely positive. So as every new rollout, there are adjustments that we're making, improvements that we're doing, new software upgrades, rapidly delivering those. But everything is ramping actually very nicely, and we are seeing first customers providing side-by-side data, which is very impressive. We are seeing flexibility, time analysis, cost of ownership analysis. The general, also the quality of the results comparisons come in, the flexibility in the samples. And all these things are pointing absolutely in the right direction. So we are excited. And, but it, again, it is an early long cycle. It's an early indication now in a long purchasing cycle. We have first large reference labs, hospitals that are already testing systems and first placements altogether, purchases in addition to obviously evaluation sites on top of that. So we're currently playing it conservative on the numbers. But it's, clearly, if you look at the 2023 targets, NeuMoDx will play a role. We said and I think we got some comments that it was a conservative number, but that 2023 requires a contribution from QIAstat and NeuMoDx above $150 million for that target to work. And I think that's the number that we will continue to benchmark ourselves against in future quarters.

And we'll go next to Peter Welford at Jefferies.

Two quick questions and then a follow-up, which is just with regards to the margin. I guess if we look, despite being a significant number of launches, right, a huge amount at the moment, you still have very well controlled both sales and marketing and R&D. I guess if we just think forward in future years, I guess can we just outline why shouldn't we see significant leverage coming through? Or perhaps another way, what are the things we should be thinking about as areas you're thinking to invest in, in future years that will, I guess, constrain the margin absent the opposite way of looking at it? And then just to follow up on QuantiFERON-TB, which is that we're hearing that there might be a couple of months' delay in the U.S. to file an amendment before that can be fully launched on the LIAISON platform. Can you just comment at all on that and whether or not that impacted at all any of your objectives for this year?

Roland, do you want to take that?

Thank you. Let me kick it off with the margin question. I think, Peter, I think it's a good observation. I think we feel very positive about also our midterm margin potential. It's quite obvious that right now, we have some headwinds because we have to build out, on the one hand side, certain infrastructure particular for our new launches on the consumable side there, which clearly leads that certain products particular on the QIAstat consumable side, one on the underutilized production side, but it was the increased volume over time that is going to turn around. And we do believe it is one of the contribution factors. So I would expect that on the one hand side, we get over time a certain ease on the gross margin side as in general, I would believe that the whole molecular franchise grows a little bit faster than the life science franchise but, I think, in general would help the overall gross margin as well. On top of our operational expansion, I think we're going to continue to see more leverage out of SG&A, particularly on the sales side. The whole digitalization of our sales channel is very helpful for our margin track. The cost per transaction is coming down quite nicely, and that will help us, of course, midterm as well. I think on the R&D side of expenses, I would expect that the framework where we are today in terms of percentage of revenues is an area where we believe we do have a nice balance in terms of input to output, and that should work out going forward. So yes, I would expect that we see also 2020 and the years beyond margin expansion year-over-year.

Great. And related to the submission that we made in the United States to go with our partner DiaSorin, this is a PMA. And as usual in PMAs, there are information exchanges that happen between FDA and the company. I'm not quite sure what you're referring to, but we are on track and confirming second half of the year being our current expectation for those. So we have currently no reason to believe that there's any change to that originally committed time line.

Okay. Peer and Roland, with that, I would like to end the conference call and thank all of you for your participation. If you have any questions or comments, please do not hesitate to reach out to us. Thank you.

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