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Qiagen Fast-Tracks HPV Genotyping, CF Tests; Acquisitions Help Drive Q3 Revenue

This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
Qiagen has fast-tracked development of its human papillomavirus genotyping assay and a cystic fibrosis assay, and expects to launch several multiplex tests next year, CEO Peer Schatz said during the firm’s third-quarter conference call this week.
The firm is aiming to capitalize on its earlier acquisitions of Digene and Genaco to develop and sell a variety of multiplex molecular assays that bridge the infectious disease and oncology markets. Meanwhile, Qiagen reported that its third-quarter revenues rose 50 percent, thanks in part to Digene’s contribution.
The $1.6 billion acquisition in July of Digene provided Qiagen with the only HPV molecular test cleared for marketing in the US and boosted the number of its sales people focused on molecular diagnostics to more than 250 (see BioCommerce Week 8/8/2007).
In the wake of that acquisition, Schatz told investors at the UBS Global Life Sciences conference in September that Qiagen was developing a few new HPV tests (see BioCommerce Week 9/26/2007).
“We have a very exciting HPV genotyping product that we have on fast track that will be launchable in the foreseeable future,” Schatz said during the conference call this week. “This is a very powerful product that will be leveraging multiplexing technologies.”
Schatz said the firm would expand its clinical sales force that details tests to physicians, as well as increase its direct-to-consumer campaigns for the HPV test both in the US and in international markets.
“This is extremely important as we’re still seeing extremely low penetration rates, even in the United States,” he said. “The education of physicians is absolutely critical.”
Qiagen currently sells around 120 molecular diagnostic assays. Schatz said the firm would expand its oncology molecular assay pipeline to capitalize on the HPV assay.
He said Qiagen would provide an update on its assay-development plans at its annual investors meeting in February.
But he noted that in addition to fast-tracking development of the HPV genotyping assay, a cystic fibrosis assay also has been given priority in the development pipeline. Multiplex panels for respiratory and hospital-acquired infections “should come out in 2008,” he said.
The $40 million acquisition of Genaco a year ago brought Qiagen a multiplex technology and 11 test panels for respiratory, hospital-acquired, and bacterial infections, among other conditions, which are currently sold for research use only (see BioCommerce Week 11/1/2006).
“Our Qiaplex technology allows us to put a lot of real estate onto a panel,” Schatz said this week. “With very high sensitivity we can hit many targets within a given sample. This is a benefit we want to bring to our customers.
“We’re not thinking about an MRSA assay here and then a VRE assay there or a third assay there,” he added. “We’re thinking of creating panels … that can give a very high resolution of the various targets, and a sub-typing of them as well.”
He said that although the firm has fast-tracked some women’s health-related assays, “the hospital-acquired infections panel will be more in a regulated format,” and is not expected to be launched until the second half of 2008.
Q3 Revenues Soar, But Acquisition Costs Hit Bottom Line
For the three months ended Sept. 30, Qiagen reported revenues of $176.6 million compared to $117.9 million in the comparable period a year ago. The most recent quarter’s results include the operations of Digene and eGene, which was acquired in July for $34 million (see BioCommerce Week 4/18/2007).

“I see a lot of data around HPV testing, where analytical performances are being looked at. What is important is clinical performance, and this is where probably the most significant barrier kicks in.”

Qiagen did not break out the portion of revenue it derived during the third quarter from these two acquisitions. However, Schatz said during the call that the firm’s guidance for Digene’s revenue in the quarter was around $40 million, “and we met or exceeded the guidance. So, the business is performing very well.”
Consumables sales grew 45 percent, while instrument sales increased 39 percent year over year, he noted. Sales in North America were up 70 percent during the quarter, while sales in Asia grew 29 percent, and sales in Europe increased 23 percent.
Of the 50 percent overall revenue growth, 10 percent was organic, 35 percent came from acquisitions, and 5 percent came from currency exchange, said Schatz.
Charges related to the Digene and eGene acquisitions, however, resulted in Qiagen taking a net loss of $7.3 million, or $.04 per share, for the quarter compared to a profit of $19.4 million, or $.13 per share, in the third quarter of last year. Qiagen took charges of $25.9 million for purchased in-process research and development; $4.5 million for acquisition, integration, and related costs; and $3 million for acquisition-related intangible amortization.
Excluding those charges, Qiagen’s adjusted net earnings for the quarter were $31.1 million, or $.17 per share, compared with adjusted net earnings of $21.9 million, or $.14 per share, last year.
“We saw revenue and earnings growth which were in line [with] and above our expectations, respectively,” said Schatz. “Sales of our sample and assay technologies to customers in the molecular diagnostics field developed better than expected” and contributed approximately 42 percent of the firm’s overall revenues in the quarter, he added.
Qiagen did not provide a figure for its litigation costs in the third quarter. The firm is involved in an ongoing patent and anti-trust suit with Third Wave Technologies, which aims to sell its own FDA-approved HPV molecular diagnostic assay as early as next year (see related article).
Schatz declined to comment on the ongoing litigation. He said that Qiagen — through its acquisition of Digene — has the most extensive patent portfolio in the world covering HPV.
“This IP portfolio is only one of very many significant barriers to entry in the HPV testing market,” said Schatz.
“I see a lot of data around HPV testing, where analytical performances are being looked at,” he added. “What is important is clinical performance, and this is where probably the most significant barrier kicks in. We have, however, a very clear [patent] position that we will defend … very actively going forward.”
Qiagen’s third-quarter R&D expenses climbed 77 percent to $17.9 million from $10.1 million year over year. Sales and marketing costs soared 57 percent to $45.2 million from $28.7 million, and general and administrative costs rose 73 percent to $21.5 million from $12.4 million year over year.
The company finished the quarter with $308.7 million in cash and cash equivalents.
Qiagen also reiterated its previous revenue guidance of $614 million to $635 million for full-year 2007.

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