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Qiagen Plans Greater Push into Molecular Dx, Bolsters Sales Force to Peddle New Products

Qiagen has launched a new avian flu molecular diagnostic test and intends to launch another 12 assays for bacterial and viral infections within the next four months as it continues to focus its business on the diagnostics market.

Roughly 20 percent of Qiagen's current revenues are derived from molecular diagnostic products, but several acquisitions over the past year have ensured that a greater proportion of its future sales will come from this estimated $2 billion market. The firm also has created a dedicated diagnostics sales force and has stepped up hiring in that part of the company over the past couple of quarters.

"We are expanding our assay portfolio significantly," said Qiagen CEO Peer Schatz during the firm's third-quarter conference call this week. The firm currently sells around 120 assays and has alliances with 25 diagnostic partners, under which the firm either distributes or co-develops products, he noted.

"We created a diagnostics sales force and focused initiative in that area," said Schatz. "This is quite a significant sales force … partially from existing salespeople at Qiagen and partially from people we hired." Though Qiagen does not provide a breakdown of salespeople it employs by market segment, the company's total sales force grew 4 percent during the third quarter to 538 people.

"We are expanding our assay portfolio significantly. We created a diagnostics sales force and focused initiative in that area. This is quite a significant sales force … partially from existing salespeople at Qiagen and partially from people we hired."

Qiagen also established a sales force focused on the applied testing markets, which Schatz said requires specialized salespeople. Products in this area serve the veterinary, food, forensics, and other markets, and according to Schatz, it is growing very rapidly, though he did not provide details for sales growth in this area.

Schatz pointed to Qiagen's avian flu tests as examples of how the company is reaching both the human and applied testing markets. The company offers screening assays for animals and food, and announced this week the launch of an avian flu test kit developed by its Artus subsidiary that detects RNA of avian flu virus strains and can provide results within two hours. The firm's Chinese subsidiary PG Biotech — purchased in September (see BioCommerce Week 9/29/2005) — has been selling an avian flu molecular detection kit for veterinary, import/export control, and quarantine needs since last year.

Qiagen's diagnostics business has been rapidly expanding over the past couple of years as the result of several strategic acquisitions, including the $40 million purchase in June of Artus, which makes PCR-based molecular diagnostics for pathogenic testing, genotyping, and pharmacogenomics applications (see BioCommerce Week 6/2/2005).

In addition to expanding its diagnostic offerings and targeting sales in that area, Qiagen has placed an emphasis on building its business in China. In addition to the acquisition of PG Biotech, the firm acquired nucleic acid reagent provider Tianwei Times in June, opened an office in Shanghai this year, and strengthened its distribution capabilities through a pact with Gene Company.

"China is expected to be the world's largest pharmaceutical market by the year 2020," Schatz said. "Biotech is clearly a key driver, and they're focusing on diagnostics and pharmacogenomics in that market."

Schatz noted that PG Biotech has 150 sales people focused solely on the diagnostics market.

Currency Exchange Rates Ate $3.1M in Q3 Sales

Qiagen reported third-quarter sales of $98.7 million, a 9-percent increase over sales of $90.4 million in the third quarter of 2004. The company had provided guidance of $101.8 million in revenues earlier in the year, but Qiagen said that unfavorable currency exchange rates cost the company $3.1 million in sales.

The reported revenues were slightly below the company's guidance, with two of Qiagen's OEM partners in molecular diagnostics delaying certain launches of instrument and consumable products.

"It clearly had an impact and was visible in our numbers," Schatz said, "but they're low-margin and didn't have an impact on our EPS. So, internally, I'm not too concerned about that. It's a small part of our business, [and] we are only generating about 1 percent of our sales from these co-developments."

Qiagen added that these delays led to a shortfall of approximately $2 million this quarter, primarily in instrumentation, which translated to a 14-percent drop in the growth of its instrumentation business. The company also said that there was a "good probability" that the delayed product launches will occur late this year or in early 2006.

Qiagen's consumables business, which contributed roughly 89 percent to net sales, grew about 15 percent in the third quarter compared to Q3 last year.

Geographically, Europe, which contributes 42 percent of Qiagen's sales, had the strongest quarter for the firm, growing 13 percent year over year. Sales in North America, which account for 48 percent of total sales, grew 8 percent.

"Pharma was strong, and surprisingly strong in the United States," said Schatz.

The company said sales in Japan were essentially flat for the quarter. "Japan remains a market that is very difficult," said Schatz. "It is facing continuing budget pressures on the public spending area, and what we are seeing is a lot of pharmaceutical companies are actually exiting the research out of Japan. So, the pharmaceutical sector is not a growth segment at the moment."

He noted that there has been some growth in the diagnostics and academic markets in Japan, and some industry observers have predicted a rebound. But Schatz said Qiagen remains conservative in its outlook for that market, and "assumes that it will remain flat going forward."

Overall, sales to the academic market accounted for roughly 45 percent of revenue, sales to the pharma/biotech market brought in 35 percent of total revenues, and the diagnostics market accounted for 20 percent.

Qiagen's net income for the third quarter jumped 40 percent to $17.6 million, or $.12 per share, from $12.6 million, or $.09 per share, in the third quarter last year.

The firm did not provide information on its R&D expenses or its cash position as of Sept. 30.

— Edward Winnick ([email protected])

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