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Qiagen Sees Huge Revenue Potential in Applied Markets, But Maintains Focus on Molecular Dx

The applied testing markets will represent a $5 billion opportunity by 2008, and Qiagen expects its preanalytical technologies to play a significant role in that segment, CEO Peer Schatz said during a presentation to analysts and investors in New York last week.

Even though these markets currently represent around half of Qiagen's total sales, Schatz said the firm will remain primarily focused on growing its molecular diagnostics business.

"What we wanted to show today was that the applied testing markets … shares technologies with these other markets and has huge opportunities," he told BioCommerce Week during an interview after the presentation. "But our near-term market is clearly molecular diagnostics."

Schatz said that the applied markets segment of molecular testing — which targets applications including food and environmental testing, quality control, forensics, biosecurity, and veterinary applications — is expected to grow greater than 20 percent per year through 2015.

Qiagen estimates that the US market for such applications alone will be worth approximately $500 million in 2008, and it is betting its preanalytical technologies will be standard on many of the tests offered in these markets.

"What we wanted to show today was that the applied testing markets … shares technologies with these other markets and has huge opportunities. But our near-term market is clearly molecular diagnostics."

For the presentation, Qiagen invited several speakers from laboratories across the country to talk about the various molecular testing markets they serve and the types of technologies they use. Among the speakers was Michael McDonald, president of Global Health Initiatives and coordinator of the National Disaster Risk Communications Initiative, who warned of the need to quickly develop tests and therapies for avian flu.

Though McDonald's presentation didn't endorse Qiagen's products, its message was clearly intended reinforce a widely held belief that molecular technologies, such as Qiagen's, will play a significant role in fighting a potential avian flu pandemic.

McDonald was followed by several other directors from various academic and commercial labs who discussed their use of molecular technologies in the forensics, blood banking, and infectious disease markets. The take-home message was that the applied markets are indeed a massive selling opportunity.

As an example of its progress in this area, Qiagen highlighted its inroads into the potentially lucrative markets for avian flu research and animal and food screening. Its PG Biotech business, which Qiagen purchased in September 2005 (see BioCommerce Week 9/29/2005), received approval from Chinese regulatory authorities in 2004 to sell the first PCR-based test kit for avian influenza virus screening. The company also sells an RT-PCR influenza kit for types A/B and avian flu (H5N1) virus, which it gained last year through its purchase of Artus (see BioCommerce Week 6/2/2005).

Still Focusing on Molecular Dx

Though half of Qiagen's sales are currently coming from the applied markets, the firm is primarily focused on growing its molecular diagnostics business, Schatz said.

Qiagen has spent the past couple of years focusing on building its molecular diagnostics business. Last year, the firm spent $90 million on eight acquisitions, several of which were aimed at increasing its presence in the molecular diagnostics field. In addition to the acquisitions, the firm has many OEM molecular diagnostic agreements with partners including Veridex, Osmetech, Beckman Coulter, and Abbott.

Schatz said during the presentation last week that the firm expects to generate revenue of $115 million from the sale of molecular diagnostic products this year, which would be around 25 percent of total revenue should Qiagen's 2006 projections hold out. He estimated the market is currently worth about $2 billion and is expected to grow 20 percent annually through 2015.

Qiagen believes it is the fourth largest player in the molecular diagnostics market behind Roche, Genprobe, and Bayer, which reached an agreement last week to sell its diagnostics business to Siemens for roughly $5.26 billion. The firm has a direct sales force of 40 focused on the molecular diagnostics market, and recently it hired Victoria Blaine away from Abbott Molecular to serve as director of molecular diagnostics sales.

In the interview with BioCommerce Week, Schatz reiterated that the firm's acquisition strategy of aggressively pursuing niche players in the preanalytical and molecular diagnostic fields has not changed, even though it has made only one purchase so far this year — that of Gentra Systems for $38 million (see BioCommerce Week 5/10/2006).

"We don't want to be a one-stop shop," Schatz said, referring to the recent flurry of large acquisitions that have hit the research tools market. He said the firm would maintain its strategy of focusing on niche areas in which it specializes.

"There's no way of blinding [customers] with branding power and channel power and those kinds of things," he said.

Qiagen's presentation coincided with the firm's 10-year anniversary as a public company in the US. To commemorate the anniversary, Schatz rang Nasdaq's opening bell on Thursday.

In those 10 years, Qiagen's annual revenues have risen from $52.2 million in 1996 to $398.4 million in 2005, with expected revenues of $453 million to $462 million in 2006. During that time, the firm's market capitalization has climbed from $185.2 million to a current market cap of roughly $2 billion.

— Edward Winnick ([email protected]

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