Qiagen will stick with its strategy of acquiring smaller companies focused on the preanalytical space as it targets continued growth in the molecular diagnostics market, according to CEO Peer Schatz.
After spending $90 million on eight acquisitions in 2005 — six of which were for businesses or technologies focused on the preanalytical segment — Qiagen officials said they see little reason to change their strategy this year. "We will definitely continue to do them going forward," Schatz said during the firm's fourth-quarter conference call this week. "What I like about [small acquisitions] is that they can have significant cultural impact, but they don't dilute your culture and they're easier to integrate."
He said Qiagen expects roughly $33 million in sales this year from these eight acquisitions (see table). "We see acquisitions as catalytic, and clearly in the preanalytical area … there are very few targets north of a few million in sales," he added.
"We definitely will continue on that path," though Schatz said the firm also was looking at potentially larger purchases. "Integration speed and risk to our underlying overall growth rate are important determinants if we want to do a deal or not."
"What I like about [small acquisitions] is that they can have significant cultural impact, but they don't dilute your culture and they're easier to integrate."
Qiagen's acquisitions last year were meant not only to bolster its preanalytical portfolio but to expand its protein and molecular diagnostics offerings. In particular, its $40-million acquisition of Artus in June provided the company with a key component — PCR-based assays — for its plans of operating in the molecular diagnostics market (see BioCommerce Week 6/2/2005).
Schatz noted that the Artus acquisition, as well as the acquisition of PG Biotech in September (see BioCommerce Week 9/29/2005), brought a significant amount of proprietary content to the firm's diagnostics portfolio, and he would look for future acquisitions to do the same.
"We do have about 90 assays in the Artus portfolio, and a little larger number in the PG portfolio," he said. "We have proprietary content in some of the areas. It is important in diagnostics to have a complete portfolio."
According to Schatz, Qiagen is the fourth-largest firm by sales in the molecular diagnostics market, which he estimated at $1 billion to $1.5 billion, depending on whose research is cited. Roche is by far the dominant player with estimated annual sales of $550 million to $700 million for molecular diagnostic products, according to industry research reports. According to Roche's 2005 annual report, the firm garnered molecular diagnostics sales of roughly $893 million.
In comparison, Qiagen said that it generates $115 million in molecular diagnostics sales, though Schatz said that he believes Qiagen is "growing substantially faster" than its competitors in the field.
In addition to the two acquisitions, Qiagen officials said they developed 30 new molecular diagnostic products and signed 15 R&D alliances in the space during 2005.
Q4 Revenues Rise 9 Percent
Qiagen said this week that its fourth-quarter revenues rose 9 percent year over year to $104.3 million.
The company's consumables business, which contributed about 88 percent to net sales, grew approximately 11 percent in the fourth quarter compared with the same period one year ago. Instrument sales fell 2 percent year over year, which company officials attributed to delayed product launches by certain partners in the molecular diagnostics market.
Qiagen posted a profit of $16.9 million, or $.11 per share, for the fourth quarter, compared with net income of $15.8 million, or $.11 per share, in the fourth quarter of 2004. Its 6-percent growth in net income would have been 18 percent for the quarter, if acquisition, restructuring, integration, and other related charges had been excluded.
Qiagen's 2005 Acquisitions
|Acquired Business||Date||Cost||Expected 2006 Revenue|
|Eppendorf's Reagent Business||December||Undisclosed||$6 million|
|Shenzhen PG Biotech||September||$14.5 million||$4 million|
|SuNyx||August||$1.6 million||$1 million|
|LumiCyte||August||$7 million (but could reach $16 million based on milestones)||$2 million|
|Tianwei Times||June||$4 million||$1.5 million|
|Nextal Biotechnology||June||$14.2 million||$3 million|
|Artus||May||$39.2 million||$15 million|
The firm's R&D expenses for the fourth quarter rose to $10.7 million from $9.5 million in Q4 2004.
For the year, Qiagen posted a 5-percent increase in sales to $398.4 million, compared with $380.6 million for fiscal 2005. The firm said excluding sales from its synthetic DNA business, which was sold in the second quarter of 2004, net sales would have increased 11 percent for the year. Its consumables sales were up 13 percent for the year.
Schatz said that Qiagen's organic sales growth was 9 percent for the year, which he said was roughly twice the average of others in the same industry.
Qiagen's R&D expenses for the year were $39.1 million, compared with $35.8 million in 2004.
The firm's net income grew 28 percent for the year to $62.2 million from $48.7 million, while its earnings per share rose 24 percent for the year to $.41 from $.33.
Qiagen officials predicted 2006 revenues of $439 million to $451 million, which would be 10 percent to 13 percent growth for the year. The firm expects earnings per share of $.52 to $.55 for 2006.
Qiagen finished 2005 with cash and cash equivalents of $191.7 million and long-term debt of $191.4 million.
— Edward Winnick ([email protected])