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Qiagen Lays out Four-Year Plan to Achieve 7 Percent CAGR

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NEW YORK – At the New York Stock Exchange on Monday, Qiagen guided analysts through a focused growth investment case aimed at maintaining a 7 percent compound annual growth rate at constant exchange rates, sharpening focus on its growth pillars to contribute at least $2 billion in revenues in 2028, and returning $1 billion to shareholders over the next four years, absent any mergers or acquisitions.

"Four years ago, this company had its back against the wall," CEO Thierry Bernard said during the event. "In the last four years, by execution and focus, we made it stronger once again," he said, adding, "What we are giving you today is a commitment to an even more focused, more profitable company."

Executives at the event asserted that Qiagen would drive growth through sales in its three fastest-growing businesses — digital PCR, syndromic testing, and bioinformatics — while also expanding its legacy sample technology and latent tuberculosis blood testing businesses.

Specifically, the firm plans to triple its QiAcuity digital PCR business from $90 million in sales in 2023 to $250 million in 2028. It also aims to double both its QiaStat-Dx syndromic testing business revenues and its Qiagen Digital Insights bioinformatics business, each increasing from roughly $100 million to $200 million in sales.

The DNA and RNA isolation and automation business, meanwhile, will expand from $650 million in sales in 2023 to $750 million, executives said, while the QuantiFeron business will grow from $450 million to $600 million.

Overall, these five growth pillars will ultimately contribute at least $2 billion in revenues in 2028, Qiagen projected, as compared to approximately $1.4 billion anticipated from these businesses in 2024. For perspective, Qiagen's full-year 2023 net revenues were $1.96 billion, and the firm expects at least $2 billion in net sales at constant exchange rate for 2024. 

Enhancing this growth strategy, Qiagen will continue to prune its portfolio and consolidate its global sites while also expanding digital and artificial intelligence-based initiatives to cut costs and improve efficiency in manufacturing, regulatory, and customer service domains.

In an interview at the event, Bernard called the plan "ambitious but realistic," noting that while much has changed in the past four years, Qiagen has continued to grow faster than the market. "We want to sharpen our focus," Bernard said, in part by constraining energy and efforts to areas where the firm believes it can take between a number one and number three position.

Exemplary of this approach, Qiagen announced last week that it will close its NeuMoDx business. "I still to this day believe it is the best PCR platform out there from a conceptual design — the fastest and simplest — and I myself fought to get that platform into our portfolio," he said. However, the automated qPCR market is "overloaded with platforms post-COVID, and prices are going down very quickly," Bernard said, further noting that closing the business "hurts, but it is a decision that is necessary."

The NYSE event was attended by roughly a dozen medtech investment analysts, many of whom subsequently updated their valuation of Qiagen.

JP Morgan analyst Casey Woodring maintained an Overweight rating for Qiagen but raised the price target on its stock to $54 from $52. Qiagen is executing at a high level, Woodring wrote in an investment report, citing its strong 7 percent top-line and 10 percent bottom-line CAGR from 2019 through 2023.

"We see promise from its existing crown jewels — QuantiFeron, QiaSymphony, QiaStat, QDI, [and] QiAcuity — which should continue to shine and support core growth on the back of COVID-driven instrument placement pull-forward," he wrote.

At UBS, Dan Leonard reiterated a Neutral rating, and also raised the price target by $2 to $46. "The current growth drivers are the same as prior, even if proportionally larger, and thus we believe the company will need to execute upon the growth acceleration before it is awarded for faster growth by the stock market," Leonard wrote in an analyst report on Monday.

Although Evercore ISI does not cover Qiagen, in a note to investors Vijay Kumar said, "All in, these seem like reasonable assumptions and [Qiagen] should be able to consistently grow its EPS at a [double-digit] clip."

At the close of trading on Tuesday on the New York Stock Exchange, shares of Qiagen were up a fraction of a percent at $43.75.

Growth drivers

In his presentation, Bernard said that he expects sales in the QiAcuity digital PCR business to grow 25 percent over the next four years. The firm launched the system in September 2020 and claims more than 2,000 cumulative placements to date.

Nitin Sood, a former PerkinElmer and Agilent Technologies executive who was hired as senior VP and head of life sciences at Qiagen 10 months ago, said during his presentation on Monday that the firm sees a $500 million total addressable market in digital PCR and will triple its revenues in this business, in part by tripling the size of its commercial team.

The firm will also now move the QiAcuity into in vitro diagnostics, launching a US Food and Drug Administration-cleared BCR-ABL clinical assay later this year, Sood said, as well as a version for clinical customers called QiAcuity-Dx.

Qiagen also plans to serve research and biopharma customers with its dPCR system, and recently signed a companion diagnostics agreement with an undisclosed partner. And, the firm has so far placed digital PCR systems in 84 state and federal labs, Sood said, to serve the wastewater market.

Admittedly a small piece of revenues, wastewater testing is also a critical demonstration of the power of digital PCR technology, Bernard also said.

Fernando Beils, senior VP and head of molecular diagnostics at Qiagen, said that the firm's QiaStat-Dx system will attain a number two market position in the coming four years, with a broader global presence and differentiated test menu.

Qiagen has a respiratory panel on the system and recently launched an FDA-cleared assay to detect gastrointestinal pathogens. The firm plans to launch an FDA-cleared syndromic assay to detect pathogens causing meningitis in the second half of this year, followed by a sepsis test from positive blood cultures and an assay to identify pathogens causing complicated urinary tract infections. To access the outpatient setting and obtain reimbursement, the firm will also launch two new five-target "mini-panels" for respiratory and GI pathogens, Beils said.

Within the bioinformatics business, Qiagen serves both the clinical and research spaces. Jonathan Sheldon, senior VP and head of Qiagen's digital insights business, said that the firm has an edge over its competition because it repackages the same knowledgebase for each of these spaces. It also deploys a hybrid of human- and AI-curated approaches, with the AI components clearly demarcated. The firm's agnostic software-as-service will grow to $200 million in sales in the coming four years, he said, in part through the launch of nine new informatics products. The firm will also grow its five AI-enabled applications to at least 14, and invest approximately 20 percent of sales into research and development.

Flagships

Sample prep and latent TB testing with QuantiFeron make up approximately half of Qiagen's business, and the firm also expects to grow in these flagship areas over the coming four years.

Qiagen was founded 40 years ago with proprietary spin columns to isolate DNA and RNA, and the firm's blue boxes of kitted reagents are de rigueur in research and clinical labs. Entering the sales relationship "from this pivotal, unavoidable position" has allowed Qiagen to expand further into the molecular diagnostics workflow, Bernard said, "from sample to insight."

Sood said the advances in sample prep will include two new instruments. The QiaSymphony Connect will launch in 2025 and feature preconfigured workflows for liquid biopsy applications that enable high sample volumes, low eluate volumes, and low dead volumes. The QiaSprint Connect will be a benchtop instrument for high-throughput sample preparation, processing 192 samples per hour, and will launch in 2026.

For QuantiFeron, Bernard said the firm's medical education efforts have converted approximately 40 percent of the latent TB testing space from skin testing to blood testing and helped to persuade the World Health Organization to make blood-based assays the preferred method.

Going forward, Beils said in his presentation that the firm will access the remaining 60 percent of the TB testing market with a dedicated sales force and customer education and will expand its outreach in developing countries.

The firm will also grow QuantiFeron by adding automated liquid handling through partnerships with Tecan and Hamilton, and automated assay and result processing through its partnership with DiaSorin. With the latter, it is also collaborating to develop a Lyme disease assay, which Beils said is currently under review with the FDA.

Efficiency

With streamlining efforts branded QiaEfficiency, Qiagen CFO Roland Sackers said the firm will streamline and consolidate on many levels, in part through deploying digital- and AI-based approaches.

In manufacturing, for example, Qiagen plans to use predictive analytics to improve supply chain and inventory management, Sackers said in his presentation at the event. It will also use AI optics to reduce scrapping by up to 15 percent, and AI-based post-market surveillance report generation will be faster and more accurate. In customer service, the firm will use SupportGPT to manage its approximately 75,000 tickets per year, reducing hands-on time by 15 percent, he also said.

Likewise, Qiagen recently relocated its San Diego-based Verogen forensic testing business to Maryland. It has also begun participating in an online auction system to dispense with unneeded materials.

These small opportunities to reallocate resources are all expected to add up, Sackers said, noting that the firm also anticipates some potential refinancing opportunities going forward.

Adjusted operating income will grow from 28 percent to 31 percent through the combination of all of these efforts, Sackers said. The firm has already returned approximately $300 million to shareholders through a share repurchase in January 2024, and will ask shareholders to approve a new $300 million repurchase program in an upcoming meeting.