NEW YORK (GenomeWeb Daily News) — Speaking at Piper Jaffray's annual healthcare conference today, members of Qiagen's management team provided investors with a recap of recent business activities and a glimpse of what's to come.
Qiagen CFO Roland Sackers told investors that the firm saw "very nice underlying growth" from its molecular diagnostics and applied testing businesses in 2013, with "stabilization" in its pharmaceutical/life sciences research products business.
Regionally, Qiagen's business in southern European countries such as Spain and Italy has been and will likely continue to be "quite soft," Sackers said, adding that there is a much more solid funding environment in northern European territories such as Germany, France, Benelux, and Scandinavia.
Qiagen's US business was somewhat negatively impacted in 2013 due to sequestration, but Sackers noted that things are looking more positive for the first quarter of 2014. He also noted that the company's biggest short-term opportunity is in Japan.
The company was also able to finish restructuring efforts in 2013, reallocating "several hundred" of its approximately 4,000 employees to "new responsibilities and projects," particularly in the area of molecular diagnostics and next-generation sequencing, but also in bioinformatics. Sackers noted that the company should see a favorable financial impact from this restructuring in 2014.
Other highlights from 2013, and in particular the last few months, included pharmaceutical development agreements with Eli Lilly and Clovis, as well as a few other undisclosed companies, in the area of companion diagnostics. These added to an existing CDx development deal Qiagen struck with Bayer in the second half of 2012.
Sackers and John Gilardi, Qiagen's vice president of corporate communications, also discussed how the company's QuantiFeron-TB Gold latent tuberculosis assay, which it acquired in 2011 along with Australian biotech firm Cellestis, is expected to drive growth.
QuantiFeron-TB Gold is an interferon gamma release assay that serves as a blood-based alternative to a 100-year-old tuberculin skin test for identifying people infected with Mycobacterium tuberculosis by measuring their immune reactivity to the bacterium.
Gilardi said that many competing tuberculosis tests focus on active cases of the disease, while QuantiFeron-TB Gold is designed to detect latent infections. As such, Qiagen targets the test at high-risk groups such as healthcare employees and those in congregated living situations, such as prisoners. For example, New York's Riker's Island prison is a customer, Gilardi said, and it has experienced a decline in incidence of the disease since adopting the assay.
Meantime, Sackers noted that a competing test — presumably Oxford Immunotec's T-Spot TB test, though Sackers didn't name the firm or test specifically — has recently garnered market attention because that company just completed its IPO, which has also helped draw attention to Qiagen's technology.
Sackers also underscored the fact that QuantiFeron-TB Gold received marketing approval in China last month, further increasing market penetration expectations.
Overall, Sackers and Gilardi noted that even though the test has experienced growth of more than 20 percent since Qiagen took it on, market penetration is still quite low — possibly around 10 percent. They also estimated that about 50 million skin-based latent TB tests are administered worldwide and about 22 million such tests are administered in the US annually, and these tests could eventually be replaced by IGRA-based tests such as QuantiFeron.
HPV leveling off
Human papillomavirus testing has traditionally been an important area of business for Qiagen but has recently flagged in the face of newer competing molecular HPV assays such as those offered by Roche and Hologic's Gen-Probe business.
Sackers noted that Qiagen anticipates its US HPV business to represent about 10 percent of its overall revenue in fiscal year 2014, with the loss of an important customer — presumably Quest Diagnostics, which inked an HPV screening deal with Hologic in June — representing an approximately $30 million to $40 million impact.
Piper Jaffray analyst William Quirk, who moderated Qiagen's presentation, queried management as to when the company expects stability in this business, either through customer regeneration or by becoming so small that it doesn't drag on top-line growth.
Sackers replied that this is difficult to project for 2014, but after that the business will probably be small enough to not make a significant difference in overall company growth. However, he did note that Qiagen expects HPV growth to be higher in 2014 than it was in 2013.
Finally, Sackers and Gilardi discussed Qiagen's highly anticipated GeneReader sequencing platform, noting that the company has assembled the various parts of its platform with an eye toward optimizing workflow for clinical implementation.
Gilardi noted that in terms of sequencing technology, life science customers have a very cost-driven mindset, whereas molecular diagnostics customers are very profit-driven, focusing primarily on workflow, turnaround, and reimbursement.
He said that Qiagen aims to sell "not a sequencing box" that is measured by cost per megabyte of data, but rather a way to seamlessly produce a clinically actionable report for which a customer can obtain reimbursement. "We want to be the first company that can run you through that process from beginning to end," he said.
Along those lines, Qiagen sees its preanalytics and informatics capabilities, as well as its platform's flexibility and scalability, as strong market differentiators.
Piper Jaffray's Quirk pushed Gilardi to provide more clarity on this workflow strategy, asking how much hands-on time will be expected from potential physician users.
"We're not getting into the math yet," Gilardi replied, "but it will be less hands-on time than the competition, that is clear." He noted that the largest sequencing player — presumably Illumina, although he did not identify that company by name — has several processing steps in front of its machine, whereas Qiagen's aspiration is to enable people who normally run real-time PCR assays to be able to run sequencing assays on GeneReader.
Sackers and Gilardi declined to provide an updated timeline on the commercialization of GeneReader, only reiterating that the platform will launch in 2014. Sackers noted that Qiagen's priority is to fully test the system before commercial release, and that there is no need to rush to market. However, he also noted that the company will soon be releasing early data from the platform.
As such, the company is warning investors that it is too early at this point to plug potential GeneReader sales figures into future financial result models for the company.