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Cowen Upgrades Qiagen Stock to Market Perform

NEW YORK (GenomeWeb News) – Investment bank Cowen & Co. today upgraded shares of Qiagen to Market Perform, citing the firm's recently acquired Ingenuity business, stabilization in its US human papillomavirus business, and Qiagen's movement toward higher growth businesses.

In addition to upgrading his rating for the company from Underperform, analyst Doug Schenkel raised the price target for its stock to $21 from $15.50, and increased his full-year 2013 EPS estimate to approximately $1.10 from $1.06.

His improved outlook for the company follows Qiagen's announcement on Tuesday that its revenues for the third quarter improved 6 percent year over year, as the firm beat the consensus analyst estimate on the top and bottom lines.

In a research note, Schenkel also noted that the growth outlook follows "two tough years of relative underperformance" by Qiagen. In particular, he highlighted the performance of the Ingenuity business, which Qiagen purchased for $105 million in April, and the HPV business outside of the US. Both businesses, he said, grew about $5 million better than expected.

While Qiagen's US HPV business was down 10 percent year over year, sales outside the US lifted the entire HPV business 3 percent, Qiagen said in its Q3 announcement. Additionally, the 10 percent decline in US HPV sales had been expected, and Qiagen CEO Peer Schatz said on the company's conference call that the US HPV business was beginning to stabilize.

HPV was once a core business for Qiagen, but in recent years it has lost market share to competitors, such as Hologic's Gen-Probe business and Roche. As Qiagen shifts some of its attention away from that market, it has moved into next-generation sequencing with plans to launch its GeneReader benchtop sequencer in 2014. Qiagen's buy of Ingenuity, as well as its purchase of CLC Bio, addresses the back end of the NGS workflow.

Schenkel tempered exuberance around the company's NGS business, however, noting that there is still little information about GeneReader's pricing and performance. He added that the initial focus of the instrument "practically speaking, is to defend against share loss in RT-PCR MDx assays, and the bridge between this somewhat defensive strategy and Ingenuity still remains to be defined."

But, he also said that Qiagen increasingly is moving away from its lower-growth legacy areas "into higher-growth areas of complex genetics."

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