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Qiagen Downgraded by Investment Firm Macquarie

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Citing increasing competition in the human papillomavirus testing space and possible austerity measures by the US government, investment firm Macquarie downgraded Qiagen's shares and revised revenue and EPS estimates on Wednesday.

Macquarie also lowered the target price on Qiagen's shares.

In a report, Christian Peter, an analyst at Macquarie, downgraded the company to "Neutral" from "Outperform" and lowered full-year 2011 revenue estimates to $1.18 billion from $1.19 billion. Adjusted EPS was revised to $1.01 from $1.06, and the target price for Qiagen's shares on the XETRA in Frankfurt, Germany was changed to €15.3 from €16.5.

Peter said he made his changes to reflect "the increased uncertainty about HPV competition from Roche" — whose cobas HPV test was approved by the US Food and Drug Administration last month — as well as continuing uncertainty about budget cuts in the US.

Peter is not alone in his concerns about the increasingly crowded HPV molecular testing landscape, and investment houses William Blair and Goldman Sachs also recently noted concerns about Qiagen's ability to maintain its 90 percent share of the HPV market.

In a research note issued yesterday, Isaac Ro at Goldman Sachs wrote that after checking with companies at the Eurogin conference in Lisbon this week, "we believe the competitive dynamics in HPV testing will evolve over the next 12 months as new platforms are approved, existing players expand into new regions, and additional clinical data emerges."

As decisions by customers become more cost- and convenience-based, Gen-Probe with its broader menu and "superior automation" is better positioned to capitalize on the HPV market than Qiagen, Ro added.

Gen-Probe filed a premarket approval submission with the FDA in November.

Qiagen recently cited the Japanese earthquake and tsunami and political turbulence in North Africa, particularly Egypt, in reporting flat revenues year over year for its first quarter. The firm, however, did not take into account any further issues in the two regions in maintaining its full-year 2011 forecast of sales growth of 5 percent to 7 percent at constant exchange rates, and adjusted EPS of 7 percent to 13 percent.

Ro said in his note that near-term, "a lack of material improvement in US patient volumes keeps us cautious on US HPV growth, in general, and on Qiagen's guidance for 2011 constant currency growth in particular."

Macquarie's Peter said that while he did not incorporate further disruptions in Japan or North Africa into his financial estimates, "we believe that there remains a risk that [such occurrences] could potentially put the guidance in jeopardy and further delay the return of visible growth for Qiagen."

During the weekend, Qiagen announced changes in its QIAensemble program. The QIAensemble Revolution program will combine existing and upcoming components that are slated to be launched in the near future, in order to broaden the menu and increase speed to up to 1,000 samples per shift.

Also, the QIAensemble Revolution program will combine hybrid capture 2 and PCR technologies and other assays and is planned for launch by 2013 or 2014.

"The fact that no competitor test has matched the level of clinical validation available for the digene HC2 HPV Test further underscores the benefits of quickly migrating this assay onto highest-performance automation," Qiagen CEO Peer Schatz said in a statement. "Very importantly, our decision to share instrument components will make QIAsymphony and QIAensemble more compatible to share assays, which will accelerate our menu creation and help position QIAGEN to achieve even stronger leadership in molecular diagnostics."

Peter said of the announced changes, "We believe that this step is sensible in light of current competition for HPV testing and could lead to a considerable de-risking of the franchise."

In Thursday trade on the XETRA, Qiagen's shares closed down around 1 percent at €14.56. In mid-afternoon trading on the Nasdaq, shares of Qiagen were down a fraction of a percent at $20.86.

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