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Qiagen Q2 Revenues Drop 4 Percent on Currency Effects, Beat Analysts' Estimates

This article has been updated from a previous version to include comments made by CEO Peer Schatz in a conference call.

NEW YORK (GenomeWeb) – Qiagen said after the close of the market on Wednesday that its second quarter revenues declined 4 percent year over year largely due to negative currency effects, though the company beat Wall Street estimates on both the top and bottom lines.

For the three months ended June 30, Qiagen posted revenues of $319.5 million compared to $330.8 million in the year-ago period, and ahead of analysts' consensus estimate of $318.0 million. On an adjusted basis and at constant exchange rates, revenues grew 5 percent year over year, driven by instrument sales and improving consumables and related revenues, the company said.

Currency movements had an adverse impact of approximately nine percentage points in the quarter, Qiagen noted. About two percentage points of total CER growth came from the company's December 2014 acquisition of Enzymatics and its next-generation sequencing technologies, while the rest of Qiagen's business contributed three percentage points of growth.

Excluding the approximately 3 percent impact of sharply lower US sales of its human papillomavirus tests for cervical cancer screening, adjusted net sales rose 8 percent in Q2, Qiagen said.

"We've been facing heavy price pressure in the US for our HPV test, and this was due to the entry of new competitors," Qiagen CEO Peer Schatz said during a conference call Thursday to recap the company's earnings. "But we have maintained clear leadership, albeit at a competition-induced dramatically lower price. For 2015, we continue to expect about three to four percentage points of headwind, and this is in line with the first half. For the third quarter, we expect three percentage points [of headwind], and about one to two percentage points in the fourth quarter."

"This means the sales contribution from products related to HPV screening in the US for the fourth quarter of 2015 will be well below 3 percent of our total sales, so any future change in the US HPV franchise is not expected to have a major impact on overall Qiagen sales," Schatz added. "We're nearing the end of this headwind in late 2015, and then you will see a faster overall growth rate for Qiagen that is being driven by a solid performance from the rest of our business."

By customer class, molecular diagnostics, now responsible for about half of all sales at the firm, grew 3 percent as 10 percent growth from the core portfolio tempered a 43 percent decline in US HPV test sales. Qiagen said that instrument sales grew by double digits, led by QIAsymphony and QIAcube automation systems as well as instrument services. Meantime, consumables and related revenues grew in the single digits.

Also within molecular diagnostics, Qiagen's QuantiFERON-TB test for latent tuberculosis testing maintained a double-digit growth pace on expansion in Europe, the US, and Asia-Pacific. Separately this week, the Foundation for Innovative New Diagnostics said that it has signed a five-year memorandum of understanding with Qiagen to formalize their partnership to advance TB diagnostics including tests to enable targeted preventive therapy, to detect drug resistance at the point of care, and sequencing assays for eventual TB surveillance and regimen selection.

In other customer classes, applied testing sales grew 11 percent with a key driver being the ongoing global rollout of its new Investigator STR assay kits; pharma sales grew 7 percent; and academia sales grew 7 percent.

"The US is the largest market for forensics with around 400 accredited laboratories analyzing more than 4 million casework and reference samples per year," Schatz noted. "In the US, we have been offering sample technologies and this is part of our very high market share in sample technologies for forensics around the world. We are practically in every laboratory worldwide conducting forensic testing with such sample technologies. Now, with the expiry of some patents in the US, we are entering the assay market with our Investigator STR kits for genetic fingerprinting."

Qiagen's net income in Q2 was $25.1 million, or $.11 per share, compared to $32.8 million, or $.14 per share, in the year-ago quarter. On an adjusted basis, EPS was $.26, topping analysts' consensus estimate of $.25.

Qiagen's R&D spending fell 11 percent to $33.6 million from $37.9 million, while its SG&A expenses dropped 3 percent to $117.3 million from $120.9 million.

For the third quarter of 2015, Qiagen expects adjusted net sales to rise approximately 3 percent at CER, including about three percentage points of headwind from lower US sales of HPV tests compared to the same period in 2014. The company said it expects adjusted EPS of between $.29 and $.30 in Q3.

For full-year 2015, adjusted net sales are expected to rise about 4 percent at CER, as growth of 7 percent to 8 percent in the core portfolio (including Enzymatics' contributions) is tempered by the adverse effect of three to four percentage points due to declining HPV test sales. Full-year 2015 adjusted EPS are expected to be between $1.16 and $1.18 at CER compared to $1.00 in 2014, with anticipated adverse currency effects.