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Qiagen Upgraded to Overweight by JP Morgan; Stock Surges on Thermo Fisher Buyout Speculation

NEW YORK – JP Morgan on Thursday upgraded Qiagen's stock to Overweight from Underweight following a buy-side survey, two product surveys, and a valuation analysis.

JP Morgan issued the note a day after Bloomberg reported that Qiagen could be an acquisition target for Thermo Fisher Scientific, sending shares of Qiagen soaring in trading on the New York Stock Exchange.

In the equity research note, JP Morgan's Tycho Peterson stated that they believe "problems that have plagued Qiagen over the last few years should not persist indefinitely."

"Barring a near-term takeout, we see potential for new management to reset the bar and pursue abundant opportunities for portfolio rationalization and cost reduction, and therefore we think the worst is in the rearview for Qiagen," Peterson wrote. "Meanwhile, existing crown jewels (QuantiFeron, QiaSymphony, CDx, bioinformatics, forensics) should continue to shine and support core growth."

Qiagen had a tumultuous October in which the company announced the departure of long-time CEO Peer Schatz, the discontinuation of its next-generation sequencing instrument development, underwhelming third quarter revenues, and reduced full-year 2019 sales guidance on continued weakness in China and the expected impact of the NGS decision on near-term diagnostic development deals. Tempering the bad news was Qiagen's disclosure of a new partnership with Illumina to continue developing NGS-based companion diagnostics on Illumina sequencing platforms.

In the wake of these announcements, newly appointed interim CEO Thierry Bernard attempted to assure investors that the company has a plan for growth focused on its existing broad portfolio of molecular diagnostic products and partnerships.

In his research note, JP Morgan's Peterson acknowledged that upside risks to its Overweight stock rating include stronger-than-expected revenue acceleration from Qiagen's QuantiFeron latent tuberculosis test and its QiaSymphony suite of molecular testing and automation products, as well as the successful commercialization of new products such as the QiaStat-Dx syndromic molecular testing platform; the NeuMoDx high-throughput molecular diagnostic system; and a digital PCR instrument.

Other risks include strong traction from in vitro diagnostic kits developed through its Illumina partnership and significantly accretive M&A, Peterson said.

Shares of Qiagen on the New York Stock Exchange surged nearly 10 percent on Wednesday in heavy trading to $35.45 on the Thermo Fisher buyout speculation. On Oct. 8, the day after Qiagen released preliminary Q3 earnings and lowered guidance, shares were trading at $25.41.

A Qiagen spokesperson said that as policy the company does not comment on market rumors and M&A speculation.

In early morning trading on the NYSE, Qiagen's shares continued to climb, up more than 4 percent at $36.90.