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As HPV Business Slows, Qiagen Looks to MDx Menu Expansion, Other Initiatives to Drive Growth

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As one of its major molecular diagnostics-related revenue sources begins to slow down, Qiagen today outlined its plan to replace it with several new MDx initiatives and other molecular biology-related growth drivers.

In a conference call recapping the company's fourth-quarter and full-year 2013 earnings, released yesterday, Qiagen CEO Peer Schatz attempted to assuage investors' worries about the company's shriveling human papillomavirus testing business by discussing five anticipated growth drivers, including market and test menu expansion for its QIAsymphony RGQ MDx workflow.

As part of that specific initiative, Qiagen also noted this week that in December it received CE marking and began European marketing for a new QIAsymphony RGQ test for Clostridium difficile, and also submitted the same test and the entire QIAsymphony RGQ MDx workflow to the US Food and Drug Administration for 510(k) clearance.

For the fourth quarter ended Dec. 31, 2013, the firm posted $362.6 million in revenues, up from $346.5 a year ago, but falling short of the consensus Wall Street estimate of $365.5 million. Meantime, for full-year 2013, sales rose 4 percent to $1.31 billion from $1.25 billion in 2011 — 5 percent growth at constant exchange rates and in line with the consensus analyst estimate.

The company saw growth across all customer classes, with applied testing and pharmaceutical customers leading the way over molecular diagnostics and academia. Qiagen noted that a 6 percent increase in revenues from consumables and other revenue more than offset a 4 percent decline in instrument sales — a decline the company attributed to the way revenue from instrument placements is deferred over a multi-year period in QIAsymphony reagent rental agreements.

Nevertheless, Qiagen said that it exceeded its 2013 goal to reach a cumulative installed base of more than 1,000 systems compared to more than 750 at the end of 2012, and noted that it has set a target of 250 new QIAsymphony placements in each of 2014 and 2015.

Full details of Qiagen's Q4 and full-year 2013 financial results can be found here.

Responsible for about half of the company's overall revenues, molecular diagnostics sales in 2013 climbed 7 percent on the back of consumables and its relatively new QuantiFeron-TB test for detection of latent tuberculosis.

However, the company experienced approximately two percentage points of headwinds from its HPV testing business, and expects that effect to double to four percentage points in 2014 and eventually "bottom out" in 2015, Schatz said during today's call.

In June, Qiagen's HPV business took a hit when women's health diagnostics rival Hologic announced it was entering into a strategic alliance with Quest Diagnostics to more broadly offer testing based on Hologic's Aptima family of products — a win that came at the expense of Qiagen, which had previously maintained leadership in the HPV molecular testing realm with its Digene Hybrid Capture 2, or HC2, test, and which counted Quest among its biggest customers for the assay.

"We expect increasing headwinds from the HPV product portfolio in the US, which continues to face competitor-driven pricing pressure [including] the non-exclusive switch of a US reference laboratory to a competitive product portfolio in addition to ours," Schatz said.

He noted that global sales of HPV testing declined 4 percent at constant exchange rates in 2013, and accounted for about 16 percent of total sales. US sales were down "at a double-digit pace, in line with our expectations, creating about 2 percentage points of headwind on total Qiagen sales; but at the same time, we saw solid double-digit CER growth in the rest of the world, where we have done extremely well in winning business from screening programs," Schatz said.

Nevertheless, he added, Qiagen sees 2014 "as the year that US HPV sales fall well below 10 percent of net sales … [and] if we look into 2015, we expect a bottoming out of US HPV revenues."

Despite this less-than-stellar forecast for the HPV franchise, Schatz stressed that during the same period Qiagen anticipates approximately 8 to 9 percent growth from the rest of its business, which led it to provide a 2014 revenue guidance of about 4 to 5 percent CER growth.

QIAsymphony RGQ expansion

Qiagen expects a major contributor to this revenue growth to be consumables pull-through for its QIAsymphony RGQ platform, and as such is heavily focused on beefing up the platform's test menu.

The QIAsymphony RGQ MDx system is a modular platform that comprises the QIAsymphony SP for sample preparation, the QIAsymphony AS for assay setup, and the Rotor-Gene Q thermal cycler, which received FDA clearance in 2012.

While the platform has, according to Qiagen, the broadest menu in its category in Europe and other markets — now approaching 25 tests — the system is currently primarily used for laboratory-developed assays in the US, which is why it's seeking FDA clearance for the platform and the first test, Artus C. difficile QS-RGQ MDx kit.

Developed in partnership with IntelligentMDx under a multiyear agreement signed approximately one year ago, the Artus C. difficile QS-RGQ MDx kit is expected to be the first of several new healthcare-associated infection assays for the QIAsymphony platform in coming months.

In addition, Qiagen will look to continue the momentum it has built in the personalized medicine space by adding PCR-based companion diagnostics to the platform.

"We are pleased with the pace of placements, but the focus today is on the success to expand the menu," Schatz said during today's call. "These are important steps to increase the utility of QIAsymphony for customers and build on the FDA approvals of our TheraScreen KRAS and TheraScreen EGFR companion diagnostic assays."

Schatz did not provide specifics about future companion diagnostic development, but said that in 2014 the company also plans to submit for approval in the US a QIAsymphony RGQ kit for the diagnosis of herpes simplex viruses Iⅈ and in the US and Europe a kit for vancomycin-resistant bacteria and methicillin-resistant Staphylococcus aureus.

"We're also expanding the menu in Europe, where more than 20 assays are offered on the QIAsymphony RGQ," Schatz said. "The RespiFinder RG panel was recently launched in Europe. This is a novel multiplex PCR assay for the simultaneous detection and differentiation of 21 respiratory pathogens, and is the first highly multiplexed pathogen assay designed to run on Rotor-Gene Q. This is strengthening the competitive profile of QIASymphony and addressing the more urgent care testing needs of our customers."

In the personalized medicine space Qiagen is also looking to parlay its relationship with Exosome Diagnostics into future growth. Exosome has developed technology to isolate nucleic acids and other biomarkers from exosome vesicles in the cell, which holds promise for developing so-called liquid biopsies for molecular testing.

"The advancements in harvesting exosomes are moving ahead rapidly, and we see an opportunity with this collaboration to shift the paradigm in gaining access to molecular information," Schatz said. "As part of this collaboration … the first of the new sample technology kits are set to be launched in 2014. These will allow researchers, drug developers, and doctors to take repeated real-time genetic snapshots of disease from a patient by examining exosomes without the need for tissue biopsy." The samples are designed to run on PCR, pyrosequencing, and NGS technologies, he added.

And, Schatz noted, Qiagen further expanded this collaboration in January to develop "blood-based diagnostics to detect certain mutations of an undisclosed gene associated with NSCLC and other malignancies. This assay will have the potential to be paired with several new anti-cancer therapies. We have worldwide exclusive commercialization rights and intend to submit the test for regulatory approvals."

Other growth drivers

During the call, Schatz outlined five growth drivers for the company over the coming years, two of which are the QIAsymphony test menu expansion and personalized healthcare/companion diagnostic initiative.

The other three anticipated growth drivers, Schatz said, are the company's QuantiFeron TB test, its next-generation sequencing technology, and its bioinformatics play.

On the QuantiFeron TB front, Schatz said that Qiagen is aiming to make the test, which detects interferon gamma release as a proxy for early detection of latent tuberculosis, the modern gold standard for diagnosing the disease. "This product has a strong growth profile and is set to achieve $100 million of sales in 2014," Schatz said. "We're expanding this franchise's global presence and are preparing for an important launch in China this year."

Meantime, in the NGS space Qiagen's ambition is to "offer a broad portfolio of products and services to drive the use of this breakthrough technology in clinical research and diagnostics," Schatz said.

"We have a two-pronged approach: First, we are offering many products as universal solutions that can be used with any sequencing platform or data," he said. "An important initiative for 2014 will be to accelerate the growth of this expanding portfolio, which also includes industry-leading sample technologies."

In addition, Qiagen is currently advancing its own NGS benchtop sequencing workflow, called GeneReader, which will integrate all of the aforementioned technologies into one "sample-to-insight" solution, Schatz noted. Schatz declined to provide any more specifics on GeneReader's planned launch besides noting it would be this year, and stressed that the company has not included anticipated revenues from the platform in 2014 revenue guidance.

Finally, "another achievement in 2013 was [Qiagen] becoming the industry leader in commercial bioinformatics," Schatz said. By combining its internal bioinformatics efforts with those of Ingenuity and CLC Bio, both of which Qiagen acquired in 2013, "we are establishing an important foundation for growth by offering … solutions to transform complex data generated by any sequencer into valuable molecular insights," Schatz said. "Bioinformatics is a market segment set for dynamic growth, and we are anticipating significant incremental sales contributions in 2014 and beyond."

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