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Molecular Diagnostics Lifts Qiagen's Q1 Revenues 2 Percent

The story has been updated to include comments from Qiagen's conference call.

NEW YORK (GenomeWeb News) – Qiagen said after the close of the market on Monday that its revenues rose 2 percent year over year as growth in molecular diagnostics and applied testing offset weakness in pharma and academia.

Separately, Qiagen said that it acquired genomic data software firm Ingenuity Systems for $105 million in cash.

For the three months ended March 31, the company's revenues increased to $303.6 million from $296.4 million in the year-ago period. It missed the average analyst estimate of $305.5 million.

Organic growth was 2 percent year over year, while the AmniSure acquisition, completed almost a year ago, added 1 percent to growth, Qiagen said. Currency effects provided a 1 percent headwind, due to the weakness of the Japanese yen against the US dollar, Qiagen said.

Instrument sales were down 3 percent year over year, the company said. It added that placements of the QIAsymphony saw continued "strong pace" during the quarter, and the number of placements for 2013 is set to move beyond 1,000. At the end of 2012, there were more than 750 placements.

Consumables and reagents revenues improved 4 percent on the strength of the firm's molecular diagnostics business as well as single-digit growth in applied testing.

Molecular diagnostics sales were up 11 percent year over year, while applied testing grew 5 percent. Both pharma and academia were down 4 percent, though.

Within molecular diagnostics, consumables sales were up in the double digits, while instrument sales were lower due to a focus on QIAsymphony placements under multiyear reagent rental agreements. Qiagen added that the QuantiFeron-TB test grew 20 percent year over year, but HPV testing products slipped at a mid-single digit clip in the US due to pricing pressure. In other regions, HPV testing "showed growth," the company said.

Profiling products improved at a double-digit rate, while its personalized healthcare business was also up compared to a year ago.

In applied testing, the company saw high-single digit growth in consumables as human identification/forensics, veterinary medicine, and food safety experienced "steady business expansion." The pharma business improved year over year in Asia-Pacific and Japan, but slowed in the Americas and Europe, the Middle East, and Africa, resulting from Qiagen's restructuring efforts and site consolidations begun in 2012.

Lastly, academia was down as a result of concerns about reduced government funding, including sequestration that took effect in the US in March. Academic sales in Europe, as well as in Japan and Asia-Pacific outside of China, were also weaker year over year, Qiagen said. It estimated that government funding cuts could reduce full-year 2013 consolidated sales growth by at least 1 percentage point.

Net income attributable to the owners of Qiagen for the first quarter came in at $20.0 million, or $.08 per share, compared to $28.6 million, or $.12 per share, a year ago.

On an adjusted basis, EPS was $.23, just beating the consensus Wall Street estimate of $.22.

"Our results for the first quarter of 2013 show the ability of Qiagen to grow amid challenging conditions," Qiagen CEO Peer Schatz said in a statement. "Our sales to customers in molecular diagnostics showed solid growth, and the improved performance was supported by applied testing and all regions delivering growth that more than compensated for soft conditions in academia given government funding concerns in various markets and in particular sequestration in the United States.

"Our portfolio of growth drivers, which include the QIAsymphony automation platform, the QuantiFeron-TB latent tuberculosis test and our personalized healthcare franchise — is building momentum and showed significant gains as molecular diagnostics delivered double-digit growth," he added.

Qiagen's R&D spending in the quarter rose to $34.3 million, a 20 percent increase from $28.6 million a year ago. CFO Roland Sackers noted on the conference call this morning that R&D spending from a year ago was especially low due to restructuring moves launched in 2011.

SG&A in the quarter costs increased 10 percent to $128.5 million from $116.3 million a year ago.

Qiagen ended the quarter with $372.8 million in cash and cash equivalents and $87.8 million in short-term investments.

For the second quarter, Qiagen said it expects adjusted net sales growth of between 1 and 2 percent. Adjusted EPS is anticipated to be $.25.

The company reduced its full-year revenue guidance to 5 percent growth from an earlier guidance of between 5 and 6 percent growth. Adjusted EPS is now expected to be about $1.13, down from an earlier range of $1.16 to $1.18.

Last summer, Qiagen moved into the next-generation sequencing space with its purchase of Intelligent Bio-Systems, giving it an instrument platform. The acquisition of Ingenuity, Schatz said on the call, is part of the company's goal to reduce the time and costs needed to obtain high quality NGS data.

"Our ambition is to introduce a differentiated next-generation sequencing workflow that will drive the adoption of this breakthrough technology in new areas," Schatz said. "Our development is moving rapidly ahead backed by significant investments and we are on track to have the first placements with select customer groups in 2013."

In the pipeline are a suite of reagents and content products that will be launched during the year, with the commercial launch of Qiagen's NGS system targeted for later in the year.

On the call, Schatz also said that the firm has begun consolidating all global regulatory activities into its Manchester, UK site. As a result the firm's Hamburg, Germany site will be closed and activities carried out at that facility will be moved to Manchester.

On the regulatory front, Qiagen continues to work with the US Food and Drug Administration on its premarket approval submission for the therascreen EGFR RGQ PCR kit, Schatz said. The company made its PMA application in late 2012 and is intended as a companion diagnostic for Boehringer Ingelheim's non-small cell lung cancer drug afatinib.

In Tuesday afternoon trade on the Nasdaq, shares of Qiagen fell 5 percent to $19.80.

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