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Qiagen Q4, 2012 Growth Driven Significantly by QiaSymphony Sales in MDx, Applied Markets


Qiagen this week reported a 4 percent increase in fourth-quarter revenues and a 7 percent increase in full-year 2012 revenues at constant exchange rates, driven in particular by growth in its molecular diagnostics and applied testing products.

Within the molecular diagnostics and applied testing segments, the company's QiaSymphony modular automated molecular testing system, Rotor-Gene Q real-time PCR instrument, and associated consumables and testing kits were responsible for much of the growth, and will continue to be for the foreseeable future, Qiagen said.

"We are on track for the QiaSymphony installed base to break through 1,000 placements in 2013 after exceeding our 2012 target of placing well over … 200 systems," CEO Peer Schatz said during a conference call this week recapping Qiagen's Q4 and full-year 2012 earnings.

Instrument sales rose 7 percent in Q4 and 11 percent for full-year 2012, benefitting from demand for a broad range of Qiagen instruments, the company said. However, the QiaSymphony platform was a major contributor to this growth, with about 70 percent of sales of that platform in 2012 to molecular diagnostics customers primarily through rental agreements where revenues are recognized over a multi-year period, Qiagen said.

"The full sales contribution is understated in these results due to the shift to more and more reagent vendor contracts," Schatz said during the call. "However, these placements are creating important multi-year customer commitments and future revenue streams."

Further detailing QiaSymphony placements later in the call, Schatz noted that worldwide placements included particularly strong demand in the Asia-Pacific. In the US, "placements have been in areas where customers are using a lot of [laboratory-developed tests], where placements in the rest of the world are driven by Qiagen offering one of the industry's broadest menus of more than 20 regulated commercial assays and profiling in personal healthcare," Schatz said. Qiagen's Rotor-Gene Q instrument is approved for in vitro diagnostic use in the US, but its full QiaSymphony platform is not yet.

Regarding QiaSymphony revenue stream pull-through, Schatz noted that the company is seeing double-digit sales growth in QiaSymphony consumables, and that the "average pull-through rates are improving as well, and they range anywhere between $30,000 a year [to] now more than $300,000 on some systems. So we're looking for further improvements in 2013 and beyond especially as we turn our attention towards expanding the menu and increasing throughput."

Schatz did note that there was "a certain degree of cannibalization as we convert from customers using manual methods to Qiagen kits on automated systems. However, we see the impact is very manageable. We're primarily gaining market share and we have seen no signs at all of any customer peaking in terms of consumables pull-through on the system."

Consumables and related revenue at Qiagen rose 4 percent in Q4, having faced "a challenging comparison due to major product tender in the 2011 quarter;" and 10 percent in 2012, led by double-digit growth in molecular diagnostics and applied testing.

By customer class, molecular diagnostics revenues increased by 6 percent in Q4 and 15 percent in 2012. Besides QiaSymphony and related products, contributors to this category included a number of non-PCR-related technologies, including the company's QuantiFeron-TB, DiGene HPV, and AmniSure assays. The company did note that its personalized healthcare portfolio, all of which is currently based on the QiaSymphony or Rotor-Gene Q platform, saw double-digit growth in 2012 on global demand for the company's Therascreen portfolio — particularly its KRAS test launched in mid-2012 following approval by the US Food and Drug Administration for its use in metastatic colorectal cancer patients.

The applied testing customer segment grew 16 percent in Q4 and 22 percent in 2012, primarily on double-digit growth in human identification, forensics, veterinary medicine, and food safety. Instrument sales also advanced at a double-digit rate in 2012, particularly following an early 2012 software launch that enabled customers to use many of these assays on the QiaSymphony, the company noted.

"We expect to break through 1,000 [QiaSymphony] placements during this year and see significant untapped opportunities in molecular diagnostics, applied testing, and our other current customer classes," which include pharma and academia, Schatz said.

"The reasons for the uptick are clear," Schatz added. "Customers are reacting very favorably to QiaSymphony being the only system offering sample-to-result processing for both commercial assays as well as laboratory-developed tests. This is a need that other systems are not able to address. What you see from competitors are screening systems that can only handle a few commercial assays and not the LDTs, which can be more than half of the test volumes in a typical molecular diagnostic lab."

Becton Dickinson's BD Max platform is also designed to allow user test development and to run commercial test kits (PCR Insider, 1/3/2013).

Schatz noted during the call that Qiagen has "assembled a highly competitive R&D portfolio of molecular diagnostic assays with more than 35 projects. These are a combination of internal R&D efforts as well as a series of new external collaborations."

Many of the assays have been designed for use on the QIAsymphony, "which will improve our value proposition to customers," he added. "Our ambition is to create a stream of US and European submissions that is set to begin later this year."

Qiagen received three positive US regulatory decisions in 2012: FDA clearance of Rotor-Gene Q, Therascreen KRAS, and the Artus influenza assay, which is run on the Rotor-Gene Q instrument.

"Another key moment was the launch of our next-generation CE-marked BRAF assay in Europe, which complements our extensive range of personalized healthcare assays, including KRAS, EGFR and others in this region," Schatz said. "In first studies, our BRAF assays significantly outperformed the competition with higher sensitivity and discrimination of the key mutations to allow superior clinical value."

In particular, "the launch of the Therascreen KRAS Test in the US for use in patients with metastatic colorectal cancer is gaining momentum," Schatz said. "Our number one priority is converting labs to our test. At the end of 2012 we estimate that laboratories were doing about 45,000 Therascreen KRAS tests on an annualized basis and, therefore, have converted a significant part of the market. This is double the estimated 20,000 KRAS tests from Qiagen being used before the FDA approval."

Underscoring this point was an agreement that Qiagen announced this week with Clarient, which is offering the Therascreen KRAS RGQ PCR kit as a companion diagnostic for the metastatic colorectal cancer drug Erbitux. Clarient has a customer base of more than 2,000 pathologists, oncologists, clinical labs, and hospitals.

All of these personalized healthcare assays run on the QiaSymphony system or standalone Rotor-Gene Q instrument. Schatz said that the company is also "preparing for a potential 2013 launch in the US of the Therascreen EGFR companion diagnostic for non-small cell lung cancer."

"The fact that QIAGEN will bring a broad portfolio of FDA-approved real-time PCR tests on one platform, and then with automation on the QIAsymphony, is among the reasons [that are] encouraging laboratories to convert to our tests and platforms," Schatz said.

For the three months ended Dec. 31, 2012, Qiagen posted $346.5 million in revenues, up from $334.4 a year ago and surpassing the consensus Wall Street estimate of $327.8 million.

Qiagen lowered its Q4 R&D spending 2 percent to $32.2 million from $32.8 million a year ago, while it sliced its SG&A costs 21 percent to $142.5 million from $180.9 million.

Qiagen reported a profit of $38.3 million, or $.16 per share, compared to a loss of $790,000, or break-even on a per-share basis, a year ago. On an adjusted basis EPS came in at $.34, beating analyst estimates of $.30.

For full-year 2012, Qiagen said that sales rose 7 percent to $1.25 billion from $1.17 billion in 2011, edging out analyst estimates of $1.24 billion.

Qiagen's R&D costs for the year were reduced 6 percent to $122.5 million from $130.6 million a year ago. Its SG&A spending increased a fraction of 1 percent to $495.6 million from $492.8 million in 2011.

Qiagen posted a 2012 profit of $129.5 million, or $.54 per share, compared to a profit of $94.9 million, or $.40 per share, a year ago. Adjusted EPS was $1.08 for 2012, beating analyst estimates of $.99. The company ended the year with $394.0 million in cash and cash equivalents and $90.5 million in short-term investments.