NEW YORK (GenomeWeb News) – Investment firm William Blair has initiated coverage of Qiagen with a "Market Perform" rating and estimated adjusted earnings per share in 2011 of $.98 and EPS in 2012 of $1.17, after factoring in the acquisition of Cellestis announced earlier this week.
For 2011, analyst Brian Weinstein estimates Qiagen's revenues to be $1.17 billion, while in 2012 he estimates revenues will total $1.27 billion.
In a research note last week initiating coverage, and before the Cellestis deal was announced, Weinstein said that Qiagen's "dominant position" in genetic testing sample preparation provides "stable cash flows and earnings that enable it to pursue higher risk/reward projects." In addition, the company's relationships with research laboratories could result in opportunities for new product development.
With a market share of greater than 90 percent in the human papillomavirus molecular testing market, Qiagen dominates that space, Weinstein added. He also noted that Qiagen "has been quick to embrace the potential of personalized medicine," and alliances it has created with pharma should provide Qiagen a strong first-mover advantage "in what we believe will eventually become the fabric of 21st century healthcare," Weinstein said.
However, he was cautious about the company's stock, saying that in particular, its dominance in the HPV market will be challenged by Roche and Gen-Probe as those companies continue to make progress on their HPV assay programs.
"[T]he stock has mostly tracked the overall market since the Digene acquisition in 2007," Weinstein said.
His concerns mirror those of an analyst at Goldman Sachs, who in a report issued in February said that Gen-Probe's advantages in automation and Roche's sizeable sales force could consume part of Qiagen's HPV market share.
Weinstein also said that Qiagen's success, or lack thereof, with the US Food and Drug Administration is a red flag, calling the company's record "unproven." Despite dozens of platforms and thousands of products, Qiagen has only a "handful" of FDA approvals that it has sponsored itself, he said, noting this is "particularly important given our belief that product launches are one of the three key things that will move a stock."
Weinstein noted, though, that positive news about Qiagen's development of its next-generation testing platform and assays or news of a major acquisition that would diversify its business "would be the prime catalyst for upward movement."
Over the weekend, such news may have come in the announcement that Qiagen would acquire Cellestis for $355 million. The Australian firm develops what it calls "pre-molecular" tests for diseases and has two tests currently commercially available, one for latent tuberculosis and the other for cytomegalovirus.
In a separate note issued on Monday, Weinstein was warm to the deal, saying "the move makes strategic sense, and we believe that the addition of the menu to its instrument platforms is important."
Questions around the deal exist, however. Qiagen said that Cellestis' QuantiFeron tests for TB and cytomegalovirus would be moved onto its QIAensemble, QIAsymphony, and ESE point-of-care platforms. Weinstein, however, said it is unclear what regulatory pathway there may be for getting the two tests approved for Qiagen's instruments.
"Also, we are not sure whether currently installed instruments will require retrofitting to accommodate the assays," he said.