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Qiagen Nixes Sequencer Development, Sees New NGS Opportunities With Illumina Deal

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This article has been updated with additional information from Qiagen about layoffs resulting from the restructuring and about its GeneReader program.

NEW YORK – As Qiagen exits development of a clinical version of its GeneReader sequencing instrument, the firm is embarking on a long-term strategic partnership with Illumina to develop larger diagnostic next-gen sequencing panels.

Yesterday, the company announced a "new orientation" for its NGS-related activities and a 15-year partnership with Illumina to develop NGS in vitro diagnostic kits, along with the departure of its long-time CEO Peer Schatz and lower-than-expected revenue growth for Q3.

As part of the reorganization, the company is taking a pre-tax restructuring charge of about $260 million to $265 million. About 75 percent, or $195 million to $200 million, are non-cash items related to the termination of its NGS instrument development activities. According to Qiagen, they relate to "the impairment of software and instrument development, licenses, partnership valuations, and other assets."

Qiagen spokesperson Thomas Theuringer said there will be an undisclosed number of layoffs as a result of the halted development of a new, clinical NGS instrument, though the company plans to create new jobs elsewhere. All sites that were involved in NGS instrument development will be affected, including Qiagen's headquarters in Hilden, Germany, and a site in Waltham, Massachusetts. Theuringer added that a "low single-digit percentage of the entire workforce" will be laid off. Qiagen had almost 5,000 employees in 2018, so layoffs are likely to affect more than 100 staff members. 

Current GeneReader customers will continue to be supported "indefinitely," said Jonathan Arnold, Qiagen's VP and head of oncology and precision diagnostics, and the company will still market and sell the instrument for applications using targeted panels.

The GeneReader has "carved out a nice niche" for itself, he said. "There will be a continued need for targeted sequencing, so we still feel that it's very important to support our customers and support that platform." However, he added, "That platform is an RUO system that will never become an IVD system."

It is unclear how Qiagen's 2018 deal with Natera to develop cell-free DNA prenatal screening assays for the GeneReader will be affected by the instrument development termination. Under the agreement, Qiagen paid Natera $40 million in upfront licencing fees and prepaid royalties. In addition, Natera was eligible for $10 million in milestone payments and ongoing royalties. Theuringer said Qiagen plans to discuss with Natera "how to move on with our relationship," which he said remains good.

Qiagen got a hold of the underlying technology for the GeneReader through its 2012 acquisition of Intelligent Bio-Systems (IBS) for an undisclosed amount. IBS's system used a sequencing-by-synthesis chemistry originally developed by Jingyue Ju at Columbia University,

But commercialization of the GeneReader did not go smoothly. In 2014, Qiagen postponed the launch of the platform by a year because of "challenges in the systems integration phase" and the need to update the instrument's specifications.

Following the launch of the instrument in 2015, Illumina sued Qiagen in 2016, claiming that the GeneReader infringed its intellectual property. This resulted in a preliminary injunction against Qiagen that halted all US sales of the GeneReader. The lawsuit was settled in 2017, and Qiagen resumed sales of the GeneReader in the US using a new chemistry.

With that dispute now in the past, the companies have embarked on a non-exclusive partnership that allows Qiagen to develop NGS IVD kits for the Illumina MiSeq Dx, NextSeq 550Dx, and potentially future Illumina diagnostic sequencing system.

Under the deal, Qiagen is paying Illumina a technology access fee. The company is not disclosing the amount but Theuringer said "it is a small fee."

The timing of the release of the new NGS panels will depend on regulatory approval processes, he said, but the first panels could become commercially available in 2022 or 2023.

The goal is to speed up the adoption of NGS by routine diagnostic laboratories. "We have channels into these laboratories right now that Illumina doesn't," Arnold said. "This is one of the pieces that we bring to this partnership."

In addition, Qiagen is contributing its front-end sample preparation technology and back-end bioinformatics expertise. "It's really marrying those capabilities with what are undeniably the best sequencers in the marketplace," he said, that make this a strong partnership.

Arnold said Qiagen will initially focus on developing cancer IVD kits, though tests in other areas, such as cardiology, hereditary disorders, infectious diseases, or inflammatory diseases, may follow.

Also, the company's goal is to develop tests for its pharmaceutical partners first. Arnold said Qiagen has 28 master collaboration agreements with pharmaceutical and biotech companies and hopes that developing NGS tests for pharma partners will accelerate their adoption. "We do believe that's the key driver of routine IVD adoption," he said, "because anytime you can develop a diagnostic associated with a therapy, it really speeds up market adoption — getting into the guidelines, getting into the standards, getting reimbursement in place. That's a key piece of what we're doing here."

He said Qiagen envisages two types of pharma deals. One will be custom development of NGS panels for specific clinical programs, which could be "anything from a lung cancer panel to gene expression profiling panels."

The other type of project will be comprehensive cancer profiling assays. "This will begin pushing closer towards what I would consider a universal companion diagnostic," Arnold said. "So, we will have broad claims, broad indications, and we will be working with multiple pharmaceutical partners on that."

One plan is for Qiagen to develop and market companion diagnostics that are based on Illumina's TruSight Oncology (TSO) assays for genomic profiling of tumor samples for immunotherapy. This would be a separate product from Illumina's assays, and Qiagen would take it through the development and regulatory approval process, Arnold said.

He added that Qiagen has already started conversations with potential pharma partners for NGS assays.

In conjunction with the NGS restructuring, Qiagen also plans to redistribute some resources. For example, it plans to expand activities at its Qiagen Business Services (QBS) centers in Wroclaw, Poland, and Manila, the Philippines. "We had very centralized operations," Theuringer said. "This is now an effort to move operations closer to the business to answer our customers." As a result, he added, resources will be reallocated between sites on a global scale.

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