Qiagen (NYSE:QGEN) rounded out the quarter with solid earnings, allowing the scientific-test maker to met its goals for the year with adjusted earnings per share coming in at the high end of guidance.

In conjunction with the earnings release, Qiagen announced plans to acquire Barcelona-based STAT-Dx for approximately $147 million in cash and additional payments of up to about $44 million based on reaching regulatory and commercial milestones. The company's  diagnostic platform, which will now be called QIAstat-Dx, allows for PCR-based, multiplex syndromic tests that can quickly test for multiple pathogens at the same time. The first QIAstat test is scheduled to launch in the second half of this year.

QIAsymphony machine

QIAsymphony. Image Source: QIAGEN.

Qiagen results: The raw numbers 

Metric

Q4 2017

Q4 2016

Year-Over-Year Change

Revenue

$396.9 million

$366.5 million

8%

Income from operations

$43.4 million

$4.2 million

933%

Earnings per share (EPS)

($0.18)

$0.04

N/A

Adjusted EPS

$0.43

$0.39

10%

Data source: Qiagen.

What happened with Qiagen this quarter?

  • Revenue benefited from changes in exchange rates. At constant currencies, its growth would have been a more modest 5% year over year.
  • The QIAsymphony automation system continues to sell well, and set a new record for annual placements in 2017, allowing Qiagen to reach its goal of more than 2,000 cumulative placements. Management set a new goal of having more than 2,300 machines in use by the end of 2018. Those placements are a harbinger of growth, since they drive sales of consumables, which provide 86% of revenues.
  • Qiagen's move into next-generation sequencing (NGS) is progressing nicely with sales of more than $115 million in 2017. As with the QIAsymphony, placements of its GeneReader will drive use of gene panels quarter after quarter. Management is looking for NGS sales of more than $140 million this year, putting growth north of 20% year over year.
  • Sales of the QuantiFERON latent tuberculosis (TB) test grew 24% year over year. A new partnership announced last month will put the test on DiaSorin's Liason analyzer, which has more than 7,000 machines placed worldwide. Qiagen has a goal to increase its revenue from the TB test to $300 million by 2020.
  • Adjusted EPS is the best way to compare the quarters year over year, given the restructuring charge in the year-ago quarter and a charge associated with the new U.S. tax legislation in 2017. The restructuring is clearly working with earnings growing faster than revenue.
  • The company plans to repurchase $200 million worth of shares this year after returning $300 million to shareholders last year.

What management had to say

CEO Peer Schatz is clearly excited about the acquisition of STAT-Dx and the potential of QIAstat:

"The QIAstat system has powerful advantages as they're cost effective flexible approach diagnosing common syndromes, so we expect to see a very rapid uptick. We set a sales goal for about $7 million in 2018 and for at least $30 million in 2019 if not more."

Schatz also explained the reasoning for linking up with DiaSorin on the QuantiFERON TB test:

"We consider this a win-win situation for both companies based on the high target customer correlation and see it as an elegant and strategic partnership that removes any possible uncertainty about QuantiFERON automation and menu options in the future."

Looking forward

Management is looking for revenue growth of 6% to 7% on a constant currency basis. First-quarter revenue is only expected to increase of 5% to 6% year over year, so expect acceleration throughout the year.

Adjusted earnings are expected to be in the range of $1.38 to $1.40  on a constant currency basis, which would be 9% to 10% above 2017's adjusted EPS , although tax changes and a hit from the acquisition of STAT-Dx will negate some of that growth. As with last year, growing earnings faster than revenue is something investors should be excited about.

Brian Orelli has no position in any of the stocks mentioned. The Motley Fool recommends Qiagen  The Motley Fool has a disclosure policy.