QIAGEN Continues to Transform

QIAGEN (QGEN -1.06%) continues its slow-but-steady growth on the tail end of the declining sales from human papillomavirus testing in the U.S., which helped the company meet its fourth-quarter sales guidance and exceed its guidance for adjusted earnings per share of $0.39 to $0.40 at constant exchange rates (CER).

QIAGEN results: The raw numbers

Data source: QIAGEN.

What happened with QIAGEN this quarter?

• Revenue would have been up 5% year over year at constant exchange rates.
• Sales in the molecular diagnostics segment, QIAGEN's biggest product group, increased 5% year over year at CER, boosted by the QuantiFERON-TB tuberculosis test that grew 21%, but dragged down a little by a drop in instrument service revenue.
• Sales in the applied testing segment were up just 1% at CER, but the slow growth was to be expected after the company divested its veterinary testing assays.
• Pharma sales increased 5% year over year at CER, buoyed by double-digit growth in sales of instruments. Likewise, instrument sales helped increase sales in the academia segment, which were up 6% year over year at CER.
• In January, QIAGEN announced the acquisition of two companies, N-of-One, which provides molecular oncology services and knowledge basis, and the digital PCR portfolio of Formulatrix Technology, which QIAGEN plans to integrate into its suite of instruments with an expected launch in 2020.
• There were one-time items in the year-ago quarter that make the operating income look like it soared. In reality, on an adjusted basis, operating income was actually down 2% year over year.
• The drop in adjusted operating income and adjusted earnings came from investments in QIAstat-Dx, a machine capable of running multiple tests to help diagnose complex diseases that recently launched in Europe and should be available in the U.S. this year.

Image source: Getty Images.

What management had to say

Roland Sackers, QIAGEN's chief financial officer, talked about what the company was going to do with its cash, which is up year over year thanks to the generation of $250 million in free cash flow last year: "We plan to continue our disciplined capital allocation policy, focused on targeted acquisitions to strengthen our portfolio along with increasing returns, such through our current $200 million repurchase program."

QIAGEN CEO Peer Schatz highlighted the company's new iteration of its tuberculosis test designed to be used in the developing world where diagnostic labs aren't available:

QuantiFERON-TB Access applies the market-leading QuantiFERON-TB technology in a robust single-use reaction cartridge that can be readout within 24 hours on a simple battery-powered digital format. This enables the test to be processed even in very constrained settings. We are in the final stages of development for QuantiFERON-TB Access, and are planning to conduct clinical trials in '19 in anticipation of a launch in 2020.

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Looking forward

Management guided for 2019 sales growth of 7% to 8% at CER, which includes about $30 million of sales from QIAstat-Dx. The company also set a 2019 goal for revenue from next-generation sequencing of about $190 million, up from $140 million last year, and to have 2,500 cumulative placements of its QIAsymphony automation platform by the end of the year.

The bottom line is expected to grow a little faster, with management guiding for adjusted diluted EPS of about $1.45 to 1.47 at CER, up almost 9% at the midpoint.

The growth is expected to pick up in the second half of the year with the launch of QIAstat-Dx, so investors should expect a relatively slow start in 2019. Management is guiding for first-quarter revenue growth of just 5% to 6% at CER.