Qiagen Slips Up but Is Far From Broken

The test maker trudges along.

Brian Orelli
Brian Orelli
Aug 2, 2019 at 3:07PM
Health Care

Qiagen (NYSE:QGEN) preannounced top-line results for the second quarter and updated 2019 guidance last week, so the full report this week didn't come with many surprises.

Nevertheless, the report provided some additional details on the breakdown of revenue and allowed management an opportunity to highlight plans going forward.

Qiagen results: The raw numbers

Metric

Q2 2019

Q2 2018

Change

Revenue

$381.6 million

$377.2 million

1%

Income from operations

$60.2 million

$53.3 million

13%

Earnings per share

$0.19

$0.16

19%

Data source: Qiagen.

What happened with Qiagen this quarter?

  • Sales would have been 5% at constant exchange rates, consistent with management's guidance. Instrument sales boosted the average, up 9% at constant exchange rates.
  • The growth includes 1 percentage point of headwinds from the decision to reduce third-party instrument service contracts and the divestment its veterinary assay portfolio.
  • Sales in the life sciences division rose 5% at constant exchange rates. The new next-generation QIAcube sample processing instrument helped boost sales.
  • Likewise sales of molecular diagnostics was up 5% at constant exchange rates. The segment had been growing faster -- first-quarter growth was 10% -- but sales of its tuberculosis QuantiFERON-TB test were only up 6% year over year at constant exchange rates. Fortunately the culprit was just a tough comparator, as the second quarter of 2018 had large stocking orders. Management had factored that in and still thinks it can hit its goal of 15% growth for the year with easier comparators in the second half of the year.
  • The launch of QIAstat-Dx system, which allows for testing of multiple related diseases simultaneously continues to progress well. The sales added 1 percentage point to sales growth and there should be more ahead with the system being approved by the Food and Drug Administration in May.
Three blood vials on a diagnostic testing form

Image source: Getty Images.

What management had to say

CEO Peer Schatz talked about the goals for QuantiFERON-TB blood test and opportunity ahead:

Our number one priority is further driving the conversion from the old skin test to the modern gold standard with QuantiFERON. More than 70 million skin tests are done annually. We see current global penetration at only about 20% with ample room for growth.

An urgent and important driver is the recent announcement by the U.S. Centers for Disease Control, or CDC, that they are expecting a 3- to 10-month nationwide shortage of tuberculin antigens, which are required for performing the skin test. We are seeing shortages in other countries as well, including Germany.

Schatz also highlighted a partnership with McKesson (NYSE:MCK) to help sell the QIAstat-Dx: "We have partnered with McKesson, one of the largest U.S. healthcare distribution companies, for them to serve as the exclusive distributor of QIAstat-Dx in the acute market segment of U.S. hospitals with 200 beds or less, an area where QIAGEN is less present with its commercial activities. McKesson also can become a non-exclusive distributor in the future for planned expansion of QIAstat-Dx into the non-acute retail clinics that are increasingly being found in U.S. retail pharmacies."

Looking forward

Last week, in conjunction with the preannounced earnings, management lowered 2019 guidance because of a plan to restructure its joint venture in China to sell its GeneReader next-generation sequencing systems and related products, such as consumables used on the machines.

Management is now looking for 2019 revenue growth of 5% to 6% at constant exchange rates, down from previous guidance of 7% to 8%. Adjusted earnings per share at constant exchange rates should be in the $1.42 to $1.44 range, down from $1.45 to $1.47.

Looking further ahead, Qiagen's should be able to continue growing sales of the QuantiFERON-TB test, which is now available in Europe on DiaSorin's Liaison automated analyzers that are used by testing labs; the test on the Liaison system is under FDA review with an approval expected in the second half of the year. Also look for a ramp in sales of the QIAstat-Dx system with 80% of the global market in the U.S., where the launch is just a couple of months old.