Shares of Qiagen (NYSE:QGEN) are down 20% at 1:16 p.m. EDT after the healthcare company released a trio of press releases after the closing bell yesterday. There was some good news in the bunch, but it clearly didn't outweigh the bad.
Let's get the bad news out of the way: Preliminary totals for the third quarter put revenue growth at about 3% at constant exchange rates, which is lower than the 4% to 5% that management had guided for. The company blamed slower sales in China and noted that sales were up 6% when excluding China sales.
On the bottom line, Qiagen still expects to earn $0.35 to $0.36 per share on an adjusted basis at constant exchange rates.
Qiagen also announced that CEO Peer Schatz is stepping down, although he'll stay on as a special advisor to help with the transition. Thierry Bernard, who heads Qiagen's molecular diagnostics business area, will serve as interim CEO while the company searches for a replacement.
In the good-news category, Qiagen is teaming up with Illumina (NASDAQ:ILMN) in a 15-year partnership to develop diagnostic tests using NGS. Qiagen will develop the tests for Illumina's MiSeq Dx and NextSeq 550Dx systems and has the right to develop tests for future platforms Illumina brings to market. The companies will start with cancer tests, including companion diagnostics that doctors use to determine which drugs to give patients, but may move on to other fields such as cardiology, hereditary diseases, infectious diseases, inflammatory diseases, and autoimmune diseases.
It seems like a good move to partner with Illumina rather than try to beat it in the NGS space where Illumina is dominant, but the move will result in a charge of approximately $195 million to $200 million. Qiagen also announced restructuring plan that will add another $65 million in charges, putting the total charges in the $260 million to $265 million range, most of which will hit in the third quarter.
Qiagen is clearly in transition and the lack of permanent leadership at the top may slow the rebound. Today's 20% haircut is probably a bit excessive, but given the unknowns about the timing of the turnaround, it's understandable that healthcare investors who are buying now would want to factor in extra potential reward for taking on the unknown timing risk.