The biotech-a-palooza continues at the UBS (NYSE:UBS) annual Global Life Sciences Conference (registration required to view). Yesterday, I commented on a company looking to advance DNA testing in clinical settings. Today, I'll look at one that helps prepare those collected biological samples for testing.
Netherlands-based QiagenNV (NASDAQ:QGEN) is an industry leader in biological sample processing. Before any useful laboratory or clinical test can be run, collected samples must first be "prepped" so as to perform in the respective assays. Robust and reproducible sample preparation is not a simple matter. In general, it involves the isolation of DNA, RNA, or protein from diverse such sources as blood, tissue, or urine. For example, geographic testing for West Nile virus often begins with a blender full of collected mosquitoes. Analyzing for the viral RNA with polymerase chain reaction requires first isolating sensitive RNA from the mosquito shake. Qiagen provides the products that get a sample from the blender to the test instrument.
Qiagen's products are primarily consumables, insuring a steady high-volume repeat business. By serving the health-care and research communities, the company is largely insulated from fickle economic trends like consumer spending habits. Qiagen also offers a growing catalog of molecular diagnostic test kits, and provides as OEM sample collection consumables to the diagnostic kits of partner companies. Certainly Qiagen has built an attractive and profitable business.
Whether Qiagen is currently an attractive investment is another question, as the firm is trading very near its 52-week high. To help analyze whether that price is too high, let's look at some of Qiagen's key metrics alongside similar firms supporting the biotechnology industry. The table below looks at Qiagen and biotechnology/pharmaceutical suppliers Millipore (NYSE:MIL), Sigma-Aldrich (NASDAQ:SIAL), and Invitrogen (NASDAQ:IVGN). These companies each have a market capitalization higher than Qiagen's but all fall in the mid-cap range of $2 billion-$5 billion.
| MIL | SIAL | IVGN | QGEN | |
|---|---|---|---|---|
| Current P/E | 37.2 | 19.8 | 32.2 | 35.3 |
| Forward P/E | 17.9 | 17.7 | 16.2 | 24.1 |
| Price/Sales | 3.1 | 2.9 | 3.0 | 5.4 |
| Operating Margin | 16.4% | 22.4% | 11.9% | 25.7% |
While Qiagen is strongest in terms of operating margins, it is richly priced in valuation measurements like price per earnings and price per sales in comparison with its peers -- though one could argue that Qiagen should trade at higher multiples because of its superior margins. While this is a quality company operating an attractive business, I would choose to wait for a better price before adding it to my portfolio.
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Fool contributor Ralph Casale is a biochemist by trade and holds no financial position in any of the firms mentioned. The Motley Fool has a disclosure policy.
