Qiagen
(
QGEN
) reported third quarter 2012 earnings per share (EPS) of 12
cents, compared to 15 cents in the year-ago quarter. However,
adjusting for certain one-time items, EPS came in at 24 cents in
the quarter, missing the Zacks Consensus Estimate by a penny but
surpassing the year-ago quarter adjusted earnings by a couple of
cents.
Net sales during the quarter grew 5% (10% at constant exchange
rates, or CER) year over year to $304.3 million and surpassed the
Zacks Consensus Estimate of $303 million. The upside in net sales
was driven by balanced sales growth across all the customer
classes and operational regions of the company. The acquisitions
of Cellestis (in August 2011), Ipsogen (July 2011) and AmniSure
(May 2012) contributed seven percentage points to this 10% growth
at CER and the rest was added by the company's remaining
portfolio.
Segments
Qiagen primarily derives its revenues from molecular diagnostics,
applied testing, pharma and academia, which represented 48%, 8%,
19% and 24% of total sales, respectively, during the quarter.
Region wise, the Americas (47% of revenues) witnessed an 11%
increase in sales at CER, driven by strong Personalized
Healthcare products sales and QuantiFERON latent TB test demand.
Revenues from Europe/Middle East/Africa (33% of sales) and
Asia-Pacific /Japan (19% of sales) increased 7% and 14% at CER,
respectively. The hike in Europe/ Middle East / Africa was
attributable to strong performance in many northern European
countries as well as Russia and Turkey. The growth in
Asia-Pacific /Japan came on the back of double-digit sales growth
in China, Japan and Korea in the company's Molecular Diagnostics
business with strong QIAsymphony placement.
Under product categories, Consumables and related revenues
(accounting for 87% of net sales in the quarter) grew 10% year
over year at CER, while instrumentation revenues (accounting for
the rest) increased by 4% at CER. Consumable sales during the
quarter benefited from higher sales in all customer classes,
particularly Molecular Diagnostics and Applied Testing. On the
other hand, robust growth in instruments sales came on the back
of the initiatives to secure new product placements such as the
QIAsymphony automation portfolio and its Rotor-Gene Q real-time
PCR platform. Majority of the placements took place in Molecular
Diagnostics, primarily through reagent rental agreements under
which revenues are recognized over a multi-year period. Further,
with the launch of the new QIAsymphony protocols in early 2012,
demand increased among Applied Testing customers.
Molecular diagnostics registered a 48% increase in sales at
CER, based on a broad portfolio of assays and the successful
rollout of the QIAsymphony automation portfolio. In Prevention,
the QuantiFERON latent TB test contributed significantly to the
total sales growth (up 20% at CER over the year ago quarter),
benefiting from rapid expansion in the U.S. and Europe. After
several quarters of declining HPV test revenues, the reported
quarter showed a robust 7% increase in sales at CER. With the
launch of the therascreen KRAS biomarker test for use in
colorectal cancer patients, which received FDA approval in July
2012, the demand for companion diagnostic kits increased, which
in turn led to a strong double-digit growth in the consistently
growing Personalized Healthcare. In Profiling, sales of disease
analysis products increased in key markets. In Point of Need, the
AmniSure assay (acquired in May 2012) contributed to growth.
Sales derived from applied testing were up 21% at CER,
primarily driven by strong double-digit sales growth in
consumables and instrument during the quarter. Consumables sales
also increased in the high single-digits range. The company
witnessed demand for human identification or forensics,
veterinary medicine, food safety products as well as for the
QIAsymphony automation platform with the launch of a new software
in early 2012.
Pharma sales grew 3% at CER benefiting from the restructuring
activities at select pharmaceutical companies. Academia witnessed
a mere 2% upside in net sales, as higher consumable sales more
than offset a slight decline in instruments. During the reported
quarter, the U.S. and European market conditions remained
challenging, with government funding uncertainties. Qiagen
expects market conditions in these regions to become more
challenging in the next quarter as budget restriction
uncertainties are expected to continue.
Qiagen exited the third quarter with cash and cash equivalent
and short-term investment of $311.3 million compared with $275.7
million at the end of fiscal 2011. Year-to-date, net cash
provided by operating activities were $175.0 million from $165.1
million in the same period of 2011.
Moreover, the company began a share buyback program to
repurchase up to $100 million of its shares. In October, Qiagen
also completed a $400 million U.S. private placement debt
offering.
Outlook
Qiagen reiterated its 2012 outlook. For the full year, net
sales are expected to increase in the range of 8%−9% at CER due
to a mix of organic growth and contributions from the
acquisitions of Cellestis, Ipsogen and AmniSure. Total sales are
expected to be adversely affected by unfavorable currency
movements. For 2012, adjusted EPS is expected to remain within
the band of $1.04−$1.06 (unchanged from the earlier
guidance).
Recommendation
In spite of continued adverse currency movement, we are
encouraged with Qiagen's solid third quarter performance. Even
amid a challenging academic research market with austerity
measures and tight government budgets, we are impressed with the
huge and growing molecular diagnostics market, which is currently
gaining significant traction. Qiagen is also adopting an
aggressive acquisition strategy to widen its scope and strengthen
its position in the competitive landscape compared to other major
players like
Life Technologies
(
LIFE
) and
Sigma-Aldrich
(
SIAL
). Qiagen currently retains a short-term Zacks #2 (Buy) Rank.
LIFE TECHNOLOGS (LIFE): Free Stock Analysis
Report
QIAGEN NV (QGEN): Free Stock Analysis Report
SIGMA ALDRICH (SIAL): Free Stock Analysis
Report
To read this article on Zacks.com click here.
Zacks Investment
Research