SIAL (MM)

Qiagen (QGEN) reported adjusted EPS of 24 cents in the third quarter of fiscal 2011, beating the Zacks Consensus Estimate of 21 cents but a penny lower than the prior-year quarter.

Net sales in the quarter stood at $288.9 million, up 5% year over year (up 1% at constant exchange rates or CER) but lagged the Zacks Consensus Estimate of $291 million. However, excluding the contributions from Cellestis (since August 29) and Ipsogen (since July 12), total sales declined 3% at CER.  

Under the product categories, Consumables and related revenues (accounting for 87% of net sales in the quarter) remained flat year over year at CER, while instrumentation revenues (accounting for the rest) increased more than 8%, primarily due to targeted initiatives across the company’s broad product range. QIAsymphony placements also contributed to the growth through higher sales. Instrument sales also reflected a shift toward ‘reagent rental agreements’ and similar arrangements.

Region wise, Americas (48% of revenues) witnessed a 5% decline impacted by the timing of a national HPV (human papilloma virus) test tender delivery. However, revenues from Europe- Middle East-Africa (33% of sales) and Asia-Pacific /Japan (17% of sales) increased 15% and 19% at CER, respectively. Europe benefited from the ongoing rollout of the QIAsymphony RGQ automation system as well as higher contributions from Molecular Diagnostics and Academia in Northern Europe. On the other hand, renewed growth impulses led to a double-digit growth in China while Japan demonstrated double-digit sales expansion throughout the customer base.

Segments

Qiagen primarily derives revenues from molecular diagnostics, applied testing, pharma and academia, which represented 46%, 7%, 21% and 26% of total sales, respectively, during the quarter. Molecular diagnostics sales registered a 5% drop at CER. Despite recording higher Profiling sales, the decline was due to the unfavorable timing of non-US national HPV tender in Prevension.

Sales derived from applied testing remained unchanged at CER, primarily driven by strong demand for consumable products used for the implementation of new forensic standards and human identification products in Europe and Japan.

Pharma sales rose 6% at CER based on initiatives taken during the quarter to accelerate sales of products used in drug discovery and development. Academia witnessed a 7% increase in net sales.

Qiagen has adopted several strategic initiatives in the global Sample & Assay Technologies market in order to deliver stronger performance in the second half of 2011 as well as for 2012 and beyond. The company is currently focusing on innovation and geographic expansion to drive organic growth.

Outlook

For 2011, Qiagen reaffirmed its revenue guidance. It expects to report a 3% growth in net sales at CER. Moreover, for the full year, adjusted EPS is expected to be 96-97 cents (earlier guidance being 96 cents) at CER. For the second half of 2011, Qiagen expects total sales growth of approximately 7% at CER, of which organic revenue will account for half of the growth.

Companion diagnostics is currently gaining significant traction and peers of Qiagen like Myriad Genetics (MYGN) are establishing themselves as strong players in the companion diagnostic market. However, Qiagen is 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#3 (Hold) Rank, which also reflects our ‘Neutral’ recommendation on the stock over the long term.

 
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