Qiagen Beats but Cuts Rev Guidance - Analyst Blog

Qiagen (QGEN) reported an EPS of 15 cents for the third quarter of fiscal 2010 compared to 18 cents in the year-ago period. However, after making some adjustments and treating stock-based compensation as a normal expense, the EPS came in at 24 cents, beating the Zacks Consensus Estimate by a penny. Adjusted EPS of the prior-year quarter was 25 cents. Although adjusted net income of $56.8 million during the reported quarter is higher than the previous quarter's $51.9 million, EPS declined due to a 14.7% rise in share count to 239 million shares.

Net sales were $274.3 million, up 6% from the prior-year quarter's $259.7 million and increasing 7% at constant exchange rates (CER). However, sales missed the Zacks Consensus Estimate of $277 million. While revenues related to consumables (accounting for 88% of net sales in the quarter) increased 10% annually at CER, instrumentation revenues (accounting for the rest) were 5% lower. Among the different regions, Americas, Europe and Asia/Japan all recorded robust double-digit growth during the quarter.

Qiagen primarily derives revenues from molecular diagnostics, applied testing, pharma and academia, which represented 50%, 7%, 20% and 23% of total sales during the quarter. Molecular diagnostics sales recorded a robust growth of 18% at CER on strong demand from end-market customers and expansion of the profiling assays portfolio. Moreover, the company has witnessed a growth in HPV (human papillomavirus) test screening and genotyping solution sales in the Americas, which have grown sequentially for three consecutive quarters in 2010, and annually as well. The strong performance of Qiagen is significant in a situation where patient visits to doctors have been declining amidst economic uncertainty.

Sales derived from applied testing increased 30%, driven by the company's portfolio expansion initiatives and the assay launch in Europe according to new standards in forensic testing. This division is expected to record higher growth following the launch of food tests during the fourth quarter. Sales from Pharma increased 11% at CER due to consistent demand for products used for development by pharmaceutical companies, particularly in Asia. The lowest growth of 5% was recorded by Academia. However, current market trends are optimistic. 

Under an agreement with Abbott (ABT) in October 2010, Qiagen will receive test kits for a molecular test of HIV in the US and Canada. The test, to be commercialized under Qiagen's brand, is expected to be available by 2012. In addition, Qiagen will receive a quantitative HCV test which will be used on its QIAsymphony RGQ instrument, which was launched in Europe in September to address the fast-growing molecular diagnostics market.

Outlook

For 2010, Qiagen reaffirmed its full-year earnings guidance of 91−92 cents. However, guidance for sales have been lowered to $1,090−$1,105 million from $1,120−$1,170 million. Revenue guidance was lowered due to the ongoing adverse impact of reduced patient visits to doctors for HPV tests.