Qiagen shared prelimary third-quarter figures Tuesday showing net sales grew 26% in its first set of results since the collapse of the Thermo Fisher Scientific takeover bid.
The molecular diagnostics maker cited significant demand for COVID-19 testing as a driver of sales growth that beat the top end of its target range by five percentage points.
Non-COVID-19 revenue suffered a mid-single-digit decline and QuantiFERON-TB sales were down 20%. Both figures represent improvements versus earlier in the year but analysts at Cowen identified the continued slump as ammunition for skeptics about Qiagen’s prospects.
Investors in Qiagen rejected Thermo Fisher's $11.5 billion takeover offer in the belief it undervalued the company. Qiagen now needs to repay that faith. In the near term, Qiagen’s effort to demonstrate it can thrive as an independent company will benefit from the COVID-19 pandemic.
The Europe-based company is exposed to multiple elements of COVID-19 testing, including sample prep kits, enzymes and its own diagnostic instruments and tests. In the third quarter, the opportunities added around $140 million to Qiagen’s sales, according to analysts at William Blair. Qiagen management told the analysts COVID-19 revenues fell $10 million sequentially due to lower sales of enzymes, which William Blair called "lumpy."
The sequential decline in enzyme sales was offset by improvements in other parts of the business. In the second quarter, pressure on non-COVID-19 products limited constant-currency growth to 19%. The second quarter challenges were exemplified by a 46% drop in sales of QuantiFERON-TB, a test for latent tuberculosis that suffered amid the lockdowns imposed in the U.S. and Europe.
Many countries eased restrictions throughout the third quarter, enabling Qiagen to grow sales of its TB test by almost 60% sequentially. However, QuantiFERON-TB sales were still down 20% compared to the third quarter of 2019. Cowen analysts see that test as an important long-term growth driver, making it something of a bellwether for Qiagen’s post-COVID-19 prospects.
William Blair analysts told investors QuantiFERON-TB is a “sizable growth opportunity” but far from the only driver of increased sales available to Qiagen. The analysts said digital PCR is “quite possibly the biggest growth driver,” adding that Qiagen also has opportunities to grow in sample prep and through the acquired NeuMoDx assets.
The pandemic will shape the coming quarters, though. William Blair sees sample prep as the biggest COVID-19 opportunity, supported by Qiagen’s efforts to meet demand. Pre-COVID-19, Qiagen would typically make 450,000 viral extraction kits a month. Qiagen now has capacity to make 12 million kits a month and plans to hit a 20 million monthly run rate by the end of the year. The extra capacity will help Qiagen deal with backorders.
Qiagen’s preliminary results lacked guidance for the fourth quarter. If Qiagen retains its previously disclosed full year target, William Blair analysts calculate it will need to grow approximately 17% in the fourth quarter to hit its goal. Qiagen shares fell 4% in the wake of the preliminary third quarter results, suggesting investors were expecting the company to beat its sales forecast.