Dive Brief:
- Qiagen announced Monday CEO Peer Schatz is stepping down after 27 years at the company. Thierry Bernard, the head of the company's molecular diagnostics business, will serve as an interim CEO while Qiagen's supervisory board searches for a permanent replacement.
- The company also said it is undertaking a new restructuring strategy after unexpectedly tepid growth in China led to weak preliminary third quarter results, with constant exchange rate revenues coming in at about 3%, below an expected 4-5% range. The company will be expanding its Wroclaw, Poland, and Manila, Philippines, business services centers as it shifts its global operations structure into a regional manufacturing system.
- Qiagen is also suspending next-generation sequencing-related instrument development activities as it pivots to a 15-year partnership with Illumina to develop in vitro diagnostic kits to be used with its MiSeq Dx and NextSeq 550Dx systems.
Dive Insight:
Analysts at Cowen called the slate of announcements "clearly a bad day" for Qiagen, saying the partnership with Illumina is hampered by the fact that it is a non-exclusive relationship and that the "entire relationship seems unlikely to materially move the needle for [Qiagen's] overall revenue growth."
Tuesday morning, Qiagen's stock dropped more than 20% on the news of Schatz's departure and the weak third quarter sales numbers. The company is scheduled to report final third quarter earnings Oct. 30.
Bernard will be tasked with working with CFO Roland Sackers to lead the company through its new restructuring effort. Qiagen will take a pre-tax restructuring charge of $260-265 million "predominately" in the third quarter related to its decision to suspend its NGS instrument development.
Cowen analysts called the decision to suspend new placements of GeneReader "likely ... the correct decision."
"The product has had minimal adoption to date (no more than $10-15MM in 2018 revenue), and there were no catalysts in sight to improve results," they wrote in a equity research note.
Qiagen and Illumina first plan to focus on commercializing oncology IVD kits aimed at supporting patient management. Eventually, the companies may look to other areas like cardiology, hereditary diseases, infectious diseases, inflammatory and autoimmune diseases.
"We intend to shift resources to support this new partnership, and to also review additional areas for investments in our portfolio where Qiagen can secure solid leadership positions," Sackers said in a statement.
