Qiagen posted third quarter results Wednesday in line with recently downgraded expectations.
The company saw net sales grew 3%. Qiagen blamed its inability to hit its previous 4% to 5% growth target on troubles in China, where sales slumped by 24%.
Qiagen is changing its CEO, restructuring and tying its next generation sequencing (NGS) strategy to Illumina to improve its fortunes, but analysts at Cowen think its expectations for 2020 are too high.
Qiagen braced investors for a tough quarter earlier this month when it revealed sales had fallen short of expectations and outlined a raft of changes to its business. On Wednesday, Qiagen provided more details of why it missed its sales target in its final third quarter results.
The full financials show sales in China fell 24% in the quarter, which wiped out the 11% growth seen elsewhere in Asia Pacific. Qiagen attributed the sharp decline in China to a slowdown in distributor orders and the end of its NGS joint venture. Analyst at Cowen calculate the joint venture accounted for nine percentage points of the decline in Chinese sales, putting the underlying drop at 15%.
Qiagen's troubles in China contributed to a 2% decline in molecular diagnostic sales. The unit was also hit by a 37% drop in sales from companion diagnostic co-development projects. After stripping out the impact of China and other disclosed factors from their calculations, the Cowen analysts concluded molecular diagnostic sales were likely still down by low single digits on the prior year.
Faced with the difficulties, Qiagen is restructuring its operations. Qiagen disclosed the restructuring earlier this month but its calculation of the cost of the changes has already changed. In the third quarter, Qiagen recognized restructuring charges as $277 million, as compared to its prior forecast of up to $265 million. The cash piece of the charges came in around $10 million above expectations.
The restructuring is part of a broader shift in strategy, which has seen Qiagen suspend development of NGS instruments and partner with Illumina. Last week, Illumina CEO Francis deSouza outlined why he decided to team up with Qiagen.
"They have a business in infectious disease, for example, and a number of other clinical domains where they already have the commercial capability to take products to market. That's exciting for us as a starting point in our relationship, and also gives us line of sight into how this relationship could expand into other clinical domains," deSouzav told investors on a quarterly earnings call.