Qiagen shuns M&A that 'dilutes' its focus amid reports of Quidel merger

Dive Brief:

Qiagen will not engage in M&A that dilutes its activities, CEO Thierry Bernard told investors on Wednesday, coming days after Bloomberg reported Qiagen may merge with Quidel, a big company that operates outside its current areas of focus.
Talking after a fourth quarter in which sales related to COVID-19 rose almost 400% to reach $200 million, Bernard said Qiagen’s business development is focused on bolt-on acquisitions that support and strengthen its operations in five target areas.
Acquisitions could help Qiagen maintain momentum as pandemic-related demand for testing abates. Bernard said “it might be the case that demand for testing will continue strong” into the second half of 2021.

Dive Insight:

Like other COVID-19 testing companies, Qiagen is assuming demand will remain elevated throughout the first half of 2021. Qiagen set out that view at an investor event in December. Since then, the pace of the vaccine rollout and emergence of variants that have some level of resistance to the available prophylactics has shaped views of the potential for a more prolonged pandemic.

“More and more analysts, ... companies, customers [are] saying ‘given the speed of vaccination, or the lack of, in some countries, vaccination, it might be the case that demand for testing will continue strong beyond [the first half of the year]’,” Bernard said.

Qiagen is preparing for the end of the pandemic tailwind, whenever it may occur. The company has now made more than 130 placements of its NeuMoDx molecular diagnostic solution, in some cases at sites that also use rival systems from Hologic or Roche, in other cases having won competitive tenders.

Bernard said the pandemic tailwind enabled Qiagen to accelerate placements of NeuMoDx and QIAstat-Dx by one to two years. Having been given that rapid start, Qiagen plans to expand the test menu for NeuMoDx and QIAstat-Dx next year as it seeks to build on the momentum generated by COVID-19 to ensure post-pandemic growth. However, some analysts remain skeptical about Qiagen’s prospects.

“Although some revenues may be sustained from the pandemic as the QIAstat-Dx installed base ramps up with associated future pull-through, questions remain on mid-term growth drivers and the longevity of sample prep solutions for COVID-19 testing,” analysts at Jefferies wrote in a note to investors.

For now, Qiagen is thriving. Net sales rose 36% in the fourth quarter. The jump beat guidance by four percentage points despite Qiagen raising expectations as recently as December, when it upped its fourth quarter outlook from as low as 24% to above 32%. Qiagen’s growth made the fourth quarter its strongest period of 2020.

The performance was underpinned by continued demand for COVID-19 products, coupled to the partial recovery of the non-pandemic part of Qiagen’s business. Sales of sample technologies grew 55% due to demand for automated RNA extraction kits and other products used in the response to COVID-19. Qiagen also saw improving demand for non-pandemic products including DNA extraction kits.

Qiagen’s diagnostic and PCR and nucleic acid amplification units also reported double-digit growth. The 36% growth in diagnostic was fueled by a 318% boom in QIAstat-Dx sales and continued demand for NeuMoDx. Sales of the automated PCR testing solutions were underpinned by pandemic-related demand and offset a 3% dip in revenues from QuantiFERON-TB.

COVID-19 was also a big factor in the 81% growth achieved by the PCR and nucleic acid amplification unit, which provides OEM solutions and enzymes used in third-party diagnostic kits. Qiagen cited the introduction of the QIAcuity digital PCR systems as a non-pandemic growth driver.

Across the whole business, sales in COVID-19 product groups rose 379%, compared to a 2% decline in non-pandemic products. The slight contraction in non-pandemic sales represents an improvement over earlier quarters.