Qiagen (QGEN) reported adjusted EPS of 23 cents (treating share-based compensation as a normal expense) in the second quarter of fiscal 2011, in line with the Zacks Consensus Estimate but surpassing the prior-year quarter earnings by a penny (at constant exchange rates or CER).
Net sales during the quarter were $282.2 million, beating both the Zacks Consensus Estimate of $280 million and the year-ago quarter level of $262.7 million. The company reported 1% organic revenue growth at CER, while favourable currency movements contributed 6% to the sales.
Under the product categories, revenues from consumables (accounting for 88% of net sales in the quarter) increased 2% year over year at CER, but instrumentation revenues (accounting for the rest) declined 7% primarily due to lesser number of orders by life sciences customers. Instrument sales also reflected a shift toward ‘reagent rental agreements’ and similar arrangements.
Among the different regions, Americas (52% of revenues) witnessed 5% growth, Europe- Middle East-Africa (31% of sales) declined by the same magnitude during the quarter while Asia-Pacific (17% of sales) rose 8% at CER.
Qiagen primarily derives revenues from molecular diagnostics, applied testing, pharma and academia, which represented 46%, 7%, 21% and 26% of total sales, respectively, during the quarter. Molecular diagnostics sales registered a 2% growth at CER on the back of solid growth in consumable products, partially offset by lower instrument sales. However, the comparison was hampered by higher one-time contributions in prior-year quarter, which included payments for companion diagnostic co-development projects to pharmaceutical companies.
Moreover, the company witnessed higher demand for Prevention during the quarter due to strong sales of HPV tests in the US. This was largely driven by successful market conversion initiatives, which more than offset the negative impact of reduced patient visits to physician offices.
Sales derived from applied testing grew 1% at CER primarily driven by strong demand for consumable products used for the implementation of new forensic standards in Europe and other countries as well as human identification products needed to support disaster recovery efforts in Japan. However, the company’s instrument sales plunged during the quarter.
Pharma sales remained unchanged as growth in consumable products used for drug development was mitigated by softer demand in drug discovery. Academia witnessed a 1% increase in net sales. However, the company faced increasing pressure in some key markets, including Europe and the US, due to adverse measures and reduced government spending plans.
Qiagen has adopted several strategic initiatives to drive growth in the global Sample & Assay Technologies market in order to accelerate growth in 2012 and beyond. The company is currently focusing on innovation and geographic expansionto drive organic growth.
In addition, Qiagen is offering a wide range of molecular tests in other automated platforms like the next-generation QIAensemble confirm spelling system. Presently, the company has rolled out more than 20 molecular diagnostic assays in select regions of the world and has undertaken more than 15 co-development projects with pharmaceutical companies.
Further, as an important strategic initiative, earlier in April, Qiagen inked a deal to acquire Australia-based Cellestis Limited for approximately A$341 million (US$355 million) in cash. The acquisition will enable Qiagen to access Cellestis’ proprietary QuantiFERON technology, an innovative disease diagnostic tool.
Outlook
For 2011, Qiagen reduced its revenue and EPS guidance based on the on-going Cellestis acquisition, which is expected to be completed in 2011, as well as the challenging market conditions. It expects to report 3% (earlier range was 5-7%) growth in net sales at CER. Moreover, for the full year, adjusted EPS is expected to be 96 cents (earlier guidance range being $1.00 -$1.05) at CER.
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