QIAGEN Reports Third Quarter 2010 Results
- Net sales of $274.3 million in line with QIAGEN's quarterly expectations, 8% organic net sales growth excluding swine flu-related products
- Adjusted EPS of $0.25 ($0.27 CER) exceeds target, adjusted operating income margin exceeds 29% of net sales (30% CER)
- QIAsymphony RGQ launch in Europe aims to expand position in profiling and personalized healthcare; Abbott pact provides access to key assays for North American markets
QIAGEN N.V. (Nasdaq: QGEN; Frankfurt Prime Standard: QIA) today announced results of operations for the third quarter and the nine-month period ended September 30, 2010. Net sales for the third quarter of 2010 were in line with expectations provided by QIAGEN on August 10, 2010, while adjusted earnings per share exceeded those expectations.
"QIAGEN delivered a solid performance in the third quarter of 2010, meeting or exceeding our guidance against the backdrop of challenging economic conditions," said Peer Schatz, Chief Executive Officer of QIAGEN N.V. "While our molecular diagnostics franchise continues to grow rapidly and gain share, the portion of U.S. sales in prevention assays (approximately 20% of sales and primarily HPV tests) has been exposed to declining doctors' office visits. We have more than offset this pressure through successful market conversion, resulting in steadily increasing penetration. Our successful conversion efforts have produced sequential quarterly and year-over-year growth in this area despite a year-on-year decline in visits of up to 15%. Although we believe a reversal can be expected, this adverse trend has continued in the third quarter and will impact our full-year sales in 2010. At the same time, our underlying business performance remains strong, underscoring our strategic initiatives to expand in molecular diagnostics, applied testing, pharma and academia. As we look to 2011, and with current economic conditions anticipated to continue, we believe QIAGEN is well-positioned to keep growing significantly faster than its markets and make further progress toward global leadership in molecular technologies."
Third Quarter 2010 Results
Net sales in the third quarter of 2010 increased 6% to $274.3 million from $259.7 million in the same quarter of 2009, and rose 7% at constant exchange rates (CER). Reported operating income for the quarter declined 6% to $50.2 million from $53.4 million in the same quarter of 2009, while net income for the 2010 quarter declined 3% to $36.5 million from $37.7 million in the 2009 quarter. Diluted earnings per share for the third quarter of 2010 declined to $0.15 (based on 239.0 million weighted average shares and share equivalents outstanding) from $0.18 in the comparable 2009 period (based on 208.3 million weighted average shares and share equivalents outstanding).
Adjusted operating income decreased 3% to $79.1 million in the third quarter of 2010 from $81.8 million in 2009, while adjusted net income rose 10% in the third quarter to $58.8 million from $53.5 million in the comparable 2009 period. Adjusted diluted earnings per share declined to $0.25 in the third quarter of 2010 from $0.26 in 2009. Reconciliations of reported results to adjusted results are included in the tables accompanying this release.
Nine-Month Period 2010 Results
Net sales rose 11% to $801.4 million in the nine-month period ended September 30, 2010, from $720.7 million in the same period of 2009. Reported operating income of $137.8 million for this nine-month period was slightly above the $137.3 million in the comparable 2009 period. Net income increased 16% to $108.0 million from $93.3 million in 2009, while diluted earnings per share of $0.45 in the 2010 period were unchanged from the comparable 2009 period.
Adjusted operating income in the nine-month period ended September 30, 2010, increased 6% to $225.8 million from $212.7 million in 2009, while adjusted net income rose 13% to $160.7 million in the first nine months of 2010 from $142.0 million in the comparable 2009 period. Adjusted diluted earnings per share decreased to $0.67 per share in the first nine months of 2010 from $0.69 per share in the comparable 2009 period.
Results for the third quarter and nine-month period of 2010 include the results of operations from recent acquisitions, notably SABiosciences Corporation (acquired in December 2009) and DxS Ltd. (acquired in September 2009). Reconciliations of reported results determined in accordance with generally accepted accounting principles (GAAP) to adjusted results are included in the tables accompanying this release.
"Our performance in the third quarter of 2010, which faced a tough comparison against the exceptional contributions of swine flu-related products to our results in 2009, reaffirms our track record of delivering organic growth with improved profitability," said Roland Sackers, Chief Financial Officer of QIAGEN N.V. "By targeting further improvements through operational excellence initiatives we have improved our adjusted operating income margin during the year, exceeding 29% of net sales in the third quarter of 2010. We continue to focus on driving growth internally as well as by leveraging our strong balance sheet and cash flow."
Driving Growth and Strengthening Strategic Position in Molecular Diagnostics
QIAGEN is in an important strategic phase, driving significant expansion in molecular diagnostics - prevention, profiling, personalized healthcare and point-of-need testing - by leveraging its global leadership in sample and assay technologies and making major investments in new products and market expansion.
Among product categories, consumables and related revenues represented 88% of net sales in the third quarter of 2010 and grew 10% CER over the third quarter of 2009. Instrumentation represented 12% of net sales in the third quarter of 2010, decreasing 5% CER from the comparable 2009 period.
All customer classes had improved performances in the third quarter of 2010, with 8% organic sales growth when excluding significant one-time contributions from swine flu-related products in 2009. An additional six percentage points of CER sales growth was attributed to acquisitions made within the last 12 months. (Total CER growth rates below are shown excluding swine flu-related sales):
Molecular diagnostics (50% of sales) advanced on solid demand from end-market customers and expansion of the profiling assays portfolio (approximately 20% of sales). Sales rose 18% CER, which included five percentage points attributed to acquisitions made within the last 12 months. In prevention assays (approximately 25% of sales), HPV (human papillomavirus) test screening and genotyping solution sales in the Americas have grown sequentially for three consecutive quarters in 2010, and also over the third quarter of 2009. QIAGEN's successful market adoption initiatives continued to drive sales, more than offsetting a significant decline in patient visits to doctors amid challenging U.S. economic conditions. In personalized healthcare (approximately 5% of sales), QIAGEN formed an additional partnership with an undisclosed major pharmaceutical company to develop a molecular companion diagnostic.
Applied testing (7% of sales) benefited from portfolio expansion initiatives and the assay launch addressing new European standards in forensic testing as sales rose 30% CER, which included seven percentage points attributed to acquisitions made within the last 12 months. Further growth is expected from the launch during the fourth quarter of 2010 of the first series of food tests following the May 2010 acquisition of the German food market business Institute for Product Quality (ifp).
Pharma (20% of sales) enjoyed sustained demand for products used by pharmaceutical companies in development, particularly in Asia, while growth for products used in drug discovery remained soft. Sales grew 11% CER, with eight percentage points attributed to acquisitions made within the last 12 months.
Academia (23% of sales) showed a softer performance in the third quarter of 2010, although trends indicate a solid market outlook. Sales rose 5% CER, with five percentage points attributed to acquisitions made within the last 12 months.
At constant exchange rates, the Americas (53% of sales), Europe (35% of sales) and Asia/Japan (11% of sales) all advanced at robust double-digit rates in the third quarter of 2010 compared to the same period in 2009 when excluding swine flu-related product sales.
QIAGEN's current pipeline is exceptionally strong, providing a competitive differentiation and key growth contributor. A key 2010 milestone was the European launch in September of QIAsymphony RGQ, an automated modular testing platform, to address the fast-growing molecular diagnostics market and in particular applications in profiling and personalized healthcare. It is the only modular system that covers entire laboratory workflows from initial sample preparation to the final result, and allows customers to run commercial assays as well as to develop and conduct their own PCR-based assays.
QIAsymphony RGQ, with approximately 10 assays targeted for U.S. regulatory submissions, also forms the basis of an October 2010 agreement with Abbott Laboratories that is expected to significantly strengthen the testing menus of both companies for automated in vitro diagnostic applications in the U.S. and Canada. The addition of Abbott's molecular assays for HIV-1 and HCV (hepatitis C) will expand the molecular diagnostic menu of QIAsymphony RGQ to include some of the most frequently performed assays, increasing the attractiveness of this platform as a complete solution.
In personalized healthcare, the therascreen KRAS assay, which determines the gene mutation status in patients with metastatic colon cancer, is expected to be submitted shortly for U.S. regulatory approval. This would mark another key milestone in the expansion of QIAGEN's global leadership position in personalized healthcare, which benefited greatly from the September 2009 acquisition of DxS and subsequent integration that has been completed in 2010. QIAGEN offers approximately 20 molecular assays in personalized healthcare and has a packed development pipeline. QIAGEN is a clear partner of choice for companion diagnostics, with more than 15 collaborations under way with pharmaceutical companies.
For 2010, QIAGEN is reaffirming its full-year earnings guidance. Based on foreign exchange rates as of January 31, 2010, adjusted diluted earnings per share of $0.91 - $0.92 are expected, which is within the guidance range set by QIAGEN in February 2010. The target for full-year 2010 net sales has been adjusted to a new range of $1,090 - $1,105 million from $1,120 - $1,170 million based on foreign exchange rates as of January 31, 2010. This reflects the ongoing adverse impact of reduced U.S. patient visits to doctors for HPV tests in its prevention portfolio (impacting approximately 20% of sales), which has temporarily dampened QIAGEN's growth that has been driven by successful market conversion initiatives.
Conference Call and Webcast Details
Detailed information on QIAGEN's business and financial performance will be presented during a conference call on Tuesday, November 9, 2010, at 9:30 ET / 15:30 CET. The corresponding presentation slides will be available for download shortly before the conference call at www.qiagen.com/goto/ConferenceCall, and a webcast is available at this website. A replay will also be made available on this website.