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Qiagen Q4 Revenues Grow 5 Percent; Top Line Hit by Currency Effects

This article has been updated from a previous version to provide additional information on Qiagen's 2016 organic growth drivers and comments from a company earnings call.

NEW YORK (GenomeWeb) – Qiagen reported after the close of the market Wednesday that its fourth quarter revenues grew 5 percent year over year, falling short of Wall Street expectations due largely to currency headwinds.

For the three months ended Dec. 31, Qiagen posted revenues of $366.5 million compared to $348.5 million a year ago. On average, analysts had expected revenues of $370.7 million.

On an adjusted basis and at constant exchange rates (CER), Q4 revenues grew 8 percent year over year, the company said.

The company's acquisitions of Mo Bio Laboratories and Exiqon, completed in Q4 2015 and Q2 2016, respectively, provided three percentage points of total CER growth in Q4, while organic growth provided about five percentage points.

Qiagen logged $315 million in consumables and related revenues in Q4, about 86 percent of Q4 sales, an 8 percent CER increase year over year. Instrument sales were $54 million and grew about 6 percent CER year over year.

By customer class, molecular diagnostics, responsible for about half of the company's sales, grew 11 percent at CER to $185 million. Meanwhile, at CER applied testing jumped 10 percent, pharma grew 5 percent, and academia grew 3 percent year over year.

Qiagen's Q4 R&D spending ballooned 48 percent to $58.5 million from $39.5 million, while its SG&A spending jumped 33 percent to $155.6 million from $116.9 million.

Qiagen's Q4 net income attributable to company owners was $8.6 million, or $.04 per share, compared to $50.9 million, or $.21 per share, in the year-ago period. On an adjusted basis excluding a previously announced $79.1 million restructuring charge in Q4, EPS was $.39, coming in above the Wall Street expectation of $.34.

The company finished the quarter with $439.2 million in cash and cash equivalents and $93.0 million in short-term investments.

For full-year 2016, Qiagen logged $1.34 billion in revenues, up 4 percent from $1.28 billion a year ago, or 6 percent at CER, and in line with analysts' average estimate. Organic growth contributed four percentage points to total CER growth in 2016, with nearly two percentage points coming from the Mo Bio and Exiqon acquisitions.

Organic growth drivers in 2016 included the company's QuantiFeron-TB test for latent tuberculosis, which rose to a 25 percent CER growth pace; its GeneReader next-generation sequencing system, placements of which achieved a target of capturing more than 10 percent of the market for new benchtop sequencers in oncology applications; and the QiaSymphony sample-to-answer diagnostics platform, which exceeded the company's 2016 goal of 1,750 cumulative placements alongside double-digit consumables growth.

Consumables and related revenues grew 6 percent at CER to $1.17 billion, while instrument sale grew 5 percent at CER to $172 million. By customer class, molecular diagnostics sales grew 7 percent at CER to $663 million in 2016; applied testing and pharma each grew 7 percent, and academia grew 4 percent.

Qiagen's 2016 R&D spending jumped 20 percent to $176.1 million from $146.8 million, while its SG&A expenses grew 15 percent to $530.6 million from $461.7 million.

Net income attributable to owners of the company in 2016 was $80.4 million, or $.34 per share, compared to $130.1 million, or $.55 per share, in 2015. On an adjusted basis and excluding a previously announced restructuring charge, EPS was $1.11, besting the Wall Street expectation of $1.05.

Qiagen reaffirmed guidance of adjusted net sales growth of approximately 6 percent to 7 percent at CER in 2017, based on approximately one percentage point from the acquisitions of Exiqon and OmicsSoft (announced in January), and about five to six percentage points from the rest of the portfolio. The company also reaffirmed guidance for adjusted EPS of $1.25 to $1.27 at CER, which includes benefits from the completion of a $300 million share repurchase commitment by the end of the year and restructuring charges taken in 2016, but excludes an expected $.03 per share of restructuring costs planned for 2017.

For Q1 2017, Qiagen expects net sales growth of 4 percent to 5 percent at CER, and adjusted EPS of $.21 to $.22 at CER.

During a conference call recapping the company's Q4 and 2016 earnings, CEO Peer Schatz noted that organic growth moving forward will be driven by "multiple pillars," with QuantiFeron-TB, GeneReader, and QiaSymphony leading the way.

"It's a much more differentiated growth engine than it was a few years ago," Schatz said. "QuantiFeron is certainly, just because of the size and high growth of this franchise, a major contributor to the organic growth. But we also have other strong contributors." For instance, he noted that GeneReader placements are expected to generate $150,000 to $200,000 in sequencing panel pull-through per system, "even on more limited panels."

In response to an analyst question about the anticipated number of placements of GeneReader in 2017, Schatz shied away from concrete placement numbers instead noting that the company expects to have a 20 percent share of the NGS market for oncology applications by 2020. For 2017, he added, investors "shouldn't expect percentage point" contributions by GeneReader to overall growth, but noted that the impact "will be measurable."

In addition, "QiaSymphony just continues to be a star, and we're winning tenders around the world … in infectious disease, and we just won a big HIV tender yesterday and a big hepatitis tender a couple weeks ago, and we have a very broad menu in Europe that we're marketing throughout all CE relevant regions," Schatz said. "That is driving a lot of assay growth and consumables growth. And the new capabilities of QiaSymphony — liquid biopsy is an example — is driving a lot of growth in the US."