On October 27, 2020 QIAGEN N.V. (NYSE: QGEN; Frankfurt Prime Standard: QIA) reported strong full results of operations for the third quarter and first nine months of 2020 and also increased its outlook for net sales and adjusted earnings per share (EPS) for full-year 2020 (Press release, Qiagen, OCT 27, 2020, View Source [SID1234569116]).
Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:
Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing
Schedule Your 30 min Free Demo!
Sales in the third quarter of 2020 rose 26% at actual rates, and also rose 26% at constant exchange rates (CER), to $483.8 million from $382.7 million in the same period of 2019. Adjusted EPS rose 61% to $0.58, and also $0.58 CER. Based on the solid performance, along with expectations for about 24-27% CER sales growth and about $0.58-0.60 CER of adjusted EPS in the fourth quarter of 2020, QIAGEN has increased its full-year 2020 outlook for about 20% CER sales growth and adjusted EPS growth of about 45% to about $2.07-2.09 CER from 2019 results.
"Our results for the third quarter 2020 reflect a dynamic performance driven by an ongoing very high level of sales for product groups used in the COVID-19 pandemic response and by improving demand trends in other areas of the portfolio," said Thierry Bernard, Chief Executive Officer of QIAGEN N.V.
"We are proud of the passion and commitment our QIAGENers are demonstrating to supply important products for COVID-19 testing despite supply constraints, which we are addressing with investments to expand capacity. We have added to our COVID-19 portfolio with the recent launch of QIAprep&, which integrates ultra-fast sample preparation and PCR detection in one single kit, and plan to soon launch a rapid COVID-19 antigen test developed with Ellume. As we now focus on five pillars of growth, we recently acquired the remaining 80.1% stake in NeuMoDx to strengthen our global position in automated molecular testing, with first incremental sales from this acquisition expected in the fourth quarter of 2020. Our QIAcuity digital PCR system is also enjoying strong customer interest following the first placements in September 2020. These results show that while QIAGEN is increasingly relevant for COVID-19 testing, we are not dependent on COVID-19. Driven by our strategic capabilities and execution mindset, we are increasingly optimistic about a strong finish to 2020 – a confidence reflected in our improved full-year 2020 outlook."
•Sales: Better-than-expected growth due to ongoing significant demand for product groups used in COVID-19 testing and improved trends compared with Q2 2020 in non-COVID-19 areas of portfolio. Total sales of product groups used in COVID-19 tests were $164 million in Q3 2020 (9M: $418 million) compared to $37 million in Q3 2019 (9M: $102 million). Sales of non-COVID products were $320 million, down about 8% CER from Q3 2019 (9M: $881 million, -12% CER). Currency movements had minimal impact on sales for Q3 2020.
•Operating income margin: Q3 2020 operating income margin was 9.2% of sales. The adjusted operating income margin was 35.2% of sales compared to 27.8% in Q3 2019, with improvements due to a decline in R&D expenses compared to Q3 2019 and lower sales, marketing and administrative expenses as a percentage of sales. Q3 2020 adjusted results excluded expenses of $103.6 million (9M: $124.5 million) from the discontinued tender offer. Q3 2019 adjusted results excluded charges from halting development of NGS instruments and initiatives to improve efficiency.
•EPS: Diluted EPS and adjusted diluted EPS grew faster than sales gains. The Q3 2020 tax rate was 39% (9M: 20%) and the adjusted tax rate was 17% (9M: 18%).
•Molecular Diagnostics: Sales of sample technology instruments and consumables led Q3 2020 performance, supported by gains for the QIAstat-Dx and NeuMoDx solutions. Sales of the QuantiFERON-TB test for latent tuberculosis detection fell 20% CER to $53 million (9M: -27% CER, $132 million), although this was a marked improvement on the 46% CER year-on-year decline seen in Q2 2020. Universal NGS solution sales were higher, while weaker trends were seen for HPV test sales and in the Precision Medicine portfolio, which included a 25% CER drop in companion diagnostic co-development revenues in Q3 2020.
•Life Sciences: Q3 2020 growth was driven by higher sales for sample technology solutions and supported by year-on-year gains in OEM component sales to other diagnostic suppliers. Double-digit CER sales growth was also achieved for universal NGS solutions offset by lower sales in QIAGEN Digital Insights (bioinformatics) and Human ID / Forensics.
•Americas: Q3 2020 growth was underpinned by high-single-digit CER sales growth in the U.S. and by dynamic gains in Brazil and Mexico. Excluding QuantiFERON-TB sales, Americas sales grew 30% CER in Q3 2020 (9M: +17% CER).
•EMEA: The fastest regional growth in Q3 2020 was driven by gains in both customer classes due to double-digit CER gains in Germany, France, the UK and Italy, and single-digit CER growth in Turkey.
•Asia-Pacific / Japan: Results for Q3 2020 driven by double-digit CER growth in key countries, with China in particular growing above 20% CER, as well as gains in both customer classes.
•Net cash provided by operating activities in 2020 period included $119.4 million of cash paid for costs related to discontinued tender offer and $50.4 million of cash paid in 2020 for restructuring measures. Excluding these costs in both periods, operating cash flow rose about 50% on a comparable basis in the first nine months of 2020.
•Net cash used in investing activities in 2020 period included $239.4 million of cash paid (net of cash acquired) to buy the remaining stake in NeuMoDx as well as $119.3 million of payments for digital PCR assets acquired in 2019. Results in 2019 period included $125.0 million cash paid for digital PCR assets.
•Net cash provided by financing activities in 2020 period included $59.4 million proceeds from short-term debt, while 2019 period included $430.0 million paid for redemption of 2019 convertible notes and $74.4 million paid for share repurchases.
Roland Sackers, Chief Financial Officer of QIAGEN N.V., said: "We have launched an investment program at our sites in Germany, Spain and the U.S. and will put $120 million into scaling up production capacity – especially for QIAstat-Dx, NeuMoDx and the other pillars of our growth strategy. These investments are in product areas that will enhance our response to the COVID-19 pandemic and support our ambitions for generating growth in the future. We also generated significantly improved adjusted operating income leverage on the benefits of strong sales growth and recent efficiency programs. As our balance sheet gains strength thanks to the dynamic sales growth and cash flow trends, we will remain focused on investing to ensure QIAGEN maintains a solid growth trajectory while increasing returns to shareholders."
QIAGEN engagement for global COVID-19 response
QIAGEN teams are fully mobilized to serve all of our customers in the response to the COVID-19 crisis, providing existing solutions and developing a series of differentiated product launches. QIAGEN expects an ongoing significant increase in these product group sales compared to Q4 2019, and also higher sales sequentially from Q3 2020.These efforts come as QIAGEN sharpens its focus on five pillars of growth, many of which involve products used in the response to COVID-19 in addition to other applications: (1) Sample Technologies, (2) QuantiFERON, (3) NeuMoDx, (4) QIAstat-Dx and (5) QIAcuity digital PCR.
•Sample technologies
Sales of total sample technology consumables and related instruments rose at a double-digit CER rate in Q3 2020 compared to the same period in 2019, and also grew 10% sequentially from Q2 2020. QIAGEN experienced two trends since the end of Q2 2020: (1) greater demand for DNA sample technology consumables, and (2) a shift in demand for RNA sample technology consumables used in COVID-19 testing from manual to automated kits.
Sales of RNA sample technology consumables and instruments used in COVID-19 testing grew over 300% CER from Q3 2019 and represented approximately 56% of COVID-19 product group sales in Q3 2020 (9M: ~56%). QIAGEN is ramping up production capacity for automated sample technology consumables, which are processed on the QIAsymphony, QIAcube and EZ1 instruments as well as third-party high-throughput instruments.
QIAGEN is also launching new COVID-19 testing products based on its strong position in sample technologies. These include QIAprep&, which was launched in October 2020 to integrate RNA sample preparation and real-time PCR detection into a single kit with the aim of removing key COVID-19 testing bottlenecks. It can be completed in under one hour compared to about three hours for standard extraction-based PCR processes, and requires less disposable plastics than other tests. QIAprep& can also handle up to 2,600 samples per eight-hour shift per PCR cycler. QIAGEN plans to seek CE-IVD and FDA EUA clearances soon. QIAGEN has also launched new kits for use on 96-well third-party high-throughput instruments.
QIAGEN experienced ongoing strong demand for sample preparation instruments in Q3 2020. A total of 290 new placements of the QIAsymphony automation system were made in the first nine months of 2020, a 50% increase over the same period of 2019. This growth builds on more than 2,500 cumulative placements at the end of 2019. In the QIAcube family of instruments, placements of new QIAcube Connect (more than 800 instruments) and the QIAcube HT high-throughput version (more than 250 instruments) were both more than 50% higher than in the same period of 2019. The QIAcube family had over 8,000 cumulative placements at the end of 2019. Additionally, more than 340 placements of the EZ1 instrument were made so far in 2020, about double the placement level in the first nine months of 2019, and building on more than 3,750 cumulative placements at the end of 2019.
•PCR testing workflows: QIAstat-Dx, NeuMoDx and other PCR solutions
Total sales of PCR testing solutions represented approximately 23% of total COVID-19 sales (9M: ~21%), a more than 300% CER increase from the same period in 2019. These included higher sales of the QIAstat-Dx and NeuMoDx systems and other PCR products that include the Rotor-Gene Q PCR cycler and related consumables. These PCR workflow sales also rose sequentially in Q3 2020 from Q2 2020.
QIAstat-Dx: QIAGEN continues to place this solution for syndromic testing with the QIAstat-Dx Respiratory SARS-CoV-2 Panel that can detect the SARS-CoV-2 virus and 21 other respiratory diseases with customers worldwide. The installed base reached over 1,800 cumulative placements at the end of Q3 2020. QIAGEN is investing to significantly ramp up production of QIAstat-Dx cartridges at its sites in Germany and Spain in the coming months. The multi-stage project is expected to be finished in the first half of 2021.
NeuMoDx: QIAGEN acquired the remaining 80.1% stake in NeuMoDx Molecular, Inc. in mid-September 2020. This gives QIAGEN direct access to the U.S. market. The installed base reached 110 systems at the end of Q3 2020, including U.S. placements through the acquisition. Among recent developments, QIAGEN plans to soon submit a new NeuMoDx multiplex test that combines analysis for influenza, RSV (respiratory syncytial virus) and the SARS-CoV-2 virus for FDA EUA and CE-IVD clearance, and expects to launch this test in November. The sample input for the single-plex SARS-CoV-2 test is also expanded in Europe to include saliva as a sample type in addition to nasal and respiratory tract swabs.
•OEM components for other diagnostic suppliers
Sales of these products, which involve reagents sold to other diagnostic companies for use in their own testing solutions, rose approximately 475% CER from Q3 2019. They represented about 21% of COVID-19 sales in Q3 2020 (9M: ~23%), but declined at a double-digit CER rate sequentially from Q2 2020, a period of very strong initial pandemic demand.
•Antigen and antibody tests
QIAGEN is partnering with Ellume, an Australian diagnostics company, to develop antigen and antibody tests. These tests provide rapid results through use of the QIAGEN eHub, which gives an automated read-out in less than 15 minutes. One QIAGEN eHub will be able to process 30 nasal swab samples per hour. The QIAreach SARS-CoV-2 Antigen Test is expected to be submitted in November 2020 for FDA Emergency Use Authorization (EUA) and receive CE-IVD marking. Additionally, the QIAreach Anti-SARS-CoV-2 Total test for total Ig (Interferon gamma) antibodies (IgA, IgM, IgG) was submitted for FDA EUA. A CE-IVD marking is planned for Q4 2020.
Additional Sample to Insight portfolio developments
•QIAcuity digital PCR
The first QIAcuity digital PCR systems have been installed with customers after full commercialization began in September 2020. QIAGEN has an increasing number of customer leads for this platform, which is designed to make digital PCR technology available to Life Sciences laboratories worldwide.
Change in Executive Committee
Jean-Pascal Viola has been appointed Senior Vice President, Head of the Molecular Diagnostics Business Area, in addition to his current role leading Corporate Business Development and Intellectual Property & Litigation. He will continue as a member of the Executive Committee. Mr. Viola joined QIAGEN in 2005 and has held various roles in Singapore, the U.S. and Germany. Since joining the business development team in 2007, he played a leading role in the acquisitions of Cellestis, Stat-Dx, NeuMoDx and the Formulatrix assets for the entry into digital PCR. He was appointed Senior Vice President, Head of Corporate Business Development and Intellectual Property & Litigation in 2015, and became an Executive Committee member in 2019.
QIAGEN Virtual Deep Dive on December 8, 2020
QIAGEN is planning to hold a Virtual Deep Dive on Tuesday, December 8. This webcast will feature senior leaders and will be led by Thierry Bernard (CEO) and Roland Sackers (CFO), who will provide a strategic and financial update. It will also be an opportunity to discuss QIAGEN’s portfolio, including the strategic focus on five pillars of growth: (1) Sample Technologies, (2) QuantiFERON, (3) NeuMoDx, (4) QIAstat-Dx and (5) QIAcuity digital PCR. Further information on the time and how to register for the event will be announced shortly and available in the Investor Relations section of www.qiagen.com.
Fourth quarter and full-year 2020 outlook
Based on the dynamic growth in the first nine months of 2020, as well as the outlook for an ongoing high level of growth in the fourth quarter of 2020, QIAGEN now expects sales growth of approximately 20% CER (prior outlook of 15-18% CER) from the 2019 level of $1.53 billion. It also expects adjusted EPS to now grow about 45% CER to at about $2.07-2.09 CER from $1.43 in 2019 (prior outlook for at least 40% growth to at least $2.00 CER) based on about 235 million shares outstanding. Based on exchange rates as of October 26, 2020, currency movements against the U.S. dollar are expected to create an adverse impact of up to one percentage point on net sales growth at actual rates for full-year 2020. An adverse impact of about $0.02 per share is expected on adjusted EPS.
In Q4 2020, QIAGEN expects net sales growth of about 24-27% CER and for adjusted EPS to reach $0.58-0.60 CER based on about 237 million shares outstanding. Based on exchange rates as of October 26, 2020, currency movements against the U.S. dollar are expected to create a positive impact of about one percentage point on net sales growth and a largely neutral impact on adjusted EPS.
The outlook for adjusted EPS for Q4 and full-year 2020 excludes a pre-tax capital gain from QIAGEN’s minority investment in ArcherDX, which was acquired by Invitae (NYSE: NVTA) in October 2020. Based on the current share price of Invitae ($46), QIAGEN estimates the pre-tax capital gain could be approximately $110.8 million, or about $0.35 per share on an after-tax basis. QIAGEN has the right to receive up to 2.1 million additional Invitae shares upon achievement of certain future milestones.
Conference call on October 28, 2020
A presentation with additional information can be downloaded at View Source A conference call is planned for Wednesday, October 28, 2020, at 14:00 Frankfurt time / 13:00 London time / 9:00 New York time. A live webcast will be made available at this website, and a replay will also be made available after the event.
Use of adjusted results
QIAGEN reports adjusted results, as well as results on a constant exchange rate (CER) basis, and other non-U.S. GAAP figures (generally accepted accounting principles), to provide additional insight into its performance. These results include adjusted net sales, adjusted gross income, adjusted gross profit, adjusted operating income, adjusted operating expenses, adjusted operating income margin, adjusted net income, adjusted net income before taxes, adjusted diluted EPS, adjusted EBITDA, adjusted EPS, adjusted income taxes, adjusted tax rate, and free cash flow. Free cash flow is calculated by deducting capital expenditures for Property, Plant & Equipment from cash flow from operating activities. Adjusted results are non-GAAP financial measures that QIAGEN believes should be considered in addition to reported results prepared in accordance with GAAP but should not be considered as a substitute. QIAGEN believes certain items should be excluded from adjusted results when they are outside of ongoing core operations, vary significantly from period to period, or affect the comparability of results with competitors and its own prior periods. Furthermore, QIAGEN uses non-GAAP and constant currency financial measures internally in planning, forecasting and reporting, as well as to measure and compensate employees. QIAGEN also uses adjusted results when comparing current performance to historical operating results, which have consistently been presented on an adjusted basis.