Qiagen (QGEN) reported an adjusted EPS of 20 cents (treating share based compensation as a normal expense) for the first quarter of fiscal 2011, missing the Zacks Consensus Estimate of 21 cents but surpassing the prior-year quarter by a penny (at constant exchange rates or CER).
Net sales during the quarter were $264.3 million, missing the Zacks Consensus Estimate of $273 million and almost unchanged from the year-ago quarter. At CER, revenues declined 2% year over year. The sluggish result during the first quarter comes on the back of the recent Japan disaster along with a soft economy in Australia, New Zealand and northern Africa.
Under the product categories, revenues related to consumables (accounting for 87% of net sales in the quarter) declined 1% year over year at CER, instrumentation revenues (accounting for the rest) declined significantly by 9%.
Net sales for the first quarter of 2010 witnessed a robust 37% growth at CER on the back of strong instrument sales and high demand for HPV screening tests in the US. Among the different regions, while Americas (47% of revenue) witnessed 1% sales growth, Europe- Middle East-Africa (35% of sales) declined by the same magnitude during the quarter.
Qiagen primarily derives revenues from molecular diagnostics, applied testing, pharma and academia, which represented 44%, 6%, 21% and 29% of total sales during the quarter. Molecular diagnostics sales recorded a 2% decline at CER as Profiling was negatively affected by the crises in Japan and Egypt.
Moreover, demand for Prevention was affected by soft HPV tests in the US. However, this dip in sales was partially offset by Qiagen’s gain in Personalized Healthcare, banking on expansion of companion diagnostic sales in Europe and co-development projects with pharmaceutical companies.
The company expects the Molecular Diagnostics market in US to improve in the coming quarters with the potential uptrend in patient visits to physician offices.
Sales derived from applied testing declined 13% at CER during the quarter. This is primarily due to difficult year-over year comparisons as the first qtr of 2010 witnessed strong sales of instruments. Moreover, the company’s portfolio expansion initiatives to live up to the new European standards in forensic testing and food safety also contributed to strong growth during the year.
However consistent demand for advanced molecular technologies along with R&D initiatives for gene-based drug development activities led to a 2% increase in sales in Pharma. Academia, during the quarter witnessed a 2% decline in net sales due to softer demands in some key markets.
Qiagen has adopted several strategic initiatives to drive growth in the global Sample & Assay Technologies market. It is presently emphasizing on strengthening its pipeline of molecular content that could be used in various automated platforms. It is planning to roll out its QIAsymphony RGQ globally, which is a next-generation automated modular testing platform. Qiagen expects to significantly increase the number of system placements of this product in 2011 and 2012.
In addition, Qiagen is offering a wide range of molecular tests in other automated platforms like the next-generation QIAensemble system. The company introduced more than 20 new products and received nearly 40 regulatory clearances globally during the quarter.
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. With this acquisition, Qiagen is expected to get access to Cellestis’ proprietary QuantiFERON technology, an innovative disease diagnostic tool.
Outlook
For 2011, Qiagen reaffirms its revenue and EPS guidance. It expects to report a 5-7% growth in net sales at CER. Moreover, for the full year adjusted EPS is expected to increase 7-13% at CER. While results are poor in the first quarter of 2011, it should improve gradually later in the year.
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