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Qiagen NV (QGEN - Analyst Report) reported loss of 22 cents per share in the second quarter of 2013, a huge decline compared to the year-ago quarter earnings per share (EPS) of 14 cents. However, after adjusting for certain one-time items (other than stock-based compensation), adjusted EPS was 24 cents in the quarter, beating the Zacks Consensus Estimate and the prior-year quarter results by a penny each.

Adjusted net sales in the quarter stood at $316.4 million, up 3% year over year (up 3% at constant exchange rates or CER) and were ahead of the Zacks Consensus Estimate of $312 million. This result was mainly backed by balanced sales growth across all regions as well as strong sales in Molecular Diagnostics, Pharma and Applied Testing customer classes.  Moreover, Ingenuity (acquired Apr 29, 2013) and AmniSure (acquired May 3, 2012) contributed to growth at CER.

Under the product categories, Consumables and related revenues (accounting for 87% of net sales in the quarter) increased 5% year over year at CER. Instrumentation revenues (accounting for the rest) posted a disappointing result with an 8% decline at CER, primarily due to the transition of Molecular Diagnostics customers to reagent rental agreements for QIAsymphony automation system placements, where revenues are recognized over a multi-year period. Moreover, lower capital spending trends in Pharma, Applied Testing and Academia affected revenue growth.

Region wise, Americas (48% of revenues) witnessed 2% sales growth due to strong contribution from Brazil and Mexico. Sales in the U.S. were stable as lower sales of products used for HPV (human papillomavirus) screening were offset by growth in the rest of the product portfolio.

Revenues from Europe-the Middle East-Africa (32% of sales) and Asia-Pacific /Japan (19% of sales) increased 2% and 8%, respectively, at CER. The company witnessed double-digit sales growth in China, India and Singapore.The company noted a 12% increase in sales in the top 7 emerging markets, representing 13% of total sales.

Segments

Qiagen primarily generates revenues from molecular diagnostics, applied testing, pharma and academia, which represented 49%, 8%, 20% and 23% of total sales, respectively, during the quarter. Molecular diagnostics sales registered a 4% increase at CER.Sales derived from applied testing declined 4% at CER, primarily due to tough comparison against 28% CER sales growth in the year-ago quarter, which included contributions from the 2012 launch of the QIAsymphony automation platform’s application package. Pharma and Academia sales were up by 4% and 3%, respectively, at CER.

Qiagen implemented several strategic initiatives in the global Sample & Assay Technologies market to deliver a stronger performance in 2013 and beyond. The company is focusing on innovation and geographic expansion to drive organic growth.

Outlook

Qiagen reiterated its fiscal 2013 outlook. The company expects adjusted net sales to rise by 5% at CER. The sales growth will be mainly on the back of the recent acquisition of Ingenuity, which is expected to contribute $15 million to the company’s annual adjusted net sales.

However, this is expected to be offset by reduced government funding including the implementation of sequestration in the U.S., which will likely have an adverse impact of a minimum of 1 percentage point on adjusted net sales growth. Qiagen 2013 EPS guidance remained at $1.13. This guidance takes into account dilution of 3 cents per share related to the Ingenuity acquisition.

Qiagen also provided its third quarter 2013 guidance. For the quarter, the company expects adjusted net sales to grow 6% at CER and with adjusted EPS of 27 cents.

Companion diagnostics is currently gaining significant traction and peers like Myriad Genetics (MYGN - Analyst Report) are establishing themselves as strong players in this market. However, Qiagen is adopting an aggressive acquisition strategy to widen its scope and strengthen its position in the competitive landscape compared with other major players. Qiagen currently retains a Zacks Rank #3 (Hold).

Other Stocks to Consider

While we prefer to remain on the sidelines on Qiagen, other medical device stocks worth a look are Affymetrix Inc. (AFFX - Analyst Report) and Cyberonics Inc. (CYBX - Analyst Report). Both these stocks carry a Zacks Rank #1 (Strong Buy).

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