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Qiagen Poised on Fundamentals, Expansion Plans on Track

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On Dec 23, 2016, we issued an updated research report on Netherlands-based molecular diagnostics provider Qiagen NV (QGEN - Free Report) . The company offers innovative technologies and products for pre-analytical sample preparation and molecular diagnostics solutions.

In the past six months, Qiagen has traded significantly ahead of the Zacks categorized broader Medical - Biomedical and Genetics industry. The company has gained 23% over this period, as against 5.39% loss of the broader industry. A promising third-quarter 2016 performance added further stimulus to the company’s share price rally.

Apart from balanced segmental growth, Qiagen’s expanded commercialization to the Asia-Pacific region, beyond its initial focus on Europe, is another upside. Meanwhile, the company’s strong cash position is encouraging as it will help it pay back its shareholders through increased buyback programs.

During the third quarter, the company experienced strong sales growth for its QuantiFERON-TB test, the infectious disease testing portfolio, as well as growth in consumables used in QIAsymphony. Notably, in the U.S., there was considerable growth in Qiagen’s QuantiFERON latent TB test sales.

Also, the huge potential of the global in-vitro diagnostics market buoys optimism. The company witnessed growth across all international regions, with the Europe, Middle East, Africa region growing 7% at CER on the back of high single-digit growth in Turkey, France and the U.K., despite the Brexit condition. Qiagen’s recent expansion in the Middle East also contributed to this region’s revenue growth. Asia-Pacific/Japan saw a reversal of the trends in the first half of the year as Japan delivered double-digit CER growth in the third quarter.

Further, Qiagen is forging ahead with its test menu expansion strategy. Recently Qiagen added liquid biopsy as a sample type option for its QIAact actionable insights tumor panel, which is the first in a family of panels designed for use on the GeneReader system. This is the first targeted gene sequencing panel that can be used with either liquid biopsy or tissue samples. Qiagen is set to resume commercialization of the GeneReader NGS System, the world's first complete Sample to Insight solution designed for any laboratory to deliver actionable results, in early 2017. Recently, Qiagen announced the validation of new and improved sequencing chemistry for the GeneReader NGS System.

On the flip side, Qiagen faces tough competition, considering the wide gamut of services it provides. Moreover, the markets for some of its products are rather competitive and price sensitive. As a result, similar manufacturers may have significant advantages in terms of financial, operational, sales and marketing resources as well as experience in research and development.

Additionally, strong reliance on its tie-ups with companies to co-develop companion diagnostics paired with drugs that those companies either market currently or are developing for future use, js another downside for Qiagen. This is because future sales of companion diagnostics depend to a high degree on the commercial success of the related medicines for which the tests have been designed for determining their use in patients.

Currently, Qiagen carries a Zacks Rank #3 (Hold).

Key Picks

Some better-ranked medical stocks include NxStage Medical Inc. , Baxter International Inc. (BAX - Free Report) and Bovie Medical Corporation . NxStage Medical and Baxter International sport a Zacks Rank #1 (Strong Buy) while Bovie Medical carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NxStage Medical gained 14.0% over the last one year compared to the S&P 500’s 9.7% growth. The company has a four-quarter average positive earnings surprise of 46.3%.

Baxter International rallied 15.7% over the last one year, much higher than the S&P 500. It has a trailing four-quarter average positive earnings surprise of 27%

Bovie Medical recorded a 95.9% gain in the past one year, way better than the S&P 500. The company has a trailing four-quarter positive average earnings surprise of 28.7%.

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