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Morningstar | Qiagen Maintains Stable Growth and Margin Expansion in 2Q

Although Qiagen’s second-quarter results of 6% constant-currency growth and about 220 basis points of adjusted operating margin expansion mostly matched our expectations, we may consider increasing our fair value estimate as we re-evaluate the growth opportunities on the horizon from the recently launched QIAstat-Dx multiplex polymerase chain reaction instrument, further penetration of the QuantiFERON tuberculosis product line, and Qiagen’s genome sequencing and oncology panel products. While we still think the no-moat company has a tough path ahead competing with more established peers, such as Illumina’s growing portfolio of lower-throughput sequencers aimed for the clinical market, Qiagen’s niche products still likely represent attractive growth opportunities. Illumina’s recent results suggest demand for these emerging sequencing-based technologies has increased at a faster pace than we originally anticipated.

The molecular diagnostics division will remain Qiagen’s core growth driver, especially as U.S. human papillomavirus headwinds have largely subsided. This segment posted 10% constant-currency growth for the quarter, benefiting from ongoing strong growth near 20% in the QuantiFERON TB line as well as contributions from companion diagnostic collaboration revenue. Although Qiagen just launched the QIAstat-Dx instrument in Europe, we don’t envision this product as a material contributor to the business until 2019, the same year the company hopes to launch in the U.S. Regardless, Qiagen noted a number of contract wins for QIAstat in Europe that could indicate market share gains above our expectations. All of Qiagen’s other segments posted mid-single-digit constant-currency growth, including the applied segment, which reported negative growth due to the divestment of veterinary testing assets. While the growth in these segments fell below our expectations, especially in pharma, we don’t envision making major adjustments to our outlook in these areas for now.