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Morningstar | Qiagen’s 3Q Results Continue to Track Our Expectations

Qiagen’s third-quarter results were roughly in line with our expectations, and management slightly raised adjusted EPS outlook to our $1.32 forecast. We don’t anticipate a material change to our fair value estimate as we make a few adjustments to our model. While we still give Qiagen a no-moat rating, we applaud management’s movements into more-complex instrument markets, including the development of its GeneReader sequencing instrument, the recent QIAstat-Dx deal, and the partnership with NeuMoDx in the molecular diagnostics market. Regardless, Qiagen still faces a number of hurdles against well-entrenched competitors in these categories, and we’re skeptical that Qiagen’s attempts at differentiation will be enough to gain significant market share.

Excluding expected currency headwinds, quarterly sales grew 6.5%, and we continue to expect an acceleration in growth in 2019 as comps improve from past U.S. HPV test declines and as new products gain momentum. With 9% organic growth during the quarter, the molecular diagnostics segment remains the key growth area for Qiagen thanks to ongoing penetration of the QuantiFERON TB franchise, companion diagnostics, and newer products like GeneReader. Management still anticipates the launch of QIAstat-Dx in the U.S. next year, which should also help boost growth. Meanwhile, applied, pharma, and academic segment growth of 1%, 5%, and 5%, respectively, matched our expectations. Divestment of the veterinary assay business affected sales in the applied segment, but we still anticipate underlying mid-single-digit growth in this area. Lastly, Qiagen’s focus on efficiency continues to help improve profitability, with adjusted operating margin up 100 basis points from last year to 27.9%, and we still model modest margin improvements over the next few years helped by improving product mix.