Frankfurt The strategy of Qiagen For a long time, it seemed as steady as predictable. Based on its know-how in the so-called purification of DNA, the Hilden biotech pioneer has built up a diversified business as a pre-supplier for genetic research over more than two decades. From the mid-2000s, Qiagen also positioned itself as a key player in molecular, gene-based diagnostics.
New developments from own research as well as the acquisition of smaller companies and technology have driven the expansion since then. Qiagen rose to become the largest biotech company in Germany, with sales of about $ 1.5 billion last year and a top rating of more than eight billion euros in April.
But since then, the Hildener Group has maneuvered with a series of disappointing news in a crisis of confidence, which could even question the independence in the estimation of some skeptics. At the beginning of last week, Qiagen management had to admit that its own sales target was missed for the second time in succession.
At the same time, the company announced the surprising resignation of the long-standing CEO Peer Schatz as well as a serious change of strategy in the important field of gene sequencing. There, the company says goodbye to the further development of its own technology, the so-called gene reader, in favor of an alliance with the market-leading US competitor Illumina.
Industry experts such as Tycho Petersen von JP Morgan are increasingly questioning "whether Qiagen can really implement its long-term growth plans." At the same time, there are new speculations that the Hildener Biotech Group may sooner or later become a takeover candidate. First and foremost, food supplies are now lagging behind key competitors in the industry, both in terms of valuation and economic performance.
In response to the recent negative news, Qiagen shares fell more than 20 percent and have since recovered only marginally. Since April, the market capitalization of the group has shrunk by a good 30 percent to just 5.7 billion euros.
The price-earnings ratio, measured by the expected adjusted result, is now well below the level of the life science sector at around 19. There are multiples of 30 or more common. If the Qiagen price continues to bobble on the reduced level of 25 euros, so the speculation, the prospective customer could encourage a push.
Another incentive could result from the abrupt departure of Peer Schatz. "The vacuum at the top," estimates CommerzbankAnalyst Daniel Wendorff, "makes the group even more susceptible."
The longtime CEO is not only the father of Qiagen's expansion strategy. He also always stood for the independence of the group. As a result of his withdrawal, external actors could infer a new constellation.
As a potential buyer, the US company Thermo Fisher, which has a lot of catching up to do in the diagnostics business and, with its extensive range of instruments and reagents in the field of research, basically serves the same clientele as Qiagen, is at the forefront.
Growth promise not fulfilled
For other actors, however, a takeover would be more complicated. Pure diagnostic providers like Abbott and Healthineers could with the research business of Qiagen start a little bit. The two most offensive buyers in the life science sector, the US group Danaher and the German MerckGroup, are still busy digesting their recent acquisitions. Danaher agreed to take over Biopharmaceuticals business in the spring GE For $ 21 billion, Merck has just stepped into the chemical sector with the acquisition of Versum.
Diagnostics market leader Roche in turn, it would have to fear greater cartel problems as it also supplies research laboratories and is heavily involved in molecular diagnostics. It would also be problematic for Roche to continue Qiagen's activities in the development of companion diagnostics for other pharmaceutical companies.
The operational development group shows by no means dramatic weaknesses. In the first half of the year, Qiagen increased sales despite the dollar appreciation by just over one percent to 730 million dollars and thus moved about in the industry trend. Adjusted for currency effects, this corresponds to a plus of five percent.
The key problem is that they have been promising to accelerate growth for some time, but can not deliver on it. In the third quarter Qiagen increased by only three instead of the promised four to five percent.
It has now been agreed that Qiagen will also revise its annual forecast at the end of the month on presentation of the final figures. The bottom line is that the group may even be in the red as a result of $ 260 million in value adjustments and sequencing restructuring costs.
High investment, moderate growth
The swing in the area of gene sequencing, which is largely responsible for these costs, also casts doubt on whether the strategic direction is always right. Qiagen had too long on the in-house development gene reader set, although in the pharmaceutical industry, the trend towards high-throughput sequencing was long recognizable, criticize industry observers. The alliance with the technology leader Illumina is therefore considered reasonable, but comes from some experts' perspective a few years too late.
Such errors explain the comparatively moderate balance of investment and growth at Qiagen. On average over the past ten years, the biotech group has pumped just under one third of its sales into investments in the future, a good 21 percent went into property, plant and equipment and acquisitions and another more than eleven percent into research. This compares with only about five percent revenue growth per year and about six percent operating revenue growth per year.
Other actors acted much more efficiently in this regard. For example, with an investment ratio (including research and development) of 28 percent, Thermo Fisher generated average revenue growth of nine and 12 percent earnings growth. The French biomerieux invested 24 percent of its revenues and increased by an average of eight percent.
This, too, could provide potential bidders with arguments for better and more efficient realization of Qiagen's potential in other constellations.
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