StocksDiva
13 years ago
QIAGEN N.V. (QGEN) 1Q 2012 Earnings Call April 24, 2012 9:30 AM ET
Operator
Ladies and gentlemen, thank you for standing by. Welcome to QIAGEN N.V. investor and analyst conference call on the Q1 results 2012. (Operator instructions) I would not like to turn the conference over to Albert Fleury, Director Investor Relations and Corporate Finance NA. Please go ahead, sir.
Albert Fleury
Thank you. Good afternoon and good morning to you in the U.S. and welcome to the QIAGEN conference call to discuss our latest quarterly results. Joining me on the call this morning are Peer Schatz, Chief Executive Officer, Roland Sackers, Chief Financial Officer, and John Gilardi, Vice President, Corporate Communications and Investor Relations. A copy of this announcement and the presentation for this conference can be downloaded from the Investor Relation’s section of our home page at www.qiagen.com.
Before I turn the call over to Peer, please keep in mind that the following discussion and responses to your questions reflect management’s view as of today, April 26, 2012. As we share information to help you better understand our business, we will make statements and provide responses that state our intentions, beliefs, expectations or predictions of the future. These constitute forward-looking statements for the purpose of the Safe Harbor provisions. These involve certain risks and uncertainties that could cause QIAGEN’s actual results to differ materially from those projected. QIAGEN disclaims any intention or obligation to revise any forward-looking statements. For a complete description of the risks and uncertainties, please refer to our Form 20-F filed with the U.S. Securities and Exchange Commission.
At this time I’d like to now hand the call over to Peer.
Peer Schatz
Thank you, Al. Good morning to all joining us from the United States and good afternoon to all joining from Europe. I’d like to welcome you all into our conference call and the opportunity to discuss our results for the first quarter of 2012. As you saw in our release last night, we are pleased with our start into 2012 and improving demand for our products across all customer classes and regions. And sales were $296 million representing a 13% increase at constant exchange rates.
Adjusted operating income rose 14% to approximately $80 million and adjusted diluted earnings per share rose to $0.23 per share. These results led by double-digit growth in all regions and also contributions from all customer classes were ahead of our targets. What were the reasons? Demand for our product among customers and Pharma Applied Testing and Academia improved better over the first quarter of 2011, a period that was adversely affected by the disasters in Japan as well as unrest in Northern Africa.
We also saw solid gains among our growth drivers in molecular diagnostics. These include companion diagnostics for personalized health care. These areas are contributing more than $75 million in sales across QIAGEN and growing rapidly. We’re also seeing solid growth for our disease profiling tests. Growth in this area is further underpinned by the success of QIAsymphony. HPV sales were flat in the quarter. As we have said, HPV is not expected to be a growth driver in 2012, however, remains a solid foundation for our expansion in molecular diagnostics into the growth driver areas that include personalized health care and profiling.
In terms of the 13% constant exchange sales growth, about 7% percentage points came from the Celestus and Ipsogen acquisitions completed in the third quarter of 2011. The rest of business delivered 6 percentage points, so we’re seeing signs of improvement over 2011. A key driver has been the progress we have been making on our strategic initiatives to drive platform success, to add content, to broaden our geographic presence and to grow efficiently and effectively.
Important developments in the first quarter of 2012 included the first regulatory clearance of a QIAsymphony component in the United States, the Roto-Gene Q real-time PCR cycler and in China we received approval for the second of three components, in this case, the QIAsymphony SP module.
In terms of adding content, we are preparing for the U.S. approval of the KRAS biomarket tests. FDA decisions are expected during 2012.
And we are improving our efficiency and effectiveness. The efficiency program launched in late 2011 is making good progress and we are now implementing projects that are freeing up resources to reinvest. Also in our press release we announced some organizational leadership changes. Effective July 1, we are creating two business areas; Molecular Diagnostics and Life Sciences. I will touch on this topic later.
Moving to Slide 5, I wanted to show you how we view the various contributors to our performance; Molecular Diagnostics which represented 47% of QIAGEN sales rose 21% on the constant exchange rate basis. We are to invest even more in our rapid growth drivers. These include personalized health care, profiling and QuantiFERON-TB test. These and other products together delivered 37% constant exchange rate growth and represented 29% of our sales.
As I mentioned earlier, we are seeking to maximize the value of our HPV franchise. We had flat sales in the first quarter of 2012, both in the U.S. and globally and this product now represents 18% of net sales globally. In the United States the contribution is fallen to 14% of sales in the first quarter of 2012 compared to 16% in the first quarter of 2011.
I want to reaffirm a few statements. First, no HPV competitor has come out with a better product, neither in terms of clinical data nor in terms of automation. Most, in fact, have significantly inferior clinical profiles. Second, HPV is valuable in providing critical mass in building relations with customers. We are determined to maintain our HPV leadership and are successful in doing so, as we have a very strong, competitive offering. Third, we believe our rapid growth drivers should more than outweigh any concerns in 2012 about lower HPV sales in the United States.
Turning to the life sciences, which involves the Academia, Pharma, and Applied Testing customer classes, here we are focusing on new opportunities. You can see that Applied Testing and Pharma both delivered very robust, double digit growth in the first quarter of the year. Academia was also a contributor, amid improving trends albeit with growth at a much slower pace than in the past. We are still seeing uncertainties about funding in Academia going into the second half of the year and in 2013, both in the U.S. and Europe.
Overall this performance gives us confidence about accelerating full year growth in 2012 over 2011. As for our full year guidance, we see it as a balanced, taking into account the opportunities and risks we see. What we can say at this time is that we are increasingly confidence of achieving the guidance and we will review it accordingly as the year progresses.
I would like to hand over to Roland for a review of our financial performance. Roland?
Roland Sackers
Thank you, Peer and good afternoon to everyone in Europe. Good morning to those joining from the U.S. As you heard from Peer, we have started the year with good momentum and are committed to accelerating our full year growth in 2012, over our results in 2011.
Today I will briefly talk about our performance in the first quarter, before providing you with an update on our outlook on the rest of the year.
On slide 6, you'll see our key results for the quarter. Net sales grew rose 13% at constant exchange rates to approximately US$296 million. Consumables sales were up 14% using constant exchange rates, while Instruments rose at a slower 5% pace, using constant exchange rates, in the period.
Adjusted gross profit rose 10% to approximate US$210 million. The adjusted gross profit margin was 71% for the first quarter of the year, down slightly from 72% in the first quarter of 2011.
As you may recall, the adjusted gross profit margin in the fourth quarter of 2011, was 69%. We saw this as a normal way to slip below 70%. That census was due to specific factors in that period, namely the gross margin on companion diagnostic co-development payments that were booked as revenues. As you can see, we've returned to a level above 70%, and are on track to meet our full year target of an adjusted cost margin of between 70% and 71%.
I also want to highlight that (inaudible) adjusted gross profit margin while driving rapid of QuantiFERON-TB test. When it is manufactured by a third party it has gross margin below the (inaudible) consumable average. Adjusted operating income was 14% to approximately US$80 million from the first quarter of 2011 and the adjusted operating margin remains steady at 27% of net sales.
As a percentage of net sales, higher manufacturing and sales costs were essentially upset by lower spending on R&D, marketing and administration. Adjusted diluted earnings per share were $0.023 in the first quarter, up from $0.21 in the same period of 2011. (inaudible) despite a higher adjusted tax rate. First quarter of 2012 compared to 26% in the same period of 2011.
I also want to note there the difference between the reported tax rate, which was 14%, and the adjusted tax rate. The difference was due mainly to a much higher tax rate on the adjustments, since these were mainly in high tax jurisdictions. In summary, the third quarter for QIAGEN was a solid start to the year.
I’m now on Slide 7. For the quarter we delivered double-digit growth in all regions and we were particularly pleased with the broad business expansion in the Americas, namely the U.S., Canada and Brazil. The Americas, which account for 47% of net sales grew 15% using constant exchange rates. Placement QIAsymphony tests across all customer classes, as well as contributions from the QuantiFERON-TB test underpinned this growth. In the U.S., as noted by peer, HPV were stable in the first quarter. The Europe, Middle East and Africa region, which account for 34% of net sales, grew 12% using constant exchange rates. Spain and some other areas of southern Europe remain challenging.
However, our exposure in this region is quite small and other areas of Europe are doing better, such as Germany, France and the Nordic region and we also saw improvement this year (inaudible) in Italy. The Asia-Pacific and Japan region accounted for about 18% of net sales and grew 14% using constant exchange rates. Growth is mainly lead by contributions from Molecular Diagnostics.
We also experienced important growth contributions, however, from Pharma and Academia. The key markets remain China and Japan. We continue to be pleased with some momentum of QuantiFERON-TB test in this region, as well.
Moving to Slide 8, here is an overview of our financial position at the end of the first quarter. We continue to have a healthy balance sheet and solid financial position. One that we can use to strengthen our operations. We continue to review various M&A opportunities along our three strategic areas of Novell Technologies, adding content to our portfolio and geographic expansion.
As of March 31 group liquidity was approximately US$275 million which compares to approximately US$276 million as of December 31, 2011. Our equity ratio stood at 69% compared to 68% at the end of 2011. Our leverage has decreased slightly to approximately 0.8 times net debt to EBITDA from about 0.9 at the end of 2011. As for free cash flow, we had said in the Q1 results would be grossly affected mainly due to the restructuring payments for the efficiency program launched late in the fourth quarter of 2011 and this was the case.
Although reported net income was essentially steady at US$28 million, we experienced a growth development in other non-cash components, in income and working capital which led to negative free cash flow for the first quarter. Among reasons for the change in working capital which amounted to US$45.5 million in the first quarter of 2012 compared to US$16 million in the prior year quarter where cash restructuring payments of approximately US$20 million. Also in the first quarter of 2012 we experienced an unusually low level of accounts payable compared to the first quarter in 2011 and we also made some tax payments for both 2011 and 2012 in the first quarter of this year.
Those were among the main reasons for the performance of free cash flow and, again, they expect improvement during the course of 2012. I would now like to hand it back to Peer for a strategy update.
Peer Schatz
Thank you, Roland. I am now on Slide 6 to provide you an overview of our strategic initiatives and goals set for 2012. We are well on track to achieve our number one goal which is to have more than 200 new QIAsymphony systems by the end of 2012. This builds on the more than 550 systems in place at the end of 2011. We are in the early years of a decade long product cycle, and we expect the rollout to be successful based on QIAsymphony's versatility in terms of sample processing bandwidth, as well as flexibility to prepare and process assays. In terms of adding content, we are preparing important regulatory submissions that include a Therascreen EGFR by a market test in the U.S., and decisions on our two Therascreen KRAS submissions could be expected in 2012. Discussions with the FDA remain positive.
As we broaden our geographic presence, we are reviewing options to expand in new markets in Eastern Europe, Asia, and Latin America. And in terms of growing efficiently and effectively, we have completed the streamlining of our organization that began in late 2011. We are now working to free up additional resources that can be reallocated to further initiatives through various operational projects. These actions and reinvesting the savings will help improve our growth profile in 2013 and beyond, and also provide positive impulses to our adjusted operating margin.
Turning to slide 10, I want to give you an update on the QIAsymphony automation system. We see QIAsymphony as a family of components that offers customers the industry's first fully integrated system from sample preparation to clinical results. First, we recently received U.S. regulatory clearance for the Rotor-Gene Q, and we are working on development plans to gain clearance for QIAsymphony SP and AS modules. Gaining this first clearance is critical to expanding our test menu in the United States, since future assay submissions will be based on this platform and can now leverage the work that lead to the submission of the first module. We are continuing to see strong growth in demand for consumables. Every placement creates an opportunity for annual consumable sales, or so called pull through, of anywhere between $30,000 to $300,000. And we continue to view QIAsymphony as a very valuable, very long term growth driver.
Turning to slide 11, here is an overview of the submissions for which we have recently received regulatory approvals, as well as completed in 2011 and what we have planned for 2012. We are looking forward to completing a number of important regulatory submissions to expand the menus of our system. Top priority is the U.S. submission of the Therascreen EGFR assay. The first submission for this assay is planned as a companion diagnostic for (inaudible), the lung cancer drug in development with Boehringer-Ingelheim. This will build on the 2011 submissions of KRAS and also the 2011 approvals of the KRAS and EGFR assays in Japan, one of the largest markets for companion diagnostics. With over 15 projects, we have the industry's deepest pipeline of partnered molecular, companion diagnostics that will build on these submissions.
Moving onto global regulatory affairs, we presently have over 50 ongoing R&D projects, which include regulatory submissions or registrations. As you can see, this represents a growing global portfolio of regulated products, and we are now moving to build up the testing menu in the United States to mirror what we have in other regions.
Turning to Slide 12, I wanted to address some of the questions we have been getting about the market potential for QuantiFERON-TB. We believe this product, which we acquired with Celestus in August 2011, is being underappreciated. 2011 pro forma sales were about $55 million and the growth rate continues at more than 20% constant exchange rate. We see long-term growth potential for QuantiFERON-TB in the United States worldwide. We're at a very low market penetration level, still.
As we've been saying, we see the latent TB testing market, which is a market in the developed world, as about 50 million tests and one valued at about $1 billion. Alone in the United States, our current estimate is that the market is about 15 million tests, and distributed among these segments as you can see here on the slide. Apart from the more than 100-year-old skin test, there is no other test on the market with any significant sales nor is there any in the pipeline.
Areas in blue are the primary targets at this time; however we are building up sales and marketing organizations to move much more aggressively into the other segments, especially immuno-compromised patients. So you'll be hearing a lot more about QuantiFERON-TB in the future and seeing it become a key contributor to our growth.
Turning to Slide 13, QIAGEN has established a leadership position in personalized health care, one anchored on various revenue streams. Sale of commercial biomarker kits for use as companion diagnostics, but also in clinical trials involving patients. Milestone payments from co-development projects. We have a robust portfolio of projects underway with many leading Pharma companies, and we are looking to add new projects in 2012. And we also have revenues from associated products, such as sample technologies, asset technologies, instruments, gene-globe molectro-pathway analysis tools, etc. We have created a business with sales of about $75 million in 2011, growing it more than 20% overall with contract development services as a base in strong growth, very strong growth, in Therascreen branded assays and related products.
We expect ongoing, strong growth in 2012, especially as we expand the commercial sales of our tests in Europe, as well as build up our presence in Japan after the approval of Therascreen KRAS and EGFR biomarker tests during 2011 in that region. And most important, we are preparing for the commercial launch of our Therascreen KRAS test as a companion diagnostic for Urbatox and Vectibix in the United States. We wanted to outline the U.S. market potential for KRAS and colorectal cancer only, which will be the indication for this test.
Based on the breakthrough data presented at ASCO a few years ago, we currently estimate that about 75,000 KRAS tests are being performed annually in this area, for this indication, in the United States. We currently sell about 20,000 PCR based KRAS tests in the United States while the rest of this market is estimated to involve laboratory developed tests. Our first priority is to convert laboratory developed tests to our tests. We are very encouraged by the response and acknowledgement by these labs about to benefit from switching to an FDA approved test.
Beyond these tests we will be working with our Pharma partners to drive penetration to an even higher level. Based on an estimated price of about $200 per reportable test, KRAS and colorectal cancer will be an attractive growth driver for QIAGEN. And that is just the start. We are working to add a theraScreen KRAS test for lung cancer and beyond KRAS the next submission will involve ETFR also for lung cancer already in 2012. These opportunities represent potential markets and show you why we are optimistic about maintaining a rapid growth pace in the future.
I'm now on Slide 14. As you know we announced a project in November to grow more efficiently and more effectively. We are enhancing productivity and have a goal to free up about $50 million of pre-tax resources for reallocation to strategic initiatives. In the first phase we have completed the streamlining of our organization and the workforce was reduced by approximately 10%. This is a net number since we are going to redeploy resources into areas that can provide faster top line growth. Teams are now working on initiatives across the organization. Key areas include focusing our R&D portfolio on growth areas across all customer classes. This obviously also includes personalized health care as well as QIAsymphony.
We're also going to optimize capacity utilization and are reviewing our site network. The project is moving quickly and we booked approximately $11 million of restructuring charges in the first quarter. Further charges are likely to be taken during 2012 and we had said that these could total up to about $20 million for the full year. And as we mentioned earlier, the payback on these investments will become evident in 2013.
Moving to Slide 15, as you saw in our announcement last night we have made important changes to QIAGEN's organizational structure at the top level, as well. These changes are designed to capture new opportunities and better address customer needs. Most importantly, as of July 1, two new business areas are being created to intensify the focus on our customers. They are Molecular Diagnostics and Life Sciences, whereby Life Sciences comprises Academia, Pharma and Applied Testing.
As I mentioned earlier, Dr. Helga Lubenow is appointed Senior Vice President, Molecular Diagnostics and Dr. Dietrich Hauffe is appointed Senior Vice President, Life Sciences. Both will become members of the executive committee. Joachim Schorr, who had been Senior Vice President of Research and Development and a Managing Director, has decided to leave QIAGEN and pursue personal projects, but he has been retained as a consultant. Michael Collasius, former Senior Vice President of Automation, will take on a new role with responsibility for project management and business process excellence reporting to me. All other members of the EC remain in their previous roles.
We believe these changes will promote faster decision making, customer-centric decision making and our goal is to deliver targeted innovation at a faster pace through better connections with our customers. This is the appropriate time in the development of QIAGEN to make this transition into business areas and regions. It will help to better prioritize and align our R&D and commercial activities, all with the goal of driving innovation and growth at a faster pace. I would now like to hand back to Roland.
Roland Sackers
Thank you, Peer. Now on Slide 16. I would like to give you an outlook for the second quarter and for the year 2012 and assumptions for adjustments to operating income. As you mentioned earlier, we have reaffirmed our full year outlook for 2012. We also provided targets for the second quarter including our expectations for a net sales growth of approximately 11% to 12% at constant exchange rates.
As was the case this first quarter, we expect some headwind as reported to us due to year-on-year foreign currency movements. Adjusted EPS for the second quarter is expected to be about $0.24 per share. This reflects the usual trend of relatively higher cost at the start of the year, but then an improving margin profile as the year progresses.
For the full year, we continue to expect total sales growth of about 6% to 8% using constant exchange rates based off a mix of contributions from Celestus and Ipsogen acquisitions as well as from the result of our business. These estimates, as usual, do not take into account any acquisitions that could be done in 2012.
Based on average foreign exchange rates so far in 2012, our reported full year results will continue to show some pressure from currency movements. We currently expect currency (inaudible) of about two to three percent points. The actual reported results would then be lower than the total constant exchange rate, which adjusted earnings per share for the full year as expected to be between $1.03 and $1.05 per share. This is based on approximately 239,000,000 fully diluted shares outstanding.
We also have here on this slide the assumptions for adjustments to operating income for the second quarter of 2012 and for the full year. EBITDA, the best compensation of about US$21 million to US$22 million remains the expectation. About US$110 million is spent for the amortization of acquired intellectual property. About US$30 million is planned for business integration, acquisition and restructuring this includes about $20 million for the efficiency project, of which $11 million was taken in the first quarter. Also included here is about $8 million of acquisition-related cost for (inaudible) and their integration. The adjusted tax rate is expected to still be about 21% and 23%, which compares to 23% in 2011.
With that, I would now like to hand back to Peer.
Peer Schatz
Yeah, thank you, Roland. I'm not on Slide 17 for the summary before we move into Q&A. We started 2012 with an intensified focus on accelerating our full-year growth rates, and we are increasingly confident of achieving our full-year targets. Critical to achieving this goal is making further progress on our strategic initiatives. We are creating a foundation for future growth, lead by the ongoing strong rollout of QIAsymphony, and we are stepping up our initiatives to add content to our portfolio, both through internal R&D, as well as targeted acquisitions and licensing. We are going to continue expanding our geographic presence in high growth markets, which are increasing their contributions to our results, and we will intensify our actions to improve efficiency and effectiveness through the project we launched in 2011.
In closing, we have shown with our results in the first quarter that QIAGEN is improving its performance and is ready to accelerate growth in 2012 compared to 2011. With that, I'd like to hand back to Al to open up the Q&A session. Thank you.
Albert Fleury
Thank you, Peer. We now look forward to taking your questions. Also please note to ensure we can accommodate as many people as possible, please limit yourselves to only one question, and if necessary, one follow up. We're implementing a new policy to mute your line after you ask one question and then the follow up. However, you are welcome to rejoin the cue to ask another question if time permits. Operator?
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StocksDiva
13 years ago
QIAGEN Reports Fourth Quarter and Full-Year 2011 Results
PR Newswire
VENLO, The Netherlands, January 31, 2012
VENLO, The Netherlands, January 31, 2012 /PRNewswire/ --
Strong performance in fourth quarter of 2011: Net sales increase 17% (+17% CER) to $334.4 million on double-digit growth across all regions; adjusted EPS rises 19% to $0.31
Significant progress on strategic initiatives to drive growth and innovation:
Driving platform success: More than 550 QIAsymphony systems installed by year-end 2011 with a strong pipeline for 2012; QIAensemble Decapper automation unit launched
Adding content: Expanding biomarker portfolio in Personalized Healthcare; products from Cellestis and Ipsogen acquisitions contribute to growth in second half of 2011
Broadening geographic presence: Dynamic expansion in high-growth markets
Growing effectively: Efficiency project launched in late 2011 with pre-tax savings goal of $50 million in 2012, reallocating resources to drive adjusted margin growth in 2013
QIAGEN expects to deliver sales and adjusted earnings growth at a faster pace in 2012
QIAGEN N.V. (NASDAQ: QGEN; Frankfurt Prime Standard: QIA) has announced results of operations for the fourth quarter and full-year 2011, making significant progress on strategic initiatives to drive growth and innovation.
Net sales in the fourth quarter advanced 17% (+17% at constant exchange rates, or CER) to $334.4 million from the fourth quarter of 2010. Adjusted operating income in the quarter grew 16% to $95.6 million compared to the fourth quarter of 2010 as the adjusted operating income margin was steady at 29% of net sales. Adjusted diluted earnings per share (EPS) rose to $0.31 in the fourth quarter of 2011 from $0.26 in the same quarter of 2010. Results for the fourth quarter of 2011 included a restructuring charge of $75 million for a project announced in November to enhance productivity by streamlining the organization and freeing up resources for reallocation to strategic initiatives.
Full-year 2011 net sales rose 8% (+4% CER) to $1,169.7 million from $1,087.4 million in 2010. Adjusted operating income in 2011 was up 4% to $319.6 million from $308.2 million a year earlier, while adjusted diluted EPS were $0.98 compared to $0.93 in 2010.
"We are pleased with our performance in the fourth quarter of 2011, ending the year with strong growth in all areas of our business. We made significant progress in 2011 on our strategic initiatives, delivering growth at a faster pace in the second half of the year while increasing sales in Molecular Diagnostics, Applied Testing, Pharma and Academia. In particular, we are expanding our leadership in Personalized Healthcare and setting new standards for laboratory automation with the successful QIAsymphony system rollout," said Peer Schatz, Chief Executive Officer of QIAGEN N.V. "With the positive momentum we are experiencing, we expect to accelerate growth to a faster pace in 2012 than in 2011 while taking a conservative view on macroeconomic challenges and on the budget funding environment. As we intensify our focus on growth areas across all of our customer classes, we look forward to building momentum and advancing QIAGEN's position in 2012 as a global leader in molecular technologies."
Fourth quarter 2011 results
Fourth Quarter 2011 Change
In $ millions, except per share
information Q4 2011 Q4 2010 $ CER
Net sales 334.4 286.0 17% 17%
Operating income, adjusted 95.6 82.4 16%
Net income, adjusted 73.6 62.0 19%
EPS, adjusted ($) 0.31 0.26
For information on the adjusted figures, please refer to the
reconciliation table accompanying this release.
Net sales grew 17% to $334.4 million in the fourth quarter of 2011 from $286.0 million in the 2010 quarter. Total sales rose 17% CER, with organic growth contributing 11 percentage points and the contributions of Cellestis (as of August 29) and Ipsogen (as of July 12) providing six percentage points. Currency movements had no net impact on the reported sales growth.
Operating income for the fourth quarter of 2011, which included a restructuring charge of $75 million, amounted to a loss of $19.6 million, compared to income of $50.8 million in the same period of 2010. Adjusted operating income, which excludes one-time items, equity-based compensation and the amortization of intangible assets, rose 16% to $95.6 million from $82.4 million in the fourth quarter of 2010.
Net loss attributable to owners of QIAGEN N.V. was $0.4 million compared to net income of $36.3 million in the fourth quarter of 2010, while adjusted net income attributable to owners of QIAGEN N.V. rose 19% to $73.6 million in the fourth quarter of 2011 from $62.0 million in the year-earlier period.
Diluted EPS in the fourth quarter of 2011 were $0.00 (based on 236.7 million diluted shares) compared to $0.15 in the same period of 2010 (based on 239.4 million diluted shares). Adjusted diluted EPS were $0.31 compared to $0.26 in the same quarter of 2010.
Reconciliations of reported results in accordance with U.S. generally accepted accounting principles (GAAP) to adjusted results are included in the tables accompanying this release.
"We achieved double-digit organic growth in the fourth quarter of 2011, led by especially strong results in Molecular Diagnostics. Strong underlying growth was also further supported by the timing of an HPV tender delivered at the end of the year. Applied Testing delivered a markedly improved performance, and we were pleased with the contributions of Pharma and Academia despite an uncertain funding environment," said Roland Sackers, Chief Financial Officer of QIAGEN N.V. "As we maintain our focus on accelerating sales and adjusted earnings growth rates, our solid financial position provides us with significant flexibility to help improve our performance through targeted acquisitions and R&D investments. The efficiency actions launched in late 2011, which are moving ahead of our initial projections, will further strengthen QIAGEN and provide effective and efficient resource allocations to support our strategic initiatives."
Full-year 2011 results
Full-Year 2011 Change
In $ millions, except per share
information FY 2011 FY 2010 $ CER
Net sales 1,169.7 1,087.4 8% 4%
Operating income, adjusted 319.6 308.2 4%
Net income, adjusted 234.4 222.7 5%
EPS, adjusted ($) 0.98 0.93
For information on the adjusted figures, please refer to the
reconciliation table accompanying this release.
For the full-year 2011, net sales rose 8% to $1,169.7 million compared to $1,087.4 million in 2010. Total sales grew 4% at constant exchange rates, with organic sales and acquisitions each contributing two percentage points. Favorable currency movements added four percentage points in reported sales growth.
Operating income in 2011 was $99.6 million, a 47% decline from $188.5 million in 2010, primarily due to the impact of a restructuring-related charge in the fourth quarter of 2011 as well as one-time charges related to the acquisitions of Cellestis and Ipsogen. Adjusted operating income, which excludes one-time items, equity-based compensation and the amortization of intangible assets, rose 4% to $319.6 million from $308.2 million in 2010.
Net income attributable to owners of QIAGEN N.V. was $96.0 million in 2011, down 33% from $144.3 million in 2010, while adjusted net income attributable to owners of QIAGEN N.V. grew 5% to $234.4 million from $222.7 million in the prior year.
Diluted EPS in 2011 declined to $0.40 (based on 239.1 million diluted shares) compared to $0.60 (based on 240.5 million diluted shares) in 2010, while adjusted diluted EPS rose to $0.98 in 2011 from $0.93 in 2010.
Reconciliations of reported results in accordance with U.S. generally accepted accounting principles (GAAP) to adjusted results are included in the tables accompanying this release.
Business review
Geographic regions
All geographic regions delivered double-digit CER growth in the fourth quarter of 2011, led by Europe / Middle East / Africa (36% of net sales, +22% CER) and driven by the rollout of the QIAsymphony automation system. Results in the Americas (46% of net sales, +16% CER) benefited from double-digit growth in Molecular Diagnostics and Applied Testing. The Asia-Pacific / Japan region (18% of net sales, +18% CER) had growth contributions from Pharma, Molecular Diagnostics and Applied Testing.
Product categories
Consumables and related revenues (85% of net sales, +18% CER) rose at a solid pace in all customer classes in the fourth quarter of 2011. For the full-year 2011, consumables and related revenues rose 5% CER and represented 87% of net sales compared to 2010. Instrument sales (15% of net sales, +11% CER) were supported by targeted initiatives across QIAGEN's broad product portfolio. QIAsymphony placements contributed to growth in cash sales as well as growing pro-rata contributions under multiyear reagent rental agreements implemented since the launch of the full QIAsymphony RGQ system in late 2010. Full-year 2011 instrument sales rose 1% CER compared to 2010 and represented 13% of net sales.
Customer classes
Among the performances in QIAGEN's four customer classes (based on total sales results that include organic growth and acquisitions at CER):
Molecular Diagnostics (Q4 2011: 50% of net sales, +30% CER) delivered a dynamic double-digit expansion. Profiling was led by the global rollout of the QIAsymphony automation platform and increasing use of QIAGEN's extensive and expanding testing portfolio in Europe (in particular in virology, including in HIV, HCV and HBV testing) and other markets outside the U.S. Personalized Healthcare advanced at a rapid double-digit pace on significantly higher companion diagnostic test sales as well as contributions from milestone payments for co-development projects with pharmaceutical companies. In Prevention, global HPV (human papillomavirus) testing sales grew at a double-digit pace, helped by a national HPV tender in the Americas that was delivered in the fourth quarter of 2011, plus growth in other international markets. U.S. HPV sales were stable compared to the fourth quarter of 2010, as a modest improvement in volume offset the pricing effects of multiyear agreements implemented with many customers. Significant contributions from the acquisitions in the second half of 2011 of Cellestis (QuantiFERON-TB Gold test for latent TB) and Ipsogen (blood cancer biomarker and test portfolio) further contributed to total sales growth. Full-year 2011 Molecular Diagnostics sales rose 7% CER and represented 47% of net sales.
Applied Testing (Q4 2011: 7% of net sales, +18% CER) grew on significantly higher instrument sales compared to the fourth quarter of 2010. Consumable product sales improved at a double-digit pace, led by human identification and forensics products and spurred by the introduction of new European standards, as well as contributions from new veterinary testing and food safety products. Full-year 2011 Applied Testing sales rose 1% CER and represented 7% of net sales.
Pharma (Q4 2011: 19% of net sales, +8% CER) showed healthy sales growth for instruments and consumables, led by demand for products used in oncology research as well as the GeneGlobe portfolio of molecular pathway analysis products. Also contributing was ongoing expansion of Certal products used on QIAsymphony for quality control in biopharmaceutical processing. Full-year 2011 Pharma sales rose 4% CER and represented 20% of net sales.
Academia (Q4 2011: 24% of net sales, +3% CER) generated single-digit sales growth in both consumable kits and instruments in the fourth quarter of 2011, benefiting from initiatives in the second half of 2011 to accelerate growth in this customer class. Europe and Asia-Pacific / Japan delivered single-digit CER growth, while sales in the Americas were flat amid ongoing budget uncertainty and cautious spending. Full-year Academia sales rose 2% CER and represented 26% of net sales.
Building momentum for growth in 2012
QIAGEN continues to make good progress on strategic initiatives to drive growth and innovation, as demonstrated by the stronger performance in the second half of 2011 with 9% CER total sales growth over the same period in 2010. QIAGEN intends to build on this momentum and accelerate full-year growth in 2012 compared to 2011, leveraging its leadership in Sample & Assay Technologies by (1) driving platform success, especially the rollout of QIAsymphony RGQ; (2) adding content to these platforms across all customer classes; (3) broadening its geographic presence in high-growth markets; and (4) growing efficiently and effectively.
QIAsymphony RGQ is a breakthrough modular platform that has started a new era of laboratory automation and workflow consolidation. This flagship instrument is expected to be a key growth driver during the next decade and support global expansion in all customer classes, particularly Molecular Diagnostics. QIAGEN achieved its year-end 2011 goal of more than 550 QIAsymphony systems installed worldwide, and has set a new goal to reach more than 750 installed systems by the end of 2012. Customer demand is very strong for QIAsymphony given its many features, including its status as the industry's first automation system that can process both commercial assays and a broad array of laboratory-developed tests from sample to clinical result. Also in late 2011, QIAGEN introduced the novel QIAensemble Decapper, which is the first system automating the tedious process of manually handling clinical liquid sample vials.
Building on the QIAsymphony success, QIAGEN is adding high-value content for use on its automated systems, particularly novel biomarkers and companion diagnostics for use in Personalized Healthcare as well as by customers in Pharma and Academia:
Two separate U.S. regulatory submissions are under review for QIAGEN's therascreen KRAS assay as companion diagnostics for use in combination with two medicines for treatment of patients with metastatic colorectal cancer. These submissions were completed in July and August 2011, marking the first regulatory submissions by QIAGEN for companion diagnostics in the U.S. Discussions with the FDA are progressing well.
A further milestone in the Personalized Healthcare strategy was achieved in December 2011 with the regulatory approval of the therascreen EGFR mutation detection kit in Japan, which built on the country's approval of the therascreen KRAS assay in April 2011. Both tests have been shown to play an important role in guiding cancer treatment decisions. Japan is one of the largest markets for companion diagnostic tests, with a combined potential patient population for EGFR and KRAS testing estimated at approximately 100,000 per year.
At the end of 2011, QIAGEN held an 89% stake in Ipsogen S.A. (Alternext:ALIPS), a French company that is a pioneer in molecular testing for leukemia and other blood cancers. Ipsogen products are based on a rich intellectual property portfolio that includes 15 biomarkers such as JAK2, for which QIAGEN plans to develop a companion diagnostic in collaboration with Eli Lilly & Company. In July 2011 QIAGEN announced its acquisition of a majority stake in Ipsogen, and subsequently increased its holding through a public offer to acquire all remaining shares. QIAGEN intends to fully acquire Ipsogen through future public offers.
In January 2012, QIAGEN reached agreements to acquire worldwide exclusive rights to three biomarkers expected to play important roles in personalizing treatment of various cancers. A strategic co-development partnership and licensing agreement with Insight Genetics, Inc. covers a genetic test for the ALK (anaplastic lymphoma kinase) biomarker, a promising target for a novel class of lung cancer drugs. In a separate agreement between Ipsogen and Personal Genome Diagnostics Inc., QIAGEN acquired exclusive rights to testing for mutations of the IDH1 and IDH2 genes, implicated in brain cancers, acute myelogenous leukemia (AML) and certain other malignancies. QIAGEN plans to provide these biomarker assays to researchers and to develop companion diagnostics for use with new medicines.
QIAGEN also added novel content to its portfolio through the acquisition of Cellestis Limited in August 2011, gaining access to a breakthrough "pre-molecular" technology for diagnosing diseases earlier than possible with other diagnostic methods. The QuantiFERON-TB Gold (QFT) test for latent tuberculosis (TB), which is approved and recommended in national guidelines in many developed countries (including U.S., Europe and Japan), had pro forma full-year net sales of approximately $55 million in 2011 and grew at a strong double-digit CER pace. Building on that success, QIAGEN intends to submit two tests for U.S. regulatory approval in 2012 for detection of the cytomegalovirus (CMV): the QuantiFERON-CMV test and a complementary DNA-based molecular diagnostic test.
QIAGEN is expanding its geographic presence after beginning direct sales in India and Taiwan during 2011. The top seven emerging markets (Brazil, Russia, India, China, South Korea, Mexico and Turkey) represented 12% of net sales in 2011 and generated 21% CER growth compared to 2010. Key areas under consideration for expansion are in Eastern Europe, Latin America and Asia.
To grow more efficiently and effectively, QIAGEN launched a project in November 2011 to enhance productivity and free up resources for reallocation to strategic initiatives. Initial actions have focused on eliminating organizational layers, overlapping structures and duplication between global, regional and local activities. As part of this project, R&D activities will focus on high-growth areas in all customer classes. QIAGEN also plans to optimize capacity utilization at selected sites and capture savings from shared service functions. As a result of these reallocations and efficiency programs, the number of positions in QIAGEN's worldwide workforce is being reduced by approximately 8-10%, with the vast majority of actions completed by the end of January 2012. Annual pre-tax cost savings of approximately $50 million are expected to be created in 2012, with the majority to be reinvested. These actions are expected to drive improvement in the adjusted operating income margin in 2013. A pre-tax restructuring charge of approximately $75 million was taken in the fourth quarter of 2011, of which approximately 40% was cash-related. As previously announced, QIAGEN plans to take a restructuring charge in 2012 for additional restructuring measures related to this program.
2012 outlook
QIAGEN has set a goal to accelerate sales and adjusted earnings growth in 2012, building on the progress on strategic initiatives during 2011. For the full year, total net sales are expected to rise approximately 6-8% CER on a mix of organic growth and contributions from the Cellestis and Ipsogen acquisitions in 2011. Based on year-end 2011 foreign exchange rates, reported sales results are expected to be adversely affected by currency movements. Adjusted diluted earnings per share (EPS) are expected to rise to approximately $1.03 - 1.05 for full-year 2012. These expectations do not take into account any acquisitions that could be completed during the year.
Conference Call and Webcast Details
Information on QIAGEN's performance will be presented during a conference call on Wednesday, February 1, 2012, at 9:30 ET / 14:30 GMT / 15:30 CET. The corresponding presentation slides will be available for download shortly before the event at http://www.qiagen.com/goto/ConferenceCall, and a webcast will be available at this website. A replay will also be made available on this website.
Use of Adjusted Results
QIAGEN has regularly reported adjusted results, as well as results considered on a constant exchange rate basis, to give additional insight into its financial performance. These adjusted results include adjusted gross profit, adjusted operating income, adjusted net income attributable to owners of QIAGEN N.V. and adjusted diluted EPS. In addition, QIAGEN provides information on free cash flow, which it defines as net cash provided by operating activities minus purchases of property and equipment. Adjusted results are non-GAAP financial measures that the company believes should be considered in addition to the reported results prepared in accordance with generally accepted accounting principles, but should not be considered as a substitute. QIAGEN believes certain items should be excluded from adjusted results when they are outside of its ongoing core operations, vary significantly from period to period, or affect the comparability of results with its competitors and its own prior periods. Reconciliations of reported results to adjusted results are included in the tables accompanying this release.
Tables with detailed financial information can be downloaded in PDF format from: http://www.qiagen.com/about/investorrelation/aboupdf/Q4_2011_e.pdf
About QIAGEN
QIAGEN N.V., a Netherlands holding company, is the leading global provider of Sample & Assay Technologies that are used to transform biological materials into valuable molecular information. Sample technologies are used to isolate and process DNA, RNA and proteins from biological samples such as blood or tissue. Assay technologies are then used to make these isolated biomolecules visible and ready for interpretation. QIAGEN markets more than 500 products around the world, selling both consumable kits and automation systems to customers through four customer classes: Molecular Diagnostics (human healthcare), Applied Testing (forensics, veterinary testing and food safety), Pharma (pharmaceutical and biotechnology companies) and Academia (life sciences research). As of December 31, 2011, QIAGEN employed approximately 3,900 people in over 35 locations worldwide. Further information can be found at http://www.qiagen.com/.
Certain of the statements contained in this news release may be considered forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. To the extent that any of the statements contained herein relating to QIAGEN's products, markets, strategy or operating results, including without limitation its expected operating results, are forward-looking, such statements are based on current expectations and assumptions that involve a number of uncertainties and risks. Such uncertainties and risks include, but are not limited to, risks associated with management of growth and international operations (including the effects of currency fluctuations, regulatory processes and dependence on logistics), variability of operating results and allocations between customer classes, the commercial development of markets for our products in applied testing, personalized healthcare, clinical research, proteomics, women's health/HPV testing and nucleic acid-based molecular diagnostics; changing relationships with customers, suppliers and strategic partners; competition; rapid or unexpected changes in technologies; fluctuations in demand for QIAGEN's products (including fluctuations due to general economic conditions, the level and timing of customers' funding, budgets and other factors); our ability to obtain regulatory approval of our products; difficulties in successfully adapting QIAGEN's products to integrated solutions and producing such products; the ability of QIAGEN to identify and develop new products and to differentiate and protect our products from competitors' products; market acceptance of QIAGEN's new products, the consummation of acquisitions, and the integration of acquired technologies and businesses. For further information, please refer to the discussions in reports that QIAGEN has filed with, or furnished to, the U.S. Securities and Exchange Commission (SEC).
Contacts: Public Relations: Dr. Thomas Theuringer Director Public Relations +49-2103-29-11826 +1-240-686-7425 Email: pr@qiagen.com http://www.twitter.com/qiagen http://www.qiagen.com/about/press Investor Relations: John Gilardi VP Corporate Communications +49-2103-29-11711 +1-301-240-686-2222 Albert F. Fleury Investor Relations North America +1-301-944-7028 Email: ir@qiagen.com http://www.qiagen.com/about/investorrelation
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