Future Perspectives

QIAGEN Perspectives for 2019

With a dynamic and disruptive portfolio of Sample to Insight solutions for molecular testing, QIAGEN expects to sustain its growth in sales and earnings in 2019 and beyond. QIAGEN serves more than 500,000 customers across the value chain, from researchers in Academia and the pharmaceutical industry to healthcare providers using molecular diagnostics to bring state-of-the-art care to patients. QIAGEN is executing on mid-term strategic plans to enhance financial performance and returns to shareholders from 2016 through 2020. Investments in innovation and commercial support are paying off in a faster sales trajectory for growth drivers, while efficiency and capital allocation initiatives enhance operating leverage and profitability.

QIAGEN continues its focus on differentiated solutions in fast-growing markets and made significant progress in enlarging and transforming its portfolio in 2018. Growth engines in 2019 include expanding the market for QuantiFERON-TB technology; driving the adoption of novel solutions in next-generation sequencing (NGS); enabling precision medicine with insights to guide treatment decisions; delivering valuable insights through automation systems; integrating bioinformatics to analyze and interpret genomic data; and deepening QIAGEN’s leadership in core technologies for sample processing. QIAGEN continues to build its innovative portfolio through research and development, external partnerships and targeted acquisitions.

Sales of QuantiFERON-TB, the gold-standard blood test for latent tuberculosis (TB) infection, grew 21% in 2018 – tracking toward a target of $300 million by 2020. As global efforts to control tuberculosis continue to intensify, QuantiFERON-TB Gold Plus (QFT-Plus) is gaining adoption worldwide to replace the time-consuming, unreliable 120-year-old tuberculin skin test. QIAGEN is adding automation options for QFT-Plus through partnerships with DiaSorin, Hamilton and Tecan to enhance the efficiency of screening, particularly for large TB programs. The company also is developing QuantiFERON-TB Access to make blood-based latent TB detection accessible to low-resource regions with a high disease burden (launch expected in 2020).

With next-generation sequencing emerging from elite research labs into clinical research and diagnostics, QIAGEN’s portfolio of NGS solutions grew rapidly to over $140 million in 2018 sales, about 10% of total revenues. A new target of $190 million was set for 2019. QIAGEN continues to add to its “universal solutions,” industry-leading sample technologies, “Digital NGS” assays and bioinformatics, reaching into nearly every NGS lab around the world. The GeneReader NGS System, a complete Sample to Insight solution for benchtop sequencing, is benefiting from new placements and growing consumable sales. After adding new GeneRead QIAact gene panels in 2018, QIAGEN continues to develop innovative content for the platform.

QIAGEN’s Precision Medicine franchise, marshaling genomic insights to enable personalized treatment decisions for patients with cancer and other diseases, exceeded $100 million in sales in 2018 and offers dynamic growth potential. More than 25 partnerships with Pharma and biotech companies make QIAGEN the global leader in creating companion diagnostics for selection of the most appropriate therapies based on genetic variations. In 2019, QIAGEN expects a stream of companion diagnostic launches in oncology and hematology.

QIAGEN is commercializing disruptive new automation systems to expand its reach in large, growing markets – and is leveraging a rich pipeline of molecular content through assay development efforts. The focus in 2019 is on execution across these platforms:

• QIAsymphony, the flagship modular system for Sample to Insight analysis with polymerase chain reaction (PCR), surpassed its target of 2,300 cumulative placements around the world in 2018, and a new target of over 2,500 was set for 2019. The QIAsymphony SP module is the market-leading “front end” solution for automated processing of samples – a critical need as laboratories handle growing volumes for NGS and PCR testing.
• The GeneReader NGS System continues to gain share in the benchtop NGS market with a full menu of cancer gene panels for clinical research, plus selected forensics applications. New panels for immuno-oncology and liquid biopsy monitoring of lung cancer are expected to launch in 2019, as well as custom panels and improvements in automation.
• QIAstat-Dx, a one-step, fully integrated system for syndromic testing, is gaining momentum after its April 2018 launch in Europe. A U.S. launch and additional diagnostic panels are expected in 2019. QIAstat-Dx delivers cost-efficient diagnosis in about an hour, with less than one minute of hands-on time. The addressable market is estimated at $800 million.
• The NeuMoDx 288 and 96 systems, launched in Europe in late 2018, offer a disruptive new platform in the fully integrated PCR market for higher-throughput diagnostics, estimated at $2.7 billion. The Sample to Insight NeuMoDx systems automate the otherwise expensive, time-consuming liquid handling process and speed up analysis for labs. QIAGEN plans to expand the assay menu in 2019 and begin to drive NeuMoDx adoption globally.
• In 2019, QIAGEN is investing to develop disruptive new solutions for digital PCR, a fast-growing molecular technology among Life Sciences customers. QIAGEN is targeting a 2020 launch with fully integrated systems that simplify digital PCR workflows, offer higher throughput and multiplexing, and provide favorable economics for customers.

Bioinformatics solutions are growing rapidly as QIAGEN software and knowledge bases deliver the real value of molecular testing: actionable insights. In 2018, launches included major enhancements to QIAGEN Clinical Insight (QCI); easy-to-use new CLC Genomics Workbench software; and other solutions. So far in 2019, QIAGEN has acquired N-of-One, adding powerful real-world evidence in oncology to QCI, and partnered with Ares Genetics to advance the fight against antibiotic-resistant infections. Bioinformatics is a key strategic advantage for QIAGEN.

QIAGEN’s differentiated core technologies for sample processing continue to drive growth, with a focus on emerging applications such as liquid biopsies and microbiome research. In 2019, QIAGEN is launching QIAcube Connect, a next-generation solution for automated sample processing that delivers digitization and ease of use to help labs process increasing volumes.

Ongoing actions to improve efficiency are expected to continue to benefit results in 2019. Key actions include consolidating activities into shared service centers and global centers of excellence, and embracing digital tools across the business. Digital channels account for a growing portion of sales, exceeding 40% in 2018 and moving toward a goal of 50% in 2020.

Global Economic Perspectives for 2019

Global economic growth slowed in 2018 and is expected to decelerate further in 2019, as well as facing downside risks from geopolitical and financial uncertainties. The World Bank forecasts global GDP growth of 2.9% in 2019, down from 3.0% in 2018, easing further to 2.8% in 2020 and 2021. Although no recession is predicted near-term, risks include increasing tariffs and other trade barriers, a chill in emerging-market economies, the United Kingdom’s move to leave the European Union, shifts toward normalizing monetary policy and the chance of a financial market disruption. U.S. growth remains solid but slower in 2019, after the 2018 surge triggered by tax reform. Growth in Europe has slowed as exports soften in an uncertain trade climate. China’s rapid growth is expected to continue to moderate amid weaker exports, though supported by domestic consumption. Japan remains in a slow-growth mode. Economic momentum tends to benefit the business environment for QIAGEN, while a downturn could hurt customer funding budgets. Currency exchange rates also affect results reported in U.S. dollars.

Industry Perspectives for 2019

Genomic insights today are moving rapidly from basic research laboratories into applications in medicine and other fields, delivering ever-greater value for patients and other users. Multiple segments of molecular testing are growing at double-digit rates. As innovation drives market expansion, QIAGEN has a fertile environment to sustain its growth in 2019 and beyond.

Molecular diagnostics, in particular, is growing briskly as healthcare providers adopt genomic testing to evaluate and monitor patients for cancer, infectious diseases and other conditions. Molecular medicine is migrating from research-based institutions into hospitals and reference laboratories in need of quick, accurate results, increasing the demand for standardized tests and automated workflows. Customers, meanwhile, embrace diverse technologies based on different needs – from low-throughput to high-throughput, and from single-target or multiplex PCR analysis to in-depth next-generation sequencing. Common themes across different customer types are need for easy-to-use technologies and decision-support software.

Life science researchers in Academia and the Pharma industry rely on novel sample and sequencing technologies to explore disease pathways and biomarkers, and increasingly to guide drug development and clinical trials as well. Developments in the science presage a wave of new therapies based on genomic insights. Applications of molecular testing also are expanding for public safety needs such as forensics and environmental monitoring.

QIAGEN is executing on a strategy to engage customers across the continuum, from discovery to routine molecular testing, and to create value with differentiated solutions and automation systems that make improvements in life possible.

Subsequent Events

On January 7, 2019, we announced the acquisition of N-of-One, Inc, a privately-held U.S. molecular decision support company and pioneer in clinical interpretation services for complex genomic data. The cash consideration totaled approximately $26.0 million. The acquisition included contingent consideration which is recorded as part of the purchase price based on the acquisition date fair value. The addition of N-of-One will enable QIAGEN to significantly expand its decision-support solutions while offering a broader range of software, content and service-based solutions. It will also enable QIAGEN to provide customers with greater access to valuable genomic data assets and service offerings. N-of-One is not expected to provide a significant contribution to our results in 2019.

On January 31, 2019, we acquired the digital PCR assets of Formulatrix, Inc., a developer of laboratory automation solutions. Combining the Formulatrix assets with QIAGEN technologies and automation, we expect to bring to market a fully integrated digital PCR solution with a targeted launch in 2020. We agreed to pay Formulatrix $125.0 million in cash upon closing and future milestone payments of $135.9 million in 2020.