Qiagen May Make Second-Biggest Acquisition This Year, CFO Says

Qiagen (QIA) NV, the Dutch company whose tools are used to predict disease and isolate DNA, may make its second-biggest acquisition to date this year.

Qiagen, based in Venlo, the Netherlands, is in talks with several diagnostics companies and may make a purchase in the “three-digit million dollar” range, Chief Financial Officer Roland Sackers said in a March 8 interview at the company’s research and manufacturing site in Hilden, Germany. He declined to be more specific.

An acquisition of that size would be the company’s second-largest after the 2007 takeover of Digene Corp. of the U.S. for $1.6 billion. Qiagen bought one company in 2010, compared with three the previous year, as valuations of potential targets began to get “very rich,” Sackers said.

“The focus on our acquisitions side is clearly on content, adding more tests to the machines in the field of molecular diagnostics, but also in the field of applied testing,” Sackers said. Applied testing involves diagnostics using non-human samples.

Qiagen fell 2.2 percent to close at 14.275 euros yesterday in Frankfurt trading, giving the company a market value of 3.3 billion euros ($4.7 billion). The stock has fallen 13 percent in the past year.

The market for acquisitions has cooled and become “more realistic,” he said. Qiagen has about $940 million in cash to help pay for purchases.

Borrowing Capacity

The company also can borrow money because its ratio of net debt to earnings before interest, taxes, depreciation and amortization is about zero, Sackers said. “We would feel comfortable with a net debt to Ebitda position of up to 2-3 times,” he said.

“We clearly see now as a good time for accretive deals and more importantly value-enhancing deals” that boost Qiagen’s strategic position, Sackers said.

Last year, Qiagen bought ESE GmbH, a German maker of equipment for testing outside the laboratory, including in hospital emergency rooms. On Jan. 11 it agreed to buy a minority stake in Alacris Theranostics GmbH as well as the right to develop products from biological labels identified by Alacris. The German start-up uses computers to model a patient’s response to certain drugs based on genomic information found in clinical samples.

Bigger Markets

Qiagen is “in the middle” of its expansion into molecular diagnostics and is eyeing bigger markets, according to Sackers. While many of Qiagen’s products in the past were aimed at markets with $5 million to $50 million in potential annual revenue, a new companion test for metastatic colon cancer that may be submitted for approval this year will target a market worth about $100 million, he said.

The company also wants to expand in emerging markets such as Asia, Eastern Europe and Latin America, Sackers said.

Qiagen sells equipment and tests to hospitals, laboratories, academic researchers and drugmakers. About half its sales come from molecular diagnostics, which are used in routine screening to detect influenza and identify the human papillomavirus, or HPV, which is linked to cervical cancer. In addition, the kits are used to select the appropriate therapy for ailments.

Switzerland’s Roche Holding AG (ROG) is competing in the HPV market with the cobas test designed to detect the HPV-16 and HPV-18 strains of the virus, which account for about 70 percent of cervical cancer cases. Roche introduced the product in several countries in 2009 and has filed for regulatory approval in the U.S.

Cervical Cancer

The ability of Qiagen’s technology to process more samples will give its HPV test an advantage when both tests are available, Sackers said.

HPV, a group of more than 100 viruses, is the primary cause of cervical cancer and the most common sexually-transmitted disease in the U.S. It’s estimated that 1 in 145 women will be diagnosed with cervical cancer, according to the National Cancer Institute.

Qiagen’s net income dropped 18 percent to $36.3 million in the fourth quarter, the company said Jan. 31. Adjusted earnings per share this year are expected to rise by about 7 percent to 13 percent, the company said. The company also sees revenue increasing between 5 percent and 7 percent at constant exchange rates, excluding the impact of any acquisitions.

To contact the reporter on this story: Dermot Doherty in Geneva at ddoherty9@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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