(Adds details, CEO and CFO comments)
Feb 4 (Reuters) - Genetic testing specialist Qiagen beat analysts’ expectations for quarterly sales and profit growth on Tuesday, citing savings generated after its decision to stop developing new next-generation sequence (NGS) instruments.
“We have reallocated resources to support business expansion, while also enabling us to set an outlook for adjusted earnings per share to grow at a significantly faster rate than sales growth,” Chief Financial Officer Roland Sackers said.
In a surprise to investors, the maker of diagnostic kits for cancer and tuberculosis said in October it would stop developing next-generation genome sequencing machines and instead collaborate with industry leader Illumina.
Qiagen’s longtime Chief Executive Peer Schatz resigned after the company disclosed the genome sequencing strategy reversal as well as a slump in its Chinese business, sending the stock tumbling 20%.
Qiagen’s earnings fell short of company guidance in the second quarter before Schatz resigned. Analysts said management should establish more realistic financial targets.
Taking into account reduced sales expectations for China as well as lower revenues from NGS projects, Qiagen expects its 2020 net sales growth to reach between 3% and 4% at comparable exchange rates and adjusted diluted earnings per share of $1.52-$1.54 in 2020, it said.
While Qiagen sees an increase in global demand for products that can be used to recognize the new coronavirus, it has not included it in its 2020 outlook given current uncertainties around broader business trends in China, the company’s interim CEO Thierry Bernard added.
Qiagen already manufactures products that allow for the identification of viruses and could benefit from targeting its products to recognize the new coronavirus, which has caused 425 confirmed deaths across mainland China.
“There is certainly a challenge there in ramping up testing in such a short time while retraining the workforce and facing restrictions on goods coming in from outside China,” Qiagen’s development lead for infectious diseases, Adrian Moody, said in an interview with Financial Times.
The company, which has its main operations in Germany but is headquartered in the Netherlands, said fourth-quarter net sales rose 4% to $413.5 million on a currency-adjusted basis, beating the 3.2% expected on average by analysts in a company-compiled consensus. (Reporting by Zuzanna Szymanska in Gdansk; Editing by Cynthia Osterman)