Introduction and Investment Thesis
Qiagen (NYSE:QGEN) is a leading provider of a diversified set of molecular diagnostics and molecular sample/assay solutions serving over 500,000 customers across a variety of end markets including life science R&D, healthcare, and industrial applications.
These solutions are used to conduct a variety of genetic and proteomic analyses from COVID testing to oncological tumor typing. In terms of the revenue mix, around 89% of sales are recurring sales based on consumables with the remainder being system sales. This large recurring revenue base provides the company with a degree of revenue stability and makes the company less exposed to more episodic and lumpy system sales. In terms of end-market exposure, the company is evenly split at roughly 50% of revenues each between more traditional life science/pharma market and molecular diagnostics.
The key driver of value in recent months is COVID related business. Here, Qiagen is well-placed across the entire stack to take advantage of testing trends. To start, the company provides the core DNA/RNA extraction technology necessary to process samples at high throughput. Qiagen also provides the PCR technology and testing kit necessary to identify positive COVID cases with high sensitivity and specificity. Additionally, Qiagen's antigen test will likely be approved this quarter with commercialization happening in the first half of next year. This is another possible positive value driver for the company. All in all, COVID made up $164MM of revenues in Q3 or nearly 35% of the mix, which more than made-up for the drop in non COVID related revenues of ~8% YoY. And although vaccine related developments such as the new clinical results from Pfizer may eventually dim the need for diagnostic tests, the high rates of infection should still provide a stable base of testing volume in the near-term. Furthermore, it will take time for vaccine volumes to ramp and reach the population. Additionally, it is still questionable what the true level of uptake
