Investor Day Call

November 17, 2011 2:00 PM ET


John Gilardi –VP, Corporate Communications and Investor Relations

Peer Schatz – CEO

Helge Lubenow – VP and Head of Molecular Diagnostics Business

James Mahony – Head, Regional Virology, McMaster University

Roland Sackers – CFO

Ellen Sheets – Chief Medical Officer

Stephen Little – VP, Personalized Healthcare

Veena Singh – MD, bioTheranostics


John Gilardi

Good afternoon. If you’ll please take your seats, we’re ready to start the event. There are some seats still here in the front that are open.

I’m John Gilardi, Vice President of Corporate Communications and Investor Relations at QIAGEN. I’d like to welcome all of you to our Annual Analyst and Investor Day. We have about 50 participants here in the room in Dallas, and as you know, our event is being held here at the Annual Meeting of the Association for Molecular Pathology, or AMP.

I want to thank all of you who made the trip to be here with us in Texas, and we’d also like to thank AMP for their support and letting us hold this event here at their venue. For those of you on the webcast, I’d like to also thank you as well for joining our event, particularly those of you in Europe where it’s now evening.

A replay will be available, starting on Friday, on the “Investor Relations” section of our homepage, at www.qiagen.com, and documents for this event are also available on our website. Today, we want to provide you with insights into our business activities and, in particular, Molecular Diagnostics. But, also, we wanted to give you an opportunity to hear from some of our customers.

We’re going to begin our program today with Peer Schatz, the CEO of QIAGEN, who will provide a strategic update. Our second speaker will be Helge Lubenow, Vice President and Head of our Molecular Diagnostics Business. Dr. James Mahony from McMaster University in Canada will be our third speaker, and he’ll provide some customer views on lab automation and, in particular, on QIAsymphony.

We’re going to then hold our first Q&A session. Roland Sackers, our Chief Financial Officer, and Dr. Ellen Sheets, our Chief Medical Officer, will also be participating in this Q&A session with our three speakers.

After a break, we’ll discuss our Personalized Healthcare business in greater detail. Our first speaker, as you can see, will be Dr. Stephen Little, Vice President of Personalized Healthcare. He will then be followed by Dr. Veena Singh from bioTheranostics in California. And then, afterwards, we’re going to hold a second Q&A session.

Following the event, I want to remind those of you here at AMP that we will be breaking up into three groups so that we can visit QIAGEN booth down on the exhibition floor. But before I turn over to Peer, I have to take care of the obligatory legal requirements.

Please keep in mind that the following discussion and responses to your questions reflect management’s view as of today, November 17, 2011. 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 description of risks and uncertainties, please refer to our Form 20-F filed with the U.S. Securities and Exchange Commission.

I’d now like to hand over to Peer Schatz. Thank you.

Peer Schatz

Yeah. Thank you, John, and a warm thank you to all of you for making it down here to Dallas to the AMP 2011 meeting. It’s an extremely important meeting for our industry. We’ve been very active here since many, many years. I’d also like to say a special thanks to everybody participating on the webcast. Some, I saw, actually are dialing in from Europe, and I’d like to thank them for their energy late in the evening for this as well.

I wanted to structure my presentation today into four different topics. The first is, I wanted to show you, in what operating environment we’re actually active – the opportunities for our company going forward, as defined by macro trends.

Then I’d describe, in a second session, how we are going to benefit from these trends through active development and commercialization programs. I’ll talk then about the growth opportunities in a little bit more detail – select growth opportunities, and then talk about how we’re going to translate that growth into shareholder value going forward.

Today, the molecular revolution has started. It is clearly evident. If you walk the halls of the AMP conference, molecular technologies have taken front and center stage. This was not the case a few years ago.

For those of you who have been here 10 years ago, it was not about molecular technologies or not nearly as visible as it is today, and it has changed dramatically. And it will continue to change going forward, as molecular technologies are creating a substantial benefit for the world of pathology and in that for the whole healthcare industry.

And this is extremely important, because we are moving towards a very difficult situation in healthcare overall – aging population and tremendous pressures for better, safer treatments, increasing efficacies and costs driving the decisions in the healthcare world more than ever. And scientific advances are happening at a breakneck speed.

For those of you who have been in this industry 20 years ago and compare now the rate of innovation of new product introductions to what we’re seeing today, this is truly a completely different, completely more significant rate of innovation that we have seen than we’ve seen ever in the last 20 years. And the technology is disseminating.

So we’re not anymore talking about pathology being confined to very select spaces or molecular testing, in general, but it is going all across the healthcare industry and also into everyday life. So let me talk very briefly how we are positioned in this industry going forward.

In Molecular Diagnostics, we’re today generating about 46% of our sales base. And we are seeing very substantial long-term growth opportunities based on the fact that this technology is revolutionizing clinical care and providing new answers, better answers to the needs in the healthcare industry.

Our customers are typically reference lab from the hospitals, and we have a number of strengths that we are putting special emphasis on. It’s Personalized Healthcare, QIAsymphony, the QuantiFERON technology portfolio, and also the world of prevention and, in particular, HPV testing.

Applied Testing, however small, is a very, very exciting growth driver and is growing at very high double-digit growth rates. We expect this market to continue for many years at high double-digit growth rates, because it is addressing markets that are typically vast in size but, only to a very small degree, penetrated with molecular technologies.

Our customers are forensic labs, industrial customers, government agencies, veterinary centers and so on and so on. And we are continually launching new portfolios in this area as soon as a sub-segment gets critical size, which can be as low as $5 million in sales. We address that market with a portfolio of tests that run on the same instruments that we sell into hospitals and clinical labs or into the pharmaceutical and academic environments.

The third sector in the Pharmaceutical industry – we definitely are talking about a lot of mergers and acquisitions and cost pressures in that space. And the Pharma industry is definitely challenged at the moment, and probably will be for quite a few years to come. However, what we are addressing in the pharmaceutical industry is a question, which is a tremendously important indoor quest to increase the development efficiency that has definitely been lagging over the last few years.

Our Molecular Technologies are used in clinical trials, are used to profile patients, to select patients, to monitor diseases progression and to provide better answers for better drug development. We are seeing great growth in this area, in the clinical research phase, which is primarily in the pharmaceuticals sector, but increasingly also in the academic sector.

And the reason why we’re getting premium growth in this space is because we have this crossover between academic and clinical portfolios. So products that basically can be use for both types of applications and fulfill the quality and regulatory requirements for both areas and we are also putting onto those portfolios content.

So the fact that we today have about 60,000 assays that can be blasted against clinical samples and almost seamlessly be transitioned into clinical products under the same roof is a tremendous benefit for our customers in Pharma and in clinical research in Academia.

Let me talk about some of these pillars in a little bit more detail. But before we go there, our position in general is one that we see as an opportunity to simplify, to accelerate and to improve the process from taking a raw biological sample, here a draw of blood, into digital information. And there are 100s of different options to do that. That diversity is constantly underestimated.

So if you walk the floors of, for instance, AMP, people will be talking about processing anything from blood samples, to plasma samples, to tissue samples of different forms, fresh tissue, FFPE tissues. They’ll be talking about stool and urine samples. They’ll be talking about anything under the sun basically that contains genetic information that has to be processed.

Now this is not a simple process, but needs a very diverse technology portfolio. And our expertise always has been and is now increasingly showing value, the ability to create a funnel to take raw biology into an analyte that can be ultimately then analyzed using our assay technology. So this transition from a component supplier to a work flow supplier covering all of these different workflow elements was key and that happened over the last 10 years.

If we look at where the various players are active, that has been changing as well. So the academic sector has been reaching out beyond by basic research and biomarkers into translational medicine even into clinical trials. If you read about some of the initiatives that are happening here in the United States but also many other countries of the world, the academic sector is reaching into clinical development expanding beyond clinical research into routine clinical development even, and in some cases even pursuing drug development. This is a new trend.

At the same time, molecular diagnostics and this is also evident here from AMP is going much deeper into the earlier phases of research. So moving through the translational medicine field even into biomarker and in some cases even looking at basic biological research. But this trend is one that the pharmaceutical industry is now looking at in more detail because their challenges here in the middle, in the translational medicine and clinical trial and approval area to basically translate that basic research into routine products and they are also relying on the various pillars that are used across this continuum. The only area that is more traditional like the diagnostics industry was let say, 10 years or 15 years ago, very strong compartmentalization is the applied testing field which is less linked to the research or even the development world.

And this brings me now to a slide that shows our competitive landscape or at least benchmarks us against companies that we’re very often compared to. The differentiation that we as a company have is that, we basically span in all of our areas both the Life Sciences and Molecular Diagnostics. We have great and formidable competitors in the various sub-segments at the market, but there is no company, that spans the continuum from the basic research field through the development processes into routine molecular diagnostics.

Most of the companies are blank on the academic field and the diagnostic space. We’re blank on the diagnostics activities here for companies who are active in the life sciences area. That continuum will become more and more important going forward because the transitional buyer marker from clinical development into routine diagnostics is happening at a break next speed.

We’re not going to see the traditional 10 years wait, 15 years wait, we’re going to see a much faster transition of these types of techniques, and going forward, the ability to basically allow that to happen on the same platforms with the same types of technologies is going to be a true differentiator.

If you look at the various diagnostics fields that we have down, I’ll focus on that. We see the Prevention, Profiling, Personalized Healthcare, and Point of Need activities that we highlighted here. Our focus is clearly at the moment in the area of prevention and profiling in terms of sales base. But in terms of the leadership position, our position in personalized medicine is really second to none. And this is something that we will talk about in little bit more detail also in the course of this presentation. Now, so there might be some misclassifications here. It’s always very subjective, but it was – this slide was done also with some analytical support and might be of help for any analysis going forward.

So let me talk about a few of the growth opportunities in more detail. But I’ll do that in a balance way. We are also looking the risks and the challenges that we’ve been facing. So if we look at 2011, we had growth drivers of QIAsymphony’s. We have now – are targeting towards the end of the year 550 placements of QIAsymphony, which is a record placement number. I don’t think there has ever been a medium throughput testing system in this industry that sold anywhere close to this type of a ramp-up that we seen here for this noble platform.

Read the rest of this transcript for free on seekingalpha.com

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