Third Quarter 2008 Earnings Conference Call

Transcription

1 November 11, 2008, 9:30am ET, 14:30 GMT, 15:30 CET Third Quarter 2008 Earnings Conference Call Conference Call Outline: 1) 30 min Presentation Peer M. Schatz, CEO Roland Sackers, CFO Dr. Solveigh Mähler, Director IR 2) 30 min Q&A session Due to time restrictions we would like to ask for a maximum of TWO questions per caller. -1-

2 Forward Looking Statements Safe Harbor Statement: Certain of the statements contained in this presentation may be considered forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. To the extent that any of the statements contained herein relating to QIAGEN's products and markets and operating results are forward-looking, such statements are based on current expectations that involve a number of uncertainties and risks. Such uncertainties and risks include, but are not limited to, risks associated with management of growth and international operations (including the effects of currency fluctuations), variability of operating results, the commercial development of the DNA sequencing, genomics and synthetic nucleic acid-related markets, as well as the nucleic acid-based molecular diagnostics, applied testing markets and genetic vaccination and gene therapy markets, competition, rapid or unexpected changes in technologies, fluctuations in demand for QIAGEN's products (including fluctuations from certain events including funding, budgets, and others), difficulties in successfully adapting QIAGEN s products to integrated solutions and producing such products, the ability of QIAGEN to identify and develop new products and to differentiate its products from competitors, the management of intellectual property, and the integration of acquisitions of technologies and businesses. For further information, refer to the discussion in reports that QIAGEN has filed with or furnished to the U.S. Securities and Exchange Commission (SEC). Regulation G: The following slides contain certain summary information about QIAGEN N.V. s sales, gross profit, operating income, net income, and earnings per share for the third quarter 2008, and the comparable period of 2007, which information is presented on a non-gaap financial measures basis rather than in accordance with U.S. generally accepted accounting principles (GAAP). Please review QIAGEN s press release dated November 10, 2008, for information on the Company s operating income, net income, and earnings per share for these periods presented on a GAAP basis. Such GAAP-basis information will also be contained in the Company s reports on Form 20-F or Form 6-K to be filed with or furnished to the U.S. Securities and Exchange Commission. -2-

3 Third Quarter 2008 Overview Financials Exceeded sales, operating margin and EPS guidance Revenues US$230.8 M Strong organic revenue growth Overall 14% HPV-related sales 20% EPS, adj. US$ 0.21 Operating income, adj. growth 53% Record revenues from 12 mo new products 5% Positive outlook Acquired pyrosequencing technology and product portfolio Strategic and Other Very successful launch of QIAsymphony SP MDx: HPV channel and message management successful MDx: new K-ras assay 23 new products: focus on mirna and genotyping Adjusted figures exclude acquisition, integration and relocation related charges as well as amortization of acquired intangibles and equity-based compensation (SFAS 123R) -3-

4 Third Quarter 2008 Key Performance Metrics Guidance 1 Feb. 12, 2008 Reported Net sales (US$ M) exceeded 2 EPS, adj. (US$) exceeded 1 based on January 31, 2008 foreign currency exchange rates 2 US$ 232 million using January 31, 2008 foreign currency exchange rates 3 adjusted figures exclude acquisition, integration and relocation related charges, amortization of acquired intangibles and equity-based compensation (SFAS 123R) Exceeded on Revenue and EPS Guidance -4-

5 Third Quarter 2008 Revenue Distribution By Product Groups By Geographic Regions 26% growth 23% growth CER America 28% growth 28% growth CER Europe 21% growth 14% growth CER 86% 51% 34% 13% 9% Others CER = Constant Exchange Rates Instruments 88% growth 83% growth CER RoW Asia 27% growth 20% growth CER -5-

6 Third Quarter 2008 Organic Growth Drivers US$ M 250 ~ 13% ~ 4% ~31% 200 ~ 2% ~ 7% ~ 5% 150 Organic Growth 14% (HPV 20%, MDx overall comparable) 1000 Revenues Q Price Volume New products Acquisitions Exchange rates Revenues Q Industry Leading Organic Growth -6-

7 Third Quarter 2008 At a Glance Q Q Growth Net sales (US$ M) % Operating income, adj. (US$ M) % Operating margin, adj. 29% 25% Net income, adj. (US$ M) % EPS, adj. (US$) % Adjusted figures exclude acquisition, integration and relocation related charges as well as amortization of acquired intangibles and equity-based compensation (SFAS 123R) and include a tax benefit of $0.02 in EPS in Q Exceeded Guidance on All Key Targets -7-

8 Third Quarter 2008 Reported and Adjusted Figures In US$ millions unless indicated Q Reported Adjustments Q Adjusted Net sales Gross profit Operating income Net income EPS (US$ per share) Adjustments exclude acquisition, integration and relocation related charges as well as amortization of acquired intangibles and equity-based compensation (SFAS 123R). 18% After Tax Profitability (adj.) -8-

9 Third Quarter 2008 Cash Flow and Balance Sheet Key Figures In US$ millions unless indicated Q Q Net income (loss) 20.8 (7.3) Depreciation & amortization Purchased in-process R&D Others, net (18.2) (10.8) Operating cash flow Capital expenditures (11.3) (8.9) Free cash flow In US$ millions unless indicated As of 9/30/2008 Cash and cash equivalents 326 Net debt 658 Near term payment obligations (next 12 months) 25 Equity ratio 51% Net debt / EBITDA, adj. ratio Free cash flow computed using net cash from operating activities less capital expenditures -9-

10 Solid Financial Position Cash distribution Conservative investment approach Strong bank group Debt positions No need for near-term debt re-financing Long-term debt matures Currency exposure P&L naturally hedged Interest rate coverage Attractive spreads locked in in 2007 Natural hedge on floating interest rates Floating interest for excess debt (US$200 M) swapped for fixed rates Conservative Investment and Hedging Strategy -10-

11 Agenda: Updates and News Acquisition of Biosystems High resolution Sequence Detection and Quantification Molecular Diagnostics strategic outlook Screening Platforms Broad Menu of Options Select New Products Exciting new product introductions Market environments Current market developments -11-

12 Acquisition of Biosystems Business from Biotage Pyrosequencing: High resolution sequence detection and quantification Consumables and instruments, patents Licensed to several players for select formats in next generation sequencing Our Focus: Focusing on high resolution sequence detection and quantification of shorter stretches of DNA (under 100b) 99.7% accuracy, (99.5% accurate at 200 bases on 454) Epigenetics (a gold standard, unique for quant.) Mutation tolerant (!) pathogens and genetic detection Full resolution detection, multiplex-capable Primary customers: research and molecular diagnostics Financials: Purchase price: US$ 53M Revenues: US$ 15M in FY

13 Leading in Epigenetics QIAcube BioRobot QIAsymphony QIAcube PAXgene TissueLyser QIAamp DNeasy AllPrep EpiTect Bisulfite Kit (48) EpiTect Bisulfite 96 Kit EpiTect Whole Bisulfitome Kit New PyroTect Genome-wide CpG GeneGlobe Assays New PyroTect DNA control set New PyroTect CpG PCR Kit Vacuum prep station New PyroTect CpG Methylation Kit For home-brew customers: New CpG Assay Design Software -13-

14 Low to Medium/High Throughput MDx Screening Platforms Complete Process Chain Sample Preparation Assay Set Up Detection Low Throughput Modules Endpoint (qualitative) PCR QIAxcel Medium-High Throughput Modules Multiplexing LiquiChip Real.time (quantitative) PCR High Throughput Fully integrated System Rotor-Gene High resolution sequence detection and quantification PyroMark -14-

15 High Throughput MDx Screening Platforms Broad Menu of Options Collection Vial Processing Sample Preparation Detection Other Menu Comment Date Next Generation Improvements Current None!! None!! Digene STM vials Rapid Capture Manual Manual ThinPrep vials Rapid Capture All vials Personal Processor, TBA QIAsymphony SP Rapid Capture Personal All vials Processor, TBA QIAsymphony SP Rapid Capture All vials QIAensemble SP Rapid Capture Personal All vials Processor, TBA QIAsymphony SP QIAensemble All vials QIAensemble SP QIAensemble 2200 QIAsymphony AS+PCR Cycler QIAsymphony AS+PCR Cycler HPV (CT, GC) HPV HPV (CT, GC) >120 assays plus unlimited range of home brew HPV (CTGC, HBV, CMV) >120 assays plus unlimited range of home brew Non-amp HC: HPV Amplified: CT/GC and others Fully automated 2003 New sample collection vials 2003 required sample prep step Fully automated 2009 Fully automated, unparalleled 2010 menu options Fully automated, 2010 high throughput Fully automated, unparalleled 2011 menu options Fully automated, 2011 high throughput -15-

16 Strong Growth in MDx QIAGEN Customer Distribution (Includes MDx product breakdown) Applied Testing Academia Pharma/Biotech Development Discovery OEM (>20 relationships) Sample & Assay Technologies Infectious Diseases (over 100 assays) Genetic (PGx, Transplant) Molecular Diagnostics HPV (5 assays) Sample Technologies MDx: ~45% of our overall sales Strong growth, broad assay portfolio 4 new assays CE marked in 2008 (HIV, Malaria, K-ras etc.) Multiple clinical trial programs ongoing New K-ras test HPV ~50% of our sales into MDx ~25% of our overall sales ~ same growth rate as overall MDx Great fit to our >120 other assays and platform breadth 2008 Nobel Prize in Medicine: Prof. Harald zur Hausen Significant changes to sales and marketing in 2008 Boosted clinical sales force (physician sales calls) (Q2) Initiated segmentation (Q3) Revamped messaging (Q4) National and non-national lab partnering programs (Q3) -16-

17 Select New Products Genotyping Sample technologies (preparation, storage) Assay technologies (PCR, multiplex) mirna Sample technologies (mirna controls, transfection reagents) Assay technologies (viral mirna quantification and functional analysis) Molecular diagnostics assays artus real-time PCR assays Malaria LC PCR Kit CE-labeled QIAplex Resplex II Panel v 2.0 Pyrosequencing K-ras genotyping assay Applied testing assays cador Bluetongue Virus RT-PCR Kit -17-

18 K-ras Testing: an Emerging Blockbuster in Theranostics K-ras: Key element in normal cell growth pathway Critical element for EGFR inhibitor drugs First EGFR inhibitor drugs for colon cancer >140 trials ongoing for EGFR inhibitors K-ras gene often mutated (leads to resistance) Lung cancer 15% - 20% Pancreas cancer up to 90% Colon cancer 35% - 45% Therefore: need for theranostic tests! Current market: Colon/rectum cancer: >1 million incidences, 50% mortality Some laboratory developed tests Some other tests in Europe using PCR The QIAGEN test based on pyrosequencing: Identifies known and unknown mutations Covers key mutations in several key gene sections Easy set up Very fast direct signal Can add more gene mutations related to the pathway -18-

19 Current Developments in Target Markets Academia (approx. 28% of revenues*) Stable/positive outlook for 2009 in US and EU No short term reprioritization expected Fiscal stimulus initiatives emphasize research Pharma/Biotech (approx. 20% of revenues*) Discovery: blue sky research Development: Phases I and thereafter Molecular testing: reducing risks = reducing costs Applied Testing (approx. 7% of revenues*) Stable government demand (forensics and vet) Quality control in food production and life stock reduces costs MDx (approx. 45% of revenues*) Early detection reduces costs MDx is transforming a US$30 billion market HPV market only 25% penetrated in US, only 6% in EU * Nine months revenue breakdown by customer group including Corbett Economically Robust Markets -19-

20 Fourth Quarter and Fiscal Year 2008 Assumptions Based on FX January 31, 2008 Q4 2008E Q Growth Net sales (US$ M) * 210 ~18% EPS (US$ per share), adj ~34% FY 2008E EPS in US$ per share, adj., including approx. US$0.01 dilution from Biosystems acquisition EPS (US$ per share), adj. increased to * US$ million using actual foreign currency exchange rates Adjusted figures exclude acquisition, integration and relocation related charges as well as amortization of acquired intangibles and equity-based compensation (SFAS 123R) Increased Full Year 2008 EPS adj. Guidance by US$

21 Fourth Quarter 2008 Assumptions Adjustments to operating income in Q SFAS 123R (US$ M) 2-3 Amortization of acquired intangibles, incl. Biosystems (US$ M) Integration and acquisition related charges incl. Biosystems (US$ M) 5-6 Operating margin, adj. ~28% Tax rate 26% - 30% Weighted average number of fully diluted shares outstanding (based on a share price of $16.00) Q FY 2008 Increase of weighted average number of fully diluted shares outstanding / Increase of share price ~203 M ~206 M ~1m shares / US$

22 Third Quarter 2008 at a Glance Strong third quarter Sales, operating margin, adj. and EPS, adj. targets exceeded Strong growth rates in all business areas Solid market environments Strategic momentum Acquired Biosystems New product introductions Driving market opportunities Outlook Strong growth expected for the rest of the year and 2009 EPS, adj. guidance US$0.79 US$0.80 EPS guidance increased by US$0.01 (includes dilution of US$0.01 following the acquisition of Biosystems) Well on Track -22-

23 Questions & Answers -23-

24 Appendices Financials -24-

25 Third Quarter 2008 Profit & Loss Statement In US$ millions unless indicated Q Q Growth Net sales % Gross profit % Gross profit, adj % Operating income (loss) 38.2 (1.7) n/a Operating income, adj % Net income (loss) 20.8 (7.3) n/a Net income, adj % EPS (US$ per share) 0.10 (0.04) n/a EPS (US$ per share), adj % Adjusted figures exclude acquisition, integration and relocation related charges as well as amortization of acquired intangibles and equity-based compensation (SFAS 123R) and include a tax benefit of $0.02 in EPS in Q % Operating Income Growth (adjusted) -25-

26 Third Quarter 2008 CER = Constant Exchange Rates 2008 Q Q Q3 Growth rates Reported CER Reported Reported CER Gross margin 66% 65% 66% 32% 26% Gross margin, adj. 72% 71% 71% 32% 27% Operating income margin 17% 16% -1% n/a n/a Operating income margin, adj. 29% 29% 25% 53% 47% Net income margin 9% 8% -4% n/a n/a Net income margin, adj. 18% 18% 18% 36% 30% EPS in US$ per share (0.04) n/a n/a EPS in US$ per share, adj % 18% Adjusted figures exclude acquisition, integration and relocation related charges as well as amortization of acquired intangibles and equity-based compensation (SFAS 123R) and include a tax benefit of $0.02 in EPS in Q Strong Gross Margin, adj. Improvement of 32% -26-

27 Third Quarter 2008 Currency Impact Actual to Guidance Actual In US$ million Reported Guidance rates Change due to currency Revenues in US$ Revenues in Euro Revenues in JPY Revenues in GBP Revenues other currencies Total Other currencies include CAD, TRY, GBP, SEK, CHF, AUD, BRL, CNY, MYR, SGD, KRW, HKD, MXN Only Marginal Foreign Currency Impact on Revenue Growth Using QIAGEN s January 31, 2008 Guidance Rate -27-

28 Third Quarter 2008 Reported and Adjusted Figures In US$ millions unless indicated Reported Adjusted Net sales Amortization of acquired intangibles (within COS) 12.8 Acquisition and integration costs 0.4 SFAS 123R impact 0.2 Gross profit Add back operating impact: Acquisition, integration related expenses (incl. COS) 8.9 Relocation and restructuring charges 0.2 Purchased in-process R&D 0.8 Amortization of acquired intangibles (incl. COS) 16.8 SFAS 123R impact (incl. COS) 1.9 Operating income Add back net income impact: Acquisition and integration related expenses 6.0 Purchased in-process R&D 0.8 Relocation and restructuring charges 0.1 Acquisition triggered impairment 2.5 Amortization of acquired intangibles 10.9 SFAS 123R impact 1.3 Net income

29 First Nine Months 2008 YTD 2008 YTD 2007 Growth Net sales (US$ M) % Gross profit % Gross profit, adj % Operating income % Operating income, adj % Net income % Net income, adj % EPS (US$ per share) % EPS (US$ per share), adj % Adjusted figures exclude acquisition, integration and relocation related charges as well as amortization of acquired intangibles and equity-based compensation (SFAS 123R) and include a tax benefit of $0.02 in EPS in Q % Operating Income Growth (adjusted) -29-

30 First Nine Months 2008 Cash Flow Key Figures In US$ millions YTD 2008 YTD 2007 Net income Depreciation & amortization Purchased in-process R&D Tax effect of share-based compensation 0.8 (5.9) 25.9 (9.4) (Increase) in accounts receivable, net (14.2) (13.7) (Increase) in inventory, net (33.0) (7.2) Others, net (6.2) (5.9) Operating cash flow Capital expenditures (26.9) (23.8) Free cash flow Free cash flow computed using net cash from operating activities less capital expenditures -30-

31 Employees September 30, 2008 America Europe Asia RoW Total Q3 08 Total Q3 07 Growth Production % R&D % Sales , % Marketing % Admin % Total 991 1, ,943 2,636 12% -31-