Thermo Fisher Scientific today terminated its agreement to acquire QIAGEN after the would-be buyer failed to persuade enough QIAGEN shareholders to approve the potentially $12.5 billion deal.
Shareholders with only 47% of outstanding QIAGEN shares agreed to support the acquisition deal, which required approval by owners of 66.67% of those shares.
The rejection came despite Thermo Fisher’s sweetening the deal last month by raising its per-share offering price from €39 ($46) to €43 (about $51). That added $1 billion to the deal’s potential value from the original $11.5 billion when plans for the acquisition were announced on March 3. Also, QIAGEN reduced the minimum percentage of shares whose owners needed to approve the deal, from 75%.
However, the sweetened deal was not enough to attract one vocal critic, the hedge fund Davidson Kempner, which last week raised its stake in QIAGEN from 3.6% to 8%. “Davidson Kempner sees Qiagen’s standalone fair value as €48-52/share [$57-$61], and therefore considers the current offer wholly inadequate,” the firm stated August 3, in announcing that it would not tender its shares to Thermo Fisher.
“We respect the decision of our shareholders and will now continue to execute our strategy to deliver growth and create greater value with our Sample to Insight portfolio that addresses growing molecular testing needs in the life sciences and molecular diagnostics,” Håkan Björklund, Ph.D., chairman of the supervisory board of QIAGEN, said in a company statement.
QIAGEN will pay Thermo Fisher a $95 million cash “expense reimbursement payment” following termination of the deal.
“Thermo Fisher is a disciplined acquirer with a strong track record of executing value-creating transactions. We remain extremely well-positioned to deliver on our proven growth strategy and continue to generate significant returns for our shareholders,” Marc N. Casper, Thermo Fisher’s chairman, president, and CEO, said in a separate statement.
One analyst agreed with Casper’s assessment that Thermo Fisher (TMO) can thrive beyond the end of the QIAGEN deal
“We see limited to no downside to the termination of the offer,” Puneet Souda, managing director, life science tools and diagnostics with SVB Leerink, and colleagues wrote today in an investor note. “We expect TMO to continue its successful history of finding, integrating, and improving operations of their M&A targets.”
Thermo Fisher had asserted that it would benefit from the deal because acquiring QIAGEN would enable it to expand its molecular diagnostics portfolio with a new SARS-CoV-2 coronavirus test under evaluation in China and other infectious disease tests.
QIAGEN benefited from a jump in demand for COVID-19 tests, to which the company last week attributed its strong second quarter results: Net income more than doubled (101%) to $89.8 million year-over-year from $44.7 million, and leaped 75% in the first half of this year to $129.6 million from $74.2 million a year earlier. Net sales grew 16% during the second quarter Q2, to $443.3 million from $381.6 million, and rose 12% for January–June 2020, to $815.3 million from $730.3 million.
The unprecedented demand for products used in coronavirus testing is driving QIAGEN’s performance in 2020. “Our employees around the world are fully mobilized to serve all of our customers in the public health response to the pandemic throughout the world,” QIAGEN CEO Thierry Bernard stated on August 4. “Sales of testing solutions for the novel coronavirus were strong across all regions in the first half of 2020, for research in the life sciences and among molecular diagnostics customers for use in identifying patients with COVID-19.”
The COVID-19-fueled growth of QIAGEN contrasts with the turbulence of last year, when the company overhauled its next-generation sequencing (NGS) activity around a 15-year partnership with Illumina aimed at increasing the availability and use of in vitro diagnostics in precision medicine by developing an array of diagnostic tests designed to run on Illumina’s Dx line of sequencers.
More dramatically, Peer Schatz, the company’s longtime CEO and chairman of the management board, said in October 2019, he was stepping down, as the company missed third-quarter revenue targets. Schatz’s departure touched off speculation among industry and market watchers that the company was ripe for a takeover.
A month later, QIAGEN disclosed that it had received “several conditional, non-binding indications of interest” as it began a review of strategic alternatives—a review it ended the following month by saying that it would instead continue as an independent business.
10M kits per week
Thermo Fisher has also benefited from COVID-focused growth, within a broader set of product offerings, Souda and colleagues noted, reporting that the company produces 10 million kits per week to meet surging demand.
“Management has guided COVID benefit to $1.1B in 3Q after ~$1.3B of benefit in 2Q. The testing benefit appears to be sustainable as PCR remains the gold standard for detecting the virus and TMO’s kits are flexible for manual, semi-automated to fully automated (3rd party built) setup,” Souda and colleagues added. “We continue to believe the $1.1B could prove conservative in 3Q.”
Thermo Fisher reported a 3.3% year-over-year rise in second-quarter net income, to $1.156 billion from $1.119 billion; and a 10% increase in revenue, to $6.92 billion from $6.32 billion.
“We see limited to no downside to TMO given its already broad diversification across its portfolio and continued benefit from COVID-19 testing through its TaqPath PCR kits franchise, which is now augmented by the Amplitude automated system,” Souda wrote.
“TMO is also supporting over 200 vaccine and therapeutic projects targeting COVID-19 via its products and pharma services division—thus we see ample upside for TMO throughout the pandemic.”
Strategy for growth
QIAGEN said its growth strategy included building a portfolio of COVID-19 diagnostic solutions by:
- Ramping up production of viral RNA extraction for use on QIAGEN’s QIAcube, QIAsymphony, and EZ1 platforms as well as third-party instruments
- Developing a variety of PCR tests for the QIAstat-Dx and NeuMoDx systems that are designed to enable COVID-19 detection while also analyzing samples for other respiratory infections
- Delivering universal NGS solutions for use with any sequencer—especially gene panels integrated with bioinformatics for analysis of SARS-CoV-2
Also on the COVID-19 front, QIAGEN said it was scaling up production capacity for reagents sold to other companies toward their own COVID-19 tests—as well as accelerating development of its own tests to detect the virus.
Those assays include a serology test and a rapid antigen test, both planned for launch in the second half of this year.
Setting sights on NeuRoDx
Another component of QIAGEN’s strategy calls for speeding up the commercialization of QIAstat-Dx and NeuMoDx—the latter by acquiring NeuMoDx, an Ann Arbor, MI, diagnostics developer which has stepped up its focus in recent months on COVID-19 tests.
QIAGEN already owns 19.1% of NeuMoDx shares, and said today it intends to acquire the remaining 80.1% stake for approximately $234 million. QIAGEN said it will disclose additional details of its planned acquisition when it reports third quarter results later this year.
“QIAGEN expects NeuMoDx to provide significant sales contributions in the future based on its differentiation as a rapid, integrated PCR-based platform that offers a dedicated COVID-19 test as well as an expanding menu of tests for other infectious diseases, such as a new multiplex test combining analysis for influenza, RSV (respiratory syncytial virus), and the SARS-CoV-2 virus, expected to be launched in the second half of 2020,” QIAGEN stated.
QIAGEN also said it will support the expansion of the QIAstat-Dx syndromic testing platform by investing in increased production capacity for system cartridges at sites in Hilden, Germany, and Barcelona, Spain—as well as by expanding the menu of tests on the platform for detecting various diseases.
Other components of QIAGEN’s growth strategy include:
- Sample tech: Developing additional sample technologies for liquid biopsies, including sample and library preparation for NGS and metagenomics applications; and new applications for research, clinical healthcare, and forensics based on 96-well plates.
- Tuberculosis (TB) detection: QIAGEN vowed to accelerate adoption of its QuantiFERON-TB test by advancing plans for launching QuantiFERON-TB Access (QFT Access), a new version of the TB detection test tailored to areas of the world with a high disease burden of TB. The company also cited its automation solutions for QuantiFERON-TB Gold Plus, based on partnerships with DiaSorin, Hamilton, and Tecan, and designed to support conversion from tuberculin skin tests to modern blood-based technology.
- Digital PCR: QIAGEN said it plans to enter the digital PCR market by launching QIAcuit, a set of new platforms designed to make the technology more accessible and attractive to labs worldwide. The company cited a pipeline of more than 1,500 customer leads and growing, as well as recent increases in production capacity.