(QGEN) Qiagen Expands with New Deals

In an attempt to expand its companion diagnostic portfolio for several types of new anti-cancer drugs, Qiagen (QGEN) recently entered into two different agreements with US biotech companies, namely Insight Genetics, Inc. and Personal Genome Diagnostics Inc. Through the agreement, the company seeks to obtain worldwide exclusive rights for biomarkers for gene mutation.

In collaboration with the Tennessee-based molecular diagnostics company Insight Genetics, Qiagen will provide a genetic test with a biomarker for non-small cell lung cancers (NSCLC) that express the abnormal anaplastic lymphoma kinase (ALK) gene.

Meanwhile, under the agreement with Maryland-based Personal Genome Diagnostics, Qiagen’s 89% subsidiary Ipsogen obtained rights to genetic testing for mutations of the IDH1 and IDH2 genes for brain cancers, acute myelogenous leukemia (AML) and other malignancies.

With the companion diagnostics market expected to remain a major growth driver going forward, several clinical laboratory companies in the US are coming up with their comprehensive portfolio of biomarkers and genetic tests.

Qiagen’s current initiatives to expand its biomarker portfolio through the addition of the ALK and IDH1/IDH2 biomarkers are expected to strengthen its position in the strongly growing molecular diagnostics market. This should bring in incremental sales for the company globally. Qiagen also plans to develop companion diagnostics to make these biomarkers available in combination with new medicines.

We are encouraged by Qiagen’s focus on strategic initiatives to drive growth and profitability in the companion diagnostics market. Its innovative tests in the genomic/esoteric arena, specifically in the area of cancer with a focus on the high-margin esoteric testing business, are expected to accelerate sales growth in next several quarters.

Major Peers in Companion Diagnostics Space

However, Qiagen is facing mounting competition in the molecular diagnostic space especially from players like Laboratory Corporation of America Holdings (LH) and Myriad Genetics (MYGN). LabCorp has already expanded its companion diagnostic portfolio with the ALK biomarker for Pfizer’s (PFE) Xalkori.

Xalkori received FDA approval along with a test (Vysis ALK Break Apart FISH Probe Kit) for certain patients with late-stage (locally advanced or metastatic) NSCLC who express ALK gene. This companion diagnostic test is exclusively available through LabCorp.

Myriad is also aiming to establish itself as a strong player in the companion diagnostic market. In 2011, the company entered into an agreement with BioMarin Pharmaceuticals (BMRN) to conduct BRCA1 and BRCA2 mutation testing on patients to be enrolled in the latter’s phase I/II clinical study of BMN 673. BMN 673 is a PARP-inhibitor drug candidate for the treatment of genetically defined cancers. Myriad also has agreements with Abbott Laboratories (ABT) and AstraZeneca (AZN).

Currently, Qiagen retains a Zacks #3 Rank (short-term Hold). Over the long term, we are Neutral on the stock, at par with LabCorp and Myriad.

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