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Qiagen's stock dives as Q3 losses spell trouble in China for life science tools

Life sciences tools maker Qiagen NV delivered a flurry of news amid lower-than-expected preliminary third-quarter earnings results that potentially signal trouble on the horizon for its peers who generate sales in China.

Qiagen's stock fell about 20.7% to $25.41 as of market close at 4:02 p.m. ET.

The Dutch company's larger peers, including Thermo Fisher Scientific Inc., Danaher Corp., Mettler-Toledo International Inc., Agilent Technologies Inc. and Waters Corp. were all trading down on Oct. 8 in the range of 2% to 6%. Waters, which has seen negative impacts from policy changes in China affecting the company's generic-drug development business, had the greatest stock movement, ticking down about 6.9% to $208.01 as of 4:02 p.m. ET. Thermo Fisher was close behind, its stock down by about 6% to $271.93 at market close — even though the tools giant's executives had said during the second-quarter earnings call that "conditions are fine" in China and its business should not slow down.

Qiagen, which makes laboratory and drug development equipment including clinical diagnostics, announced what Jefferies analyst Peter Welford described as a "triple whammy mixed bag," as it will also see its CEO exit.

As of Oct. 7, Qiagen said it expects total net sales growth of about 3% at constant exchange rates for the third fiscal quarter, coming in short of the previously stated guidance of 4% to 5% growth. China was "significantly weaker-than-expected," Qiagen said in its press release, adding that, excluding China, total sales growth was about 6%. Qiagen saw upwards of a 25% decline in China, translating to a loss of approximately $120 million in revenues, according to J.P. Morgan analyst Tycho Peterson.

"We are disappointed with the sales performance in the third quarter of 2019," Qiagen CFO Roland Sackers said.

Qiagen's third-quarter EPS is expected within the range of 35 cents to 36 cents, at constant exchange rates. The company will report full third-quarter earnings results Oct. 30.

Peterson attributed Qiagen's declines in China to slower hospital ordering patterns on in vitro diagnostic devices, which examine specimens collected from the human body, and molecular tests.

"The >25% regional decline raises obvious questions about the health of the China IVD and molecular testing markets, in addition to [Qiagen's] ability to execute on long-term revenue acceleration plans, with the CEO departure adding more uncertainty to the near- and medium-term outlook," Peterson wrote Oct. 8.

Qiagen also announced a 15-year partnership with gene sequencing giant Illumina Inc. to develop next-generation sequencing in vitro diagnostic kits. Qiagen will pay Illumina a platform access fee for the San Diego-based company's technology and will suspend its own next-generation sequencing instrument development activities. Financial terms of the agreement were not disclosed.

Leerink analyst Puneet Souda noted that the team-up would be a positive for Illumina's leadership position in the sequencing field. However, Illumina was also trading down by approximately 4.4% $288.36 as of market close.