Qiagen prepares to expand as earnings continue to grow

By Steven Overly
Monday, August 16, 2010

Qiagen's Germantown campus occupies a commanding footprint along Maryland Route 118. Tucked among trees and flanked by a suburban neighborhood, the mass of gray, industrial-modern buildings consumes 230,000 square feet on 27 acres of greenery.

But plans to substantially expand the biological research and testing company are underway, both physically at the site and financially around the globe. Executives aim to double Qiagen's revenue to $2 billion over the next five years.

That trajectory will require a mix of organic growth within the existing company, as well as strategic acquisitions, said Chief Financial Officer Roland Sackers, continuing a growth model used at least since the company relocated its American headquarters to Germantown in 2002.

Qiagen produces kits used in research and molecular diagnostic labs to test for swine flu and the human papilloma virus.

The company breaks ground next month on a 50,000-square-foot manufacturing plant. A similarly sized research and office tower, as well as a 10,000-square-foot employee eatery, will follow. By the projects' 2012 completion date, building capacity will catapult about 50 percent, said Sean Augerson, the company's senior director of North American operations.

The $52 million construction projects will be funded in part by a mix of state and county aid, and the company expects to add at least 90 jobs. It will also relocate manufacturing employees from its Gaithersburg property, Augerson said.

Last week, the company reported that second-quarter earnings increased 25 percent, to $38.5 million, compared with a year earlier. "If you look at the last couple of quarters, we have a track record of a double-digit growth rate," said Sackers, who splits his time between Germantown and Germany, where most of Qiagen's European operations are located.

The growth rate in the United States, which makes up about 50 percent of Qiagen's business, was outpaced in both Asia and Europe, Sackers said. He attributed the slower period, in part, to fewer doctor visits as many Americans remain unemployed and without health insurance.

The company's U.S. sales also took a hit when compared with the same period last year, when swine flu panic lifted demand for the company's test kits, he said.

Qiagen said it expects sales to pick up as more Americans join the ranks of the insured thanks to the new federal health-care overhaul. The company also intends to build on the acquisition-minded reputation it has developed. Sackers said Qiagen has picked up about 15 companies worldwide in the past three years alone, including Frederick's SABiosciences at the end of last year.

The 2007 purchase of Digene, a local molecular diagnostics company, for $1.6 billion was the largest acquisition.

John Sullivan, the research director at Boston-based health-care investment bank LeerinkSwann, said Qiagen's success comes in part from its ability to leverage its international distribution network.

"There are lots of examples of smaller genetic test companies that actually have good products but are terribly constrained in their ability to distribute the tests," Sullivan said. "There's a lot of precedent for companies that have the distribution channel ... to go add products by acquiring smaller companies."

Judy Britz, executive director of the Maryland Biotechnology Center, added that hungry companies like Qiagen are "a very important piece of the biotech fabric here in the state" because they provide investors who bankroll biotech companies with a way to recoup their investment.

"Qiagen has a very good history of turning technology into products," Sullivan said. "I think that today investors kind of appreciate Qiagen for what it is."

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