Investor Alert: Qiagen grabs Spanish biotech STAT-Dx in quest for new and better diagnostic tests. My personal take.

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The News:

Molecular diagnostics company Qiagen NV (Hilden DEU) has agreed to acquire biotech STAT-Dx SL (Barcelona) for up to €153 million–over 3 times the total funding the Spanish company has raised to date–to produce fast and effective diagnostic tests for infections and cancer.

STAT-Dx focuses on developing tools to provide fast and accurate test results to patients. The aim of the deal is to combine the two companies’ technologies and develop a one-step, fully integrated molecular test for common syndromes using real-time PCR (polymerase chain reaction) and Qiagen’s recognized chemistry expertise.

Qiagen will pay $147M (€118M) to acquire all shares of STAT-Dx, with an extra $44M (€35M) if regulatory and commercial milestones are achieved. The aim is to launch a product in Europe in late 2018 and then in the US in 2019.

STAT-Dx was founded in 2010 in Spain’s hottest biotech hub, Barcelona, says It has been backed by leading healthcare investors including Ysios, Kurma Partners, and Caixa Capital Risc, which, “support the company in its development of ‘closer to care’ diagnostic tools for the fast and accurate diagnosis of infectious diseases and in critical care,” Labiotech adds. Its DiagCORE system combines molecular and immunoassay techniques in a single, small device.

Together, Qiagen and STAT-Dx will develop the fittingly named QIAstat-Dxsystem, which will be able to process up to 48 molecular targets simultaneously, allowing the diagnosis of serious respiratory or gastrointestinal infections, as well as cancers. The diagnostic test will be cost-efficient, easy-to-use, and compatible with all types of clinical samples, Qiagen claims. In just 1 hour, it should be able to identify the cause of a range of syndromes, which Qiagen hopes will boost the use of molecular testing.

Qiagen hopes that its new system that makes use of STAT-Dx’s technology will have several advantages over what is currently available, including the ability to deal with a range of different samples such as difficult-to-handle sputum samples from infectious patients.

This is where the DiagCORE system device’s onboard swab processing comes into play. The Dutch company claims the system will be highly cost-efficient due to low manufacturing expenditures and customizable results, meaning the analysis of irrelevant molecular targets can be avoided.

The field of cancer diagnostics is especially robust, with it well-established nowadays that earlier detection of the disease can significantly improve a patient’s chances of survival. French biotech Novacyt SA (Velizy Villacoublay) raised €9.7M last October to develop NovaPrep technology for cervical cancer but the company hopes to improve the diagnosis of infectious diseases too.

Labiotech speculates that Qiagen and STAT-Dx’s biggest competition in cancer diagnostics will come from the exciting liquid biopsies field, which is currently being led by ANGLE PLC (Surrey GBR) and its Parsortix system.

Qiagen, a holding company with corporate headquarters in Venlo, Netherlands, closed Tuesday off 2% at €25.84 in Frankfurt.

Steve’s Take:

About 20 years ago, my mother passed away after a long, hard-fought battle with stomach cancer. Her doctors said the traditionally poor prognosis for gastric cancer results from a dearth of symptoms until sufficiently late in the development of a tumor that metastasis to nearby lymph nodes and surrounding organs already has occurred.

Although new diagnostic tests may not get the same attention and investment excitement as new, innovative therapeutics, they remain a vitally important area of biotech R&D. This point was brought home to me in the case of my mother’s illness, and regrettably, the US still seriously lags other countries.

For example, some countries in Asia do a far better job diagnosing and treating stomach and esophageal cancers than the US. Five-year survival rates in South Korea and Japan are 68% and 60%, respectively, versus 33% in the US. (See study by the CONCORD program on cancer survival, published January 30, 2018 in The Lancet.)

And that’s exactly what caught my attention with this particular acquisition. It’s the re-emergence of the diagnostics field, especially in cancer, where there’s concrete clinical evidence that stomach cancer, for example, can be cured if caught early enough. Enter Qiagen and its attention-grabbing snag of STAT-Dx.

Let’s do some numbers.

Qiagen isn’t exactly a household name yet among US investors although it trades in New York under the symbol “Qgen.” But it’s no micro-cap. Its market capitalization of €5.91B (US$7.33B) places it squarely in the mid-cap category. Its beta of 0.68 suggests it’s less risky (volatile) than the overall market. And the fact that Qiagen was founded way back in 1996 is also comforting.

Qiagen’s share price has a 1-year return of -5%; ostensibly nothing to write home about. But that’s just 24 basis points higher than its recent 5-day performance, which saw the overall market crumble, starting Friday.


Steve's Take: I believe @Qiagen is a rational bet rather than an out-and-out speculative gamble. Risky, yes. So only for a modest portion of the highly risk-tolerant portfolio. Click To Tweet

Bottom Line:

What do the analysts think?

Among the 26 analysts who follow Qiagen, the mean recommendation is Overweight (just below Buy), with an average 12-month price target of €36.08. That’s an eye-popping potential upside of 40%.

Qiagen and STAT-Dx’s plan is particularly provocative because their DiagCORE system device hopes to make high-quality diagnostics far more simple and accessible. With Qiagen paying a healthy sum for the invisible Spanish biotech, the Dutch firm must be convinced that its technology will rule the day and investors will take a far more serious look at its potential ROI.

With analysts positing a potential upside of 40% based on today’s (February 6) closing price, and considering the strategic brilliance of the STAT-Dx tie-up, this name is a Buy. I believe it’s a rational bet rather than an out-and-out speculative gamble. Risky, yes. So only for a modest portion of the highly risk-tolerant portfolio.

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