QIAGEN Management Buyout Synthetic DNA Business Unit Conference Call

Transcription

1 QIAGEN Management Buyout Synthetic DNA Business Unit Conference Call July 1, 2004

2 Welcome to QIAGEN s Conference Call Second Management Quarter Buyout and Synthetic Half Year DNA 2003 Business Conference Unit Call July 1, 2004 Conference Call Outline: -20 min Presentation Peer M. Schatz, President & CEO Patrick A. Weiss, CEO Operon Biotechnologies, Inc. Roland Sackers, CFO - 40 min Q&A session Due to time restrictions we would like to ask for only TWO questions per caller.

3 Forward Looking Statements Certain of the statements contained in this presentation may be considered forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. To the extent that any of the statements contained herein relating to QIAGEN's products and markets and operating results are forward-looking, such statements are based on current expectations that involve a number of uncertainties and risks. Such uncertainties and risks include, but are not limited to, risks associated with management of growth and international operations (including the effects of currency fluctuations), variability of operating results, the commercial development of the DNA sequencing, genomics and synthetic nucleic acid-related markets, as well as the nucleic acid-based molecular diagnostics and genetic vaccination and gene therapy markets, competition, rapid or unexpected changes in technologies, fluctuations in demand for QIAGEN's products (including seasonal fluctuations), difficulties in successfully adapting QIAGEN s products to integrated solutions and producing such products, the ability of QIAGEN to identify and develop new products and to differentiate its products from competitors, and the integration of acquisitions of technologies and businesses. For further information, refer to the discussion in reports that QIAGEN has filed with the U.S. Securities and Exchange Commission (SEC).

4 Structure of the Deal I On 6/30 QIAGEN announced the spin-out of its oligo business synthetic DNA products Operon and Sawady business Our rationale for the spin-out: while business is strong, direction has become different to QIAGEN s focus fewer products in portfolio which are of core interest to QIAGEN (speaks for partnership vs. owning) synthetic DNA was always a non-core business We were successful in making this business profitable again Handing over to an experienced management team headed by Patrick A. Weiss, Co-founder of Xeragon, Inc. and currently VP at QIAGEN.

5 Structure of the Deal II QIAGEN will keep: approx. 16% ownership in Operon Biotechnologies the sirna business preferred access to synthetic DNA product portfolio and manufacturing capacity QIAGEN will sell to Operon Biotechnolgies Synthetic DNA business (assets and business) Custom oligonucleotide business Modified oligonucleotide business Shelf products (AROS) Antibody and peptide business (small, in other line)

6 Deal Summary + Cash (received June 30, 2004) USD 17.8 million + Note USD 6.5 million Subtotal USD 24.3 million + Preferred access X= significant + Preferred purchasing terms Y= significant Total = 24.3+X+Y In addition QIAGEN retained 16% in Operon (approx) = USD 4 million Shares issued for Operon Technologies, Inc in 2000 approx. Sawady group in 2001 approx. 2.8 million 0.9 million

7 QIAGENs Business Divisions Consumables Synthetic DNA Biotechnologies, Inc. (New Company) 10% Others Instrumentation

8 Next Steps? Starting June 30, 2004 the following companies and/or related assets are transferred: QIAGEN Sciences KK (former Sawady) QIAGEN Operon GmbH (Cologne) QIAGEN Operon Inc. Alameda and Germantown Operon Biotechnologies will manufacture sirna and mirna exclusively for QIAGEN. (contract manufacturing agreement, very attractive terms) All other sirna functions (research, marketing, sales etc.) remain with QIAGEN: sirna business stays with QIAGEN Transaction effective June 30, 2004 QIAGEN will account for Operon as a minority investment

9 60% 50% 40% 30% 20% 10% 0% Q Q Q Q Q Q Q Q Q Q Q Q Q Growth by Product Line -10% -20% -30% Period Consumables Instruments Synthetic NA Growth vs prior year calculated under actual currency rates

10 Different Businesses Differences Synergies Differences Proprietary Often used in combination Non-proprietary (few exceptions) Standardized Component of products Custom made Highly optimized Many transactions with market Fast turnaround times (order to receive) High barrier to entry Competitve barriers low Brand equity in focus Flanking products Spin-out and partnership is a positive step for QIAGEN and allows QIAGEN to increase focus on its core business QIAGEN: Operon: High value adding solutions for preanalytical sample preparation High quality, fast turnaround, cost leading DNA oligonucleotide products

11 Three Different Options: a. Partner b. Sell the division c. Turn around business

12 QIAGEN Operon is strong QIAGEN Operon, Cologne grows from 0 and in 3 years becomes # 2 in Europe QIAGEN KK is today # 2 in Japan QIAGEN Operon Inc. compensates the losses of the major customers in the US with smaller customers remains being # 2 in the US and outgrew competition

13 Results We have access to what we want and need at very attractive terms (preferred access and partnership) QIAGEN boosts focus on core business Improving margins Lower volatility/cyclicality Increases perceived value of QIAGEN brand equity (premium business) No changes to QIAGEN s synthetic RNA business (QIAGEN keeps sirna business)

14 QIAGEN Gene Silencing Agreements QIAGEN and Intradigm (July 2003) Partnership for R&D of sirna for drug discovery and sirna therapeutics QIAGEN and Novartis (August 2003) Supply agreement on a genome wide sirna library QIAGEN and Affymetrix (October 2003) Collaboration on sirna research using GeneChip technology QIAGEN and Novartis (December 2003) QIAGEN licensed from Novartis novel algorithm for selection of highly functional sirna target sequences QIAGEN and AstraZeneca (June 30, 2004) Supply agreement on sirna products used in gene silencing applications

15 2004 Quarterly Revenue Guidance Guidance announced Feb 2004 Q3 Q4 Revenues (US$m) Operating Income (%)* 23-25% 24-26% EPS in $ per share* Sold to Operon Biotechnologies New Guidance Revenues synthetic DNA Revenues Other 2 2 Op.Inc. (%)* Syth. DNA 15% 15% Op.Inc. (%)* Other <10% <10% EPS in $ per share* Revenues Operating Income (%)* 24-26% 24-27% EPS in $ per share* *excluding restructuring charges

16 Accounting and Other As of July 1, QIAGEN accounts for its minority investment in Operon Biotechnologies as a cost method investment. Accordingly, QIAGEN will not reflect Operon Biotechnologies sales to third parties nor its income generated from third parties. Certain expenses will be charged to Operon Biotechnologies such as rent and administrative fees during the transition period. QIAGEN deconsolidates operations and expects to incur charges in the amount of approximately $ $0.03 in Q Impact on margins of sirna business due to outsourcing of manufacturing immaterial

17 QIAGEN QIAGEN is the market and technology leader in nucleic acid sample handling, separation and purification. Our mission is to provide an outstanding contribution to our customers success by innovating and supplying our products and services in all areas where they require this expertise. Our products and technologies enable our customers to achieve breakthroughs in research and new standards in healthcare which both contribute to improving lives. By focusing on increasing our customers success, the exceptional talent and commitment of our employees bring excellence to all segments of the value chain and outstanding success to QIAGEN.

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