Qiagen/Illumina: Earthquake in NGS IVD market

The announcement of the 15-year partnership of next generation sequencing (NGS) market leader Illumina and QIAGEN came after Illumina cut its 2019 guidance from 13-14% prior guidance and 13% consensus to 6% FY revenue growth after reporting a second-quarter revenue loss of approximately US$52m (US$835 million, lower than the Refinitiv consensus estimate for US$887.9m). However, Illumina expects acceleration of growth in H2/2019.

The collaboration with Qiagen, a molecular diagnostics and PCR/NGS-based companion diagnostics (currently 7 of 38 FDA approved assays) specialist, is set to add long-term expansion potential, particularly in the growing market for companion diagnostics for targeted cancer therapies and immuno-oncology, which is projected to triple from US$3.153bn in 2018 to US$10.656 billion in 2025, according to Energias Market Research. The emerging NGS-based decision support diagnostics market is currently dominated by Roche/Foundation Medicine, but other CDx test developers such as Agilent Technologies, Thermo Fisher Scientific, MolecularMD, and  Myriad Genetics keep an eye on the huge market opportunity.

According to the new partners, their long-term collaboration is aimed at expanding the availability and use of NGS-based in vitro diagnostic (IVD) kits and companion diagnostics for clincical decision making. In an ad-hoc press release, Qiagen announced that it will "suspend ongoing NGS-related instrument development activities" including its proprietary GeneReader NGS System, which will be supported for existing users, in order to "expanding its offering of universal NGS consumables solutions for use with any sequencer", particularly NGS market leader Illumina’s sequencing hardware.

For this purpose QIAGEN will receive non-exclusive rights to develop and market IVD kits worldwide for use on Illumina’s MiSeq™ Dx and NextSeq™ 550Dx systems. The agreement also includes rights to extend the partnership to commercialisation of Illumina’s development stage TruSight oncology tests, which have FDA breakthrough device designation and which Illumina wants to establish as diagnostic standard ifor comprehensive genomic profiling of tumour samples for immunotherapy. Illumina’s TruSight Oncology 500 (TSO 500) test is an NGS tumor profiling assay designed for detection and analysis of known and emerging solid tumor biomarkers, it uses both DNA and RNA from subject tumor samples to identify key somatic variants underlying tumor progression, such as small DNA variants, fusions, and splice variants. TruSight Oncology 500 can measure tumor mutational burden (TMB) and microsatellite instability (MSI), targeting 523 genes for SNV and indel detection and 55 genes for fusion and splice variant detection.Their was no announcement made concerning the third-generation sequencers for PacBio, whose acquisition by Illumina is still outstanding.

As part of the deal,  QIAFEN will shift "its Global Operations organisation to a regional manufacturing structure and expanding the scope of activities at QIAGEN Business Services (QBS) centers in Wroclaw, Poland, and Manila, Philippines" by the end of 2019. At the day of the announcement of the collaboration, Per Schatz, CEO of QIAGEN during the past 27 years, said he will leave its post at QIAGEN to pursue new opportunities. Thierry Bernard, Senior Vice President Molecular Diagnostics, was named interim-CEO.

Financial details of the deal were not disclosed. QIAGEN plans to take a pre-tax restructuring charge of about US$260-265m predominantly in results for Q3/2019. This charge includes approximately US$195-200m of non-cash items that are primarily related to the decision on NGS instrument development activities and comprised of charges for the impairment of software and instrument development, licenses, partnership valuations and other assets.