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Unlock Qiagen’s Fair Value
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2
Table of Contents3
1 Executive Summary
2Strong Secular Trends Support Qiagen’s Revenue and Earnings Growth
Over the Short, Medium and Long Term
3Thermo Fisher’s Offer Significantly Undervalues Qiagen’s Standalone
Value
4 Davidson Kempner Will Not Tender into this Wholly Inadequate Offer
The Offer Has Capped Qiagen’s Stock Causing it to De-rate Materially4
We fully expect the Company to
be forced to continue to upgrade
earnings guidance
1
• COVID-19 has driven a material sector re-rating
• Current P/E of 19.8x(1) is materially below:
• Historical trading range of 22-24x
• Peers trading at 35-40x
• Original March 3 offer implying 29.6x
• Current EV/2020E EBITDA of 14.7x(2) materially below precedent transaction multiples
• The Company has a leading franchise in Molecular Diagnostics and Life Sciences and is well
positioned to capitalise on:
• Short and medium term tailwinds from COVID-19
• Sustainable, long term secular trends
• The Company was slow to realize financial impact has recently repeatedly upgraded guidance yet
remains conservative
• We believe the standalone fair value for the Company to be €48-52 per share
• The offer provides for no control premium or participation in substantial synergies
• Share price is capped by offer
Offer materially undervalues the
Company
Company has materially de-rated
across all metrics despite
takeover situation
2
3
• DK is a significant shareholder and considers the offer wholly inadequate
• DK will not tender its shares and urges all shareholders not to tender
• DK fully expects the offer to fail
• DK believe Qiagen offers significant upside at current price levels
DK holds a 5.1% stake and will
not tender into this wholly
inadequate offer
4
1. Based on DK 2020E EPS - $2.55
2. Based on DK 2020E EBITDA - $850m
Table of Contents5
1 Executive Summary
2Strong Secular Trends Support Qiagen’s Revenue and Earnings
Growth Over the Short, Medium and Long Term
3Thermo Fisher’s Offer Significantly Undervalues Qiagen’s Standalone
Value
4 Davidson Kempner Will Not Tender into this Wholly Inadequate Offer
Leading Franchise Benefitting from Key Secular Trends
• COVID-19 has amplified the strength and
importance of the Company’s diagnostics and
testing franchise and its leading RNA kits,
machines and reagents are critical in all stages of
the pandemic
• The Company’s products have become
increasingly important to governments and
healthcare institutions as they seek to mitigate
the risk of future pathogens and protect their
citizens and economies. Particularly, the
Company’s syndromic testing products and
broader life science portfolio will be crucial in this
battle going forward
6
The Company has strong leadership positions in major scientific
and clinical applications
Liquid biopsy: No.1 in sample technologies
Latent TB detection: No.1 modern gold standard
test
Precision Medicine: No.1 in pharma CDx
partnerships and FDA approvals
Real-world patient data: Strengthening No.1
position in genomic data informatics
Microbiome: No.1 in sample technologies
CRISPR: No.1 in sample technologies
The Company is positioned to be a beneficiary
of key sector growth trends
COVID-19 has highlighted the strength and importance
of the Company’s diagnostics business
53.3%
12.0%16.4% 16.1%
Qiagen bioMérieux Danaher ThermoFisher
Material Uplift to the Diagnostics Industry from COVID-19
1. Defined as broker consensus as at 28-Feb-20 unless otherwise stated
2. Based on H1 figures
3. Vs. Consensus at 31-Mar-20 to adjust for revised EPS guidance of acquired GE Biopharma business
4. Based on change in Jefferies H1 forecast from 26-Feb to 10-Jul as actual H1 EPS not released
7
Medium to long-term impact of COVID-19Q2 2020 ‘beats’ vs pre-COVID-19 consensus(1)
Revenue
EPS
(2) (3)
(3)(4)
“Well, if I ask myself what COVID is going to leave us once COVID will leave us. I think it
will make a diagnostic known to everybody. And so I believe we are going to encounter
a very positive trend in certain geographies but including Europe, not only the US…So I
believe that also strategically DiaSorin mid-, long term is positioned very well to catch
that opportunity
What is the long term legacy [of COVID-19]? More systems installed, more hospital base
in the primary market, [more] visibility as an innovative company”
Carlo Rosa, CEO DiaSorin, Q1 2020 transcript
“I’m not an epidemiologist, but my prediction is that COVID-19 is here to stay in one form or
another…we need to test for COVID for the months or years to come”
Alexandre Mérieux, CEO bioMérieux, Q1 2020 transcript
“Clinicians are going to be looking for the opportunity in doing flu testing to also be doing
COVID-19 testing…the ability to run those tests on the same platform and same
cartridge…it’s driving a significant increase in our installed base”
Thomas P. Joyce, CEO Danaher, Q1 2020 transcript
“As we talk to governments and we talk to our customers…it’s a fantastic industry with
great market growth characteristics. You’re seeing the industry perform well in this
environment. …When the dust settles, the commitment to life science research, health
care infrastructure, is going to be even better over time
And so I’m very bullish about what the long-term benefits will be…But if I take the long-
term perspective, I’m very optimistic for what our industry holds and for the strong
competitive position that we’ve built in serving that industry”
Marc Casper, CEO Thermo Fisher, Q2 2020 transcript
13.9%
9.1%
5.7%
4.1%
Qiagen bioMérieux Danaher ThermoFisher
1,568
2,433
2,074
588
9874
(217)
n.q. n.q. (37)
2020E salesexcluding the
impact of COVID-19
Samplepreparation /
RNA extractionkits
QIAstat Third partyreagents
COVID-19revenue hit
QIAsymphony COVID-19antibody test
FX impact 2020E Sales (DKForecast)
2021 Sales (DKForecast)
COVID-19 Revenues Represent a 32% Net Uplift to Qiagen’s Base Business…
1. 2020E sales using broker pre-COVID-19 forecasts
The surge in
molecular COVID-
19 testing is driving
demand for sample
preparation and
related
consumables
Higher COVID-19-
induced demand
has led to a
continued increase
in cartridge
production capacity
Third party test
makers, such as
Roche, Abbott,
and Hologic,
acquiring reagents
from the Company
Revenue hit on
existing business
from customer
disruptions e.g.
lab shutdowns
(1)
8
?
COVID-19 impact; c.$760m
The increased
utilisation rate of
molecular
diagnostics,
requiring sample
preparation,
should drive
placements of
QIAsymphony
Qiagen plans to
launch a serology
test and a rapid
antigen test in the
second half of
2020
32% net uplift to base revenues in 2020 due to COVID-19
Potential for
further upside
17% yoy
increase
1.53
1.60
2.00
2.07
1.71
2.36
2.65
2.55
2.91
1.30
1.50
1.70
1.90
2.10
2.30
2.50
2.70
2.90
3.10
04-Feb 18-Feb 03-Mar 17-Mar 31-Mar 14-Apr 28-Apr 12-May 26-May 09-Jun 23-Jun 07-Jul 21-Jul
QIA 2020E EPS QIA 2021E EPS DK EPS 2020E DK EPS 2021E
… Yet the Company was Slow to Realise the Financial Opportunity, Prematurely Entered into a Deal with Thermo, and Has Been on the Back Foot Ever Since
9
1. Based on mid-points of outlook ($0.28-0.29) and preliminary numbers ($0.34-0.35)
2. Fairness opinion dated 16 July 2020 based on updated management projections have been released 22 July 2020
3. Supplemental Reasoned Statement dated 22 July 2020
4. Midpoint of $1.52-1.54
• Did not reflect
increase in
demand in
outlook
• Deal struck on
financial basis
excluding
COVID-19
impact
(4)
• Q1 numbers
beat outlook:
• Preliminary Q1
EPS +21%(1) vs.
outlook
• Increases Q2
adjusted EPS
guidance to
$0.40
• Suspends 2020
outlook for the
full-year
4 February
3 March
9 April
5 May Q2 numbers beat
raised guidance:
• Q2 EPS $0.55-
0.56 vs. $0.40
guidance
(+39%)
9 July
13 July
• Full-year outlook of at least
$2.00 provided; assumes
COVID-19 testing will be
required for the longer term
22 July
• Management provided
revised projections
just 3 days after 2020
outlook for revised
fairness opinions dated
16 July(2) on SRP(3)
10 July11 June 23 July
DK holding
1.01%
DK holding
3.00%
DK holding
5.08%
?
?
0.34
0.56
0.55
0.62 2.07
2.28
2.55
Q1A Q2A QIA Q3E QIA Q4E QIA 20E Berenb. 20E DK 20E
The Company Will Once Again be Forced to Upgrade its Numbers
The Company has a persistent history of providing highly conservative guidance which does not
appropriately reflect the positive impact of COVID-19 on the business
1. Mid-point of guidance of $0.52-0.58 for Q3 2020
2. Implied EPS based on EPS projection for 2020E
10
EPS $/share
(1)
(2)
2020E EPS
-19%
-9%
Implies that earnings
remain broadly flat
across Q3 and Q4 vs
Q2 20
This is highly surprising to us given two sequential improvement factors in
Q3 and Q4 2020 vs Q2 2020:
Ramp-up in RNA kit volumes: Qiagen was producing 12 million
kits per month at 30 June 2020. This will increase to 20mn per
month in Q4
Base business improvement: based on commentary from peers
and as economies emerge from lock-down we would expect the
decline in Qiagen’s base business to soften
Given the ramp in RNA kits, the guidance implies that Qiagen’s base
business will decline > 30% in H2 (worse than the Q2 decline)
We believe its clear that Qiagen will have to revise higher their 2020
EPS target once again
Table of Contents11
1 Executive Summary
2Strong Secular Trends Support Qiagen’s Revenue and Earnings Growth
Over the Short, Medium and Long Term
3
Thermo Fisher’s Offer Significantly Undervalues Qiagen’s
Standalone
Value
4 Davidson Kempner Will Not Tender into this Wholly Inadequate Offer
Qiagen is One of the Largest COVID-19 Beneficiaries Among Its Peer Set…
12
Core peers Broader peers
Revenue
EPS
1. Pre-COVID-19 Factset consensus projections as at 28-Feb-20; Post COVID-19 Factset consensus projections as at 21-Jul-20 unless otherwise stated
2. Reflects change in consensus projections as at 28-Feb-20 and latest DK projections
3. Reflects change in consensus projections as at 28-Feb-20 and Berenberg projections
Pre-COVID-19 vs Post-COVID-19 2020E Consensus Sales and EPS Variance(1)
Core peers, like Qiagen, are highly
exposed to COVID-19-induced
sectoral tailwinds and are expected to
significantly benefit from COVID-19
Qiagen
(3) (3)
(3) (3)
(2)
(2)
68.8% 69.1%
28.9%
(1.4%)
9.3%
(14.7%) (11.5%) (14.6%)
Qiagen DiaSorin bioMérieux Danaher Thermo Fisher Bio-Rad PerkinElmer Hologic
31.2%
24.2%
15.0%
(0.2%)
4.3%
(5.9%)(3.3%)
(5.8%)
Qiagen DiaSorin bioMérieux Danaher Thermo Fisher Bio-Rad PerkinElmer Hologic
13
… And Yet Qiagen has Experienced a Material De-rating Relative to Peers Despite Being Subject to a Takeover
1. Bloomberg consensus EPS for all peers as of 02-Mar-20
2. Bloomberg consensus EPS for Broader peers as of 09-Jul-20
3. Davidson Kempner research for Qiagen
4. Berenberg public estimates for Core peers, which best reflects COVID-19 impact
5. Prices as at 02-Mar-20 and 24-Jul-20 divided by 2020 EPS estimates on those respective dates
Qiagen was trading at a discount to peers prior to Thermo Fisher’s offer, and has further de-rated relative to peers as Qiagen’s share price
has been capped by Thermo Fisher’s offer and is out of sync with the Company’s fundamentals
(21%)
(8%)
21% 23%
29%
64%
37%
46%
Qiagen DiaSorin bioMérieux Thermo Fisher Danaher BioRad PerkinElmer Hologic
Core peers Broader peersQiagen
P/E multiple on 24-Jul-20 vs. 02-Mar-20(1)(2)(5)
(3) (4)(4)
24.0
29.0
34.0
39.0
44.0
49.0
54.0
Mar-20 Apr-20 May-20 Jun-20 Jul-20
Qiagen Core peers Broader peers
57%
35%
31%
Qiagen’s Stock Price Has Been Capped by the Current Offer
1. Market data as at 24-Jul-20; Core peers include bioMérieux and DiaSorin; Broader peers include Danaher, Hologic, PerkinElmer, Thermo Fisher and Bio-Rad
2. Based on assumption that without Thermo Fisher offer, Qiagen would have appreciated by same average % as Core peers between 2 March 2020 and 24-Jul-20
14
Qiagen share price vs. peers from pre-offer (2 March) to today (EUR)(1)
1
Core peer share prices
increased by 57% from the
initial offer date (2 March) in
line with increased
fundamentals
No de-rating implied
2
The Company’s share price is
limited by the €43/share offer
The Company only extracted
a 10% increase against its
own conservative 29%
increase in EPS guidance
Thermo Fisher make
initial offer at
€39/share
Thermo Fisher
increase offer to
€43/share
bioMérieux, Danaher, Hologic,
PerkinElmer, Thermo Fisher and
Bio-Rad are trading at or near
all-time highs
€7/share
delta(2)
Amended offer (€43)
Initial offer (€39)
3
Assuming the Company’s
share price appreciated by
57% since 2 March, in line
with core peers, implies a
current share price of
€49/share
Qiagen Qiagen DK
DiaSorin
bioMérieux
DanaherThermo Fisher
PerkinElmer
Hologic
Bio-Rad
5.0x
10.0x
15.0x
20.0x
25.0x
30.0x
35.0x
40.0x
0.0% 5.0% 10.0% 15.0% 20.0% 25.0%
20
21
E E
V /
EB
ITD
A
19A-21E sales CAGR (%)
Qiagen Trades at Completely the Wrong Multiple Due to the Cap…
1. Market data as at 24-Jul-20; Regression includes core peers (bioMérieux and DiaSorin) and broader peers (Danaher, Hologic, PerkinElmer, Thermo Fisher), Bio-Rad excluded since the company withdrew guidance and referred to a material adverse short-term impact; R2 38%
2. Sales growth and 2020E EBITDA based on Supplementary Reasoned Position Statement management forecasts as of 22-Jul-20
3. Sales growth and 2020E EBITDA based on DK assumptions
15
Sales growth (19A-21E) vs 2021E EV / EBITDA(1)
Multiple implies a negative CAGR 19A-21E
The cap imposed by Thermo
Fisher’s offer values Qiagen at
a significant discount to its
peers
(2)(3)
P/E Range (x)
Historical Range (NTM) Peer Multiples
Core / broader peer range
22.0x 23.0x 24.0x 35.0x 40.0x
QIA 20E EPS 2.07 39.2 41.0 42.7 62.3 71.2
Berenberg 20E EPS 2.28 43.2 45.1 47.1 68.6 78.5
DK 20E EPS 2.55 48.3 50.5 52.6 76.8 87.7
QIA 21E EPS 2.65 50.2 52.4 54.7 79.8 91.2
Berenberg 21E EPS 2.70 51.1 53.4 55.7 81.3 92.9
DK 21E EPS 2.91 55.1 57.6 60.1 87.6 100.1
EP
S (
$/s
hare
)…Regardless of what Projections and Methodologies are used
1. Core peers: bioMérieux and DiaSorin. Broader peers: Danaher, Hologic, PerkinElmer, Thermo Fisher, Bio-Rad
2. As per Supplemental Joint Reasoned Position Statement
3. As per Berenberg research ´published 14 July 2020
16
Qiagen standalone valuation range (€/share)
(2)
(2)
(3)
(3)
(1)
A valuation of Qiagen based on its historical P/E multiple and/or current P/E multiples for core peers and broader peers
underscores the inadequacy of Thermo’s offer
51
45
46
56
49
51
P/E; based on Qiagen historical multiples
Unaffected share price appreciation
Discounted cash flow analysis
1. Qiagen’s unaffected share price growing in line with peers since 02-Mar-20
2. Qiagen’s historical P/E multiple range applied to DK projected 2020E EPS of $2.55
17
€43/share
offer price
Qiagen’s Fair Value is €48-52 and the Current Offer is Wholly Inadequate
High end: Less
conservative
operating model with
a 6% WACC
Implied value per share of Qiagen
(1)
Figures in € DK standalone valuation range
€48-52
Low end: More
conservative
operating model
with a 7% WACC
Low end: Average of
core and broader
peers share price
growth (44%)
High end: Core
peers share price
growth (57%)
Low end: 22.5x
P/E multiple
High end: 25.0x P/E
multiple
(2)
There is very little downside risk to rejecting Thermo Fisher’s amended offer of €43/share
DK believe Qiagen offers significant upside at current price levels
All peers trading above the implied offer P/E
Qiagen’s historical P/E range implies a substantial premium to the current offer
3 March Offer: €39/share Revised Offer: €43/shareChange
Absolute / PercentageMetric Statistic Metric Statistic
P/E 2020EConsensus EPS
$1.5529.6x(1)(2)
DK EPS
$2.5519.8x(1)(3) (9.8x) / (33%)
P/E 2021EConsensus EPS
$1.6527.7x(1)(2)
DK EPS
$2.9117.4x(1)(3) (10.0x) / (37%)
EV / EBITDA 2020EConsensus EBITDA
$562m20.3x(1)
DK EBITDA
$850m14.7x(1) (5.6x) / (28%)
EV / Synergised EBITDA 2020EConsensus EBITDA
$762m15.0x(1)
DK EBITDA
$1,050m11.9x(1) (3.1x) / (21%)
2021E EPS accretion
($200m synergies) 4.3% 8.1% 380bps / 88%
2021E EPS accretion
($310m synergies)(4) 5.8% 9.5% 370bps / 64%
2021E ROIC
($200m synergies) 5.4% 7.2% 180bps / 33%
2021E ROIC
($310m synergies)(4) 6.3% 8.1% 180bps / 29%
Compared to 3 March, the Deal is Today Substantially More Beneficial to Thermo Fisher
1. Based on EUR/USD as of 24-Jul-2020 of 1.17
2. Based on €39/share offer divided by consensus EPS and EBITDA estimates at the time of the deal
3. Based on revised €43/share divided by latest DK EPS and EBITDA forecasts
4. DK estimate of revenue and cost synergies based on DK research combined with precedents in the space (e.g. Danaher/Cepheid for which synergies were 15% of target sales vs. Qiagen / TF where synergies are 10% of target sales)
18
Table of Contents19
1 Executive Summary
2Strong Secular Trends Support Qiagen’s Revenue and Earnings Growth
Over the Short, Medium and Long Term
3Thermo Fisher’s Offer Significantly Undervalues Qiagen’s Standalone
Value
4 Davidson Kempner Will Not Tender into this Wholly Inadequate Offer
Davidson Kempner Will Not Tender into this Wholly Inadequate Offer
• The Qiagen board rushed to initiate a strategic review at a point in time when the Company was in a
particularly weak position
• This encouraged the receipt of highly opportunistic bids
• Since the initial deal was agreed, the Company’s fundamental performance has been extremely strong
• Company continues to play catch-up with actual performance and are continuously forced to upgrade
their stale and overtly conservative guidance
• Further upgrading of guidance is inevitable
• Company has materially de-rated despite being under offer
• Trades at a significant discount to historic ranges, peers, the original offer and precedent transactions
• DK has a significant stake of 5.1% and considers the offer as wholly inadequate
• We will NOT be tendering our shares and urge other shareholders to likewise reject the offer
• We fully expect the current offer to fail
• DK believe Qiagen offers significant upside at current price levels
20
21
Appendix
Table of Contents
Thermo Fisher / Qiagen, 14.7x (1)
Exact Sciences / Genomic Health, 30.2x
Danaher / GE Pharma, 17.8x
Zoetis / Abaxis, 39.4x
PerkinElmer / EUROIMMUN, 20.0x
Thermo Fisher / FEI, 19.7x
Abbott / Alere, 16.8x
Thermo Fisher / Affymetrix, 20.6x
Danaher / Pall, 20.8x
Merck KGaA / Sigma-Aldrich, 19.8x
Thermo Fisher / Life Tech., 13.7x
Agilent / Dako, 21.3x
Hologic / Gen-Probe, 19.7x
Thermo Fisher / Phadia, 16.6x
Thermo Fisher / Dionex, 20.5x
Merck KGaA / Millipore, 17.4x
Agilent / Varian, 12.1x
Siemens / Dade Behring, 15.2x
Qiagen / Digene, 41.9x
Inverness Medical / Biosite, 18.8x
Siemens / Bayer Diagn., 14.6x
Siemens / Diagnostic Prod., 11.6x
Millipore / Serologicals, 19.9x
0x
5x
10x
15x
20x
25x
30x
35x
40x
45x
50x
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Core peers
Broader peers
Precedent Transactions are an Inappropriate Basis to Assess Thermo’s Amended Offer Given the Long-term and Short-term Sector Re-rating
1. Thermo Fisher/Qiagen EV / EBITDA multiple based on DK 2020E projected EBITDA
Transactions and transaction multiples (EV / LTM EBITDA) based on Reasoned Position Statement 22 July 2020
Core peers include bioMérieux and DiaSorin; Broader peers include Danaher, Hologic, PerkinElmer, Thermo Fisher and Bio-Rad
22
The sector re-rating in 2020, as a result of COVID-19, renders
precedent transaction multiples irrelevant on the basis the growth
projections for key industry players are now fundamentally
different to comparable projections at the time of such precedent
transactions
EV / EBITDA
Top Related