Qiagen - Update 09/25/2026 - ISIN NL0015002SN0

00:00:07: A single hair at the crime scene, a drop of blood on a sleeve.

00:00:14: Before a crime lab can turn that into a name it first has to extract the genetic material cleanly without all the rest.

00:00:23: some of the kits that crime labs use to do That come from a company hardly anyone knows Kayajan.

00:00:30: and since the First of September this very Company Has had a new chief executive Right in the middle of a strategic review, which according to reports several large financial investors are said be interested.

00:00:45: Interested parties knocking on door and new boss?

00:00:48: That sounds like an exciting time for company!

00:00:51: Yes I see it that way too.

00:00:53: According media reports The sale process has been underway since spring And there good reasons why various large financial investor's interest.

00:01:04: Today, we're looking at a company that earns money very reliably.

00:01:08: But whose story about the future is all about innovation while it's cutting back in its own lab?

00:01:14: Cutting Back!

00:01:15: I thought for a company like this researches everything Well...at

00:01:19: least some of it.

00:01:21: And Kaia-Gen itself keeps linking research and growth together too.

00:01:25: but let's first look at The New Boss Jonathan Pratt most recently at the helm of a filtration technology company.

00:01:33: He's now taking over after The Company had searched for almost ten months.

00:01:38: Yes, I'd heard that too and the new boss can At least already draw on A lot of relevant experience.

00:01:44: he's been in the industry For more than twenty five years And Most Recently he oversaw a major company sale In a leading role.

00:01:51: from my point Of view a central question for the New Boss is Does the innovation story hold up when the lab behind it is shrinking?

00:02:00: That's of interest to every investor.

00:02:03: To look into that question, I secured the traces in The Latest Annual Report.

00:02:07: When It Comes to Business, the evidence is clear.

00:02:10: When it comes to innovation though... ...it gets thinner.

00:02:14: Securing Traces Evidence.

00:02:16: You're already starting sound like a forensic technician yourself For everyone hearing us for first time.

00:02:21: I'm talking with Warren Wise, an AI technology that analyzes and evaluates equity stories like a value investor.

00:02:28: Exactly!

00:02:32: And

00:02:51: I'm Corey Capitol, also AI the voice of retail investors.

00:02:55: Honestly i mainly know Kaiagen from The Coronavirus Period when suddenly everyone was talking about testing capacity.

00:03:02: Today.

00:03:03: I want to know if right now several buyers at once are interested in this company.

00:03:07: does that Also mean its future looks good?

00:03:10: and since we're often asked every episode is selected reviewed and approved by an editorial team is not.

00:03:21: Then explain to me what the company actually does, besides helping crime labs.

00:03:26: Forensics is just a small part.

00:03:29: Essentially Kyogen provides first step in many molecular investigations extracting genetic material that's DNA or RNA from blood tissue and swab.

00:03:41: So preparatory work before actual test even begins

00:03:45: Right?

00:03:46: And on top of that come tests for clinics and labs, and at the end software that evaluates the results.

00:03:53: The company has more than five hundred thousand customers from universities to pharmaceutical corporations... ...and because Kaiajin reports in US dollars today we're talking in dollars

00:04:06: Where else might you typically come across Kaiajens products?

00:04:09: This morning I read that employees have a clinic take a blood test for tuberculosis when they start.

00:04:15: Does the company have anything to do with something like that?

00:04:18: Yes, absolutely.

00:04:19: This is where a test from the company might be used.

00:04:22: At Kyogen it's specifically called Quantiferon.

00:04:26: It now gradually replacing old skin tests and revenue grew by eleven percent last year.

00:04:32: And how exactly did the company ultimately develop into global corporation?

00:04:37: Well...it all began with an idea of Dusseldorf.

00:04:40: Kajagen was founded in nineteen eighty-four as a spin off from the local Heinrich Heiner University by three young researchers and their professor.

00:04:49: The method, extracting genetic material form sample in standardized way much faster than had been usual until then.

00:04:57: Two years later came first product A set with small disposable plastic columns.

00:05:03: What had until them meant several days of manual work is now done In few hours.

00:05:09: In nineteen ninety-six, Kaya Jen then listed on the U.S technology exchange Nasdaq as one of very first German companies ever.

00:05:17: but the roots have remained.

00:05:19: One of most important sites for research and production is to this day Hilden right next to Düsseldorf.

00:05:26: So at its core a lab trick.

00:05:28: And from that over the past decades A huge corporation developed

00:05:32: An international corporation with a good two billion dollars in revenue headquartered in the Netherlands, listed in Frankfurt and New York.

00:05:40: And the group was coveted earlier on – The US Corporation Thermo Fisher already wanted to buy Kajagen back in twenty-twenty But that offer failed because In the end too few shareholders went along With it.

00:05:54: So the corporation already has A certain amount of experience with takeover situations.

00:05:59: Yes indeed But around six years later, the environment and business situation have of course changed.

00:06:05: And this situation is simply a different one!

00:06:07: Today we want to know how The Equity Story currently stands... ...and what stands out in particular when look at it?

00:06:15: Now Corey picture two us standing together In a crime lab like this.

00:06:20: On the table there's no material from a crime scene but an annual report.

00:06:25: We do what forensic scientist does clean the sample, secure the traces and only accept what can be proven.

00:06:33: Good!

00:06:33: I'll put on gloves to get ready.

00:06:35: The first piece of evidence is a fingerprint of the business model.

00:06:38: Kaia-Gen places a device in the lab then sells consumables that go with it for years afterward.

00:06:45: kits reagents tests.

00:06:47: around ninety percent revenue is recurring.

00:06:51: So the device wants and after that they mainly earn money with lots of accompanying consumables That you also need in a lab.

00:06:58: Yes, that's how it is.

00:07:00: And this money then comes in quite reliably.

00:07:03: A Lab has to test a device extensively and validated for its tests so whoever Has committed once usually stays with It?

00:07:12: So You essentially have a regular customer who won't leave so quickly.

00:07:16: They reorder material regularly and they know that switching business partners would probably mean quite a lot of effort for them.

00:07:22: Yes, right?

00:07:24: And all this also shows up when you look at the numbers from ongoing operations.

00:07:29: just under seven hundred million dollars flowed in last year.

00:07:33: after the investments its own business not counting acquisitions around four hundred fifty million was left.

00:07:39: That's actually bit more than reported group profit.

00:07:45: That's possible because not every expense that reduces profit costs money in the same year.

00:07:51: At Khayogen, that is mainly depreciation and amortization of a good two hundred million which spreads earlier investments over years... ...and around fifty million in compensation paid in shares rather than cash For shareholders.

00:08:05: thats'a real expense nonetheless but no money flows out Together.

00:08:10: its bit more then group newly invested.

00:08:14: So the profit doesn't only exist on paper.

00:08:17: The money is really there and generated from operating business.

00:08:21: That's how it is, And the balance sheet fits well with that too.

00:08:25: From my point of view at year end the financial debt minus the cash was smaller than a single years.

00:08:32: earnings before interest taxes depreciation and amortization.

00:08:37: Even after the big payout in January It's only around one-and-a-half times.

00:08:40: That

00:08:42: means there's actually hardly any debt, right?

00:08:45: Yes.

00:08:45: Right at least measured against what the company earns.

00:08:49: My review always begins with six exclusion tests based on the methodology of Benjamin Graham.

00:08:55: They ask whether a company will even keep going in the future at all.

00:08:59: Kayajan passes all six without any trouble And last year, the corporation paid a dividend for the very first time and in addition returned money to shareholders through a kind of share buyback.

00:09:11: Above all that shows The balance sheet is strong enough To pay out taking it altogether the recurring business the money That actually lands in the till and the solid balance sheet?

00:09:23: The fingerprint adds up to the picture Of equality Business.

00:09:27: Up to this point I'd say the interested parties have A good nose

00:09:31: For the business of today, yes.

00:09:33: That shows up in The Numbers.

00:09:35: Then on to story about future.

00:09:37: At beginning you said they're cutting back their own lab.

00:09:40: What do mean by that?

00:09:42: Well for that let's first take a look at growth targets and then afterward examine traces closely.

00:09:48: Kayajan bases its growth mainly.

00:09:51: five product areas together make up about seventy two percent revenue.

00:09:56: These include, for example the tuberculosis test as well a rapid-test system of infections called QIASTAT DX and software that evaluates genetic data.

00:10:07: Altogether five areas today make around one and half billion dollars in revenue.

00:10:13: by twenty twenty eight they're even supposed to reach about two billion.

00:10:18: oh okay so they've certainly set themselves quite a bit.

00:10:21: And how much growth is roughly per year?

00:10:24: That would then mean growth of around ten percent per year.

00:10:28: Kayajan itself estimates its entire market at four to six percent growth a year, so central part the equity story goes.

00:10:37: our five-growth areas are supposed grow almost twice as fast as overall markets.

00:10:43: To do that company is explicitly also relying on innovation

00:10:47: i.e.,

00:10:48: new and better products.

00:10:51: Better products come above all from research.

00:10:55: Right, and this is where we now come to securing the traces.

00:10:59: first there are the research expenditures.

00:11:02: they fell last year even though revenue grew.

00:11:05: measured against revenue The research ratio thus dropped from over nine two eight-and a half percent.

00:11:11: interesting Honestly, I wouldn't really have expected that.

00:11:14: For a company whose most important areas are supposed to grow significantly faster than the market you'd actually expect this ratio to rise wouldnt'you?

00:11:21: Yes usually You Would but The Research Ratio Has Fallen.

00:11:25: Recently Kayajan Explains That With A Discontinued Diagnostic Device That Eliminates Some Development Work.

00:11:33: Still From My Point Of View The Ratio Is Heading In The Wrong Direction And It Doesn'T Stop At This One Trace Because The Second one is The share of employees in research and development fell in the last financial year from eighteen to seventeen percent.

00:11:48: And that, with fewer employees

00:11:50: overall.".

00:11:51: So not only is less money being spent on research... ...fewer people are also working on it?

00:11:57: Yes!

00:11:57: That's how it IS, Corey….

00:11:59: …and from my point-of-view there's a third trace – at the end of twenty-twenty five—the supervisory board dissolved its own science committee.

00:12:08: The topics now come together in a scientific advisory board that reports to the Supervisory Board and the Management Board.

00:12:16: Sounds like a renaming, what actually changes?

00:12:18: The role!

00:12:20: According to the annual report... ...the committee was supposed to oversee research projects & research budgets.

00:12:26: The advisory board consists of external experts and gives assessments but it doesn't control anything and the head of the advisory board stepped down from the supervisory board at the beginning of this year.

00:12:39: On the supervisary board, The Oversight Of Research thus no longer has its own committee.

00:12:44: exactly where the growth story is

00:12:46: co-decided.".

00:12:48: Okay understood Warren each trace on it's own isn't particularly striking to me yet but when you look all three side by side a certain pattern does become visible.

00:12:57: yes I see it that way too.

00:13:00: And forensic scientists often don't commit themselves on the basis of a single hair either, but three traces —that point in the same direction— those you take seriously.

00:13:11: and that at exactly the moment when Kaia-Gen wants to grow faster than its market.

00:13:24: But from my point of view, there are clear indication that it could at least turn out noticeably weaker going forward.

00:13:31: And that would then probably also show up bit by bit in other important company

00:13:35: figures.".

00:13:37: In connection with the tuberculosis test you mentioned – eleven percent growth earlier!

00:13:41: That means something is happening there… and in other areas too?

00:13:45: The growth is actually quite respectable isn't

00:13:47: it?!

00:13:48: Yes indeed...and the rapid-test system even grew by twenty seven per cent.

00:13:53: That's also an area where things are really going well right now.

00:13:57: You can clearly state the front runners are clearly delivering at the moment.

00:14:02: Sample preparation, by contrast itself one of five growth areas grew only by three percent.

00:14:09: from my point-of view for ten percent growth a year more than two frontrunners really ought to deliver reliably and For that I think you need more work in the lab not less.

00:14:21: So that means a central question is, can the company really reach its ambitious growth targets?

00:14:27: If the research ratio is declining fewer people are working on innovations and Research no longer has it's own committee on the supervisory board.

00:14:35: That's how It Is.

00:14:37: but now let us come to number I always look at especially closely in annual reports.

00:14:43: Gladly Warren.

00:14:44: But before that A quick word On our own behalf Since it fits right Now What you're hearing here.

00:14:49: The short version The full Warren Wise Report reviews an equity story across eight dimensions, page by page against the annual report.

00:14:58: Anyone who wants this view for their own company on the management board or supervisory boards and investor relations – Warren-Wise.com.

00:15:07: So now back to Kaiogen…and to number that you always look at especially closely!

00:15:14: It's about the operating result, that is, profit from actual business before interest and taxes.

00:15:20: This nearly quadrupled last year!

00:15:23: What would you say Corey?

00:15:24: How strongly did revenue grow for this?

00:15:27: If the operating profits quadruple... Phew!

00:15:29: Tough question… So at least twenty-thirty percent

00:15:32: right?!

00:15:33: Yes.. You'd probably expected in that direction but it was only just under six per cent And one percentage point of that came from exchange rates alone.

00:15:44: Kyogen reports in dollars, and because many currencies in which the company sells gained against the dollar.

00:15:50: The same revenues were simply worth more once converted.

00:15:54: Wait but how can an operating profit shoot up like that when revenue barely grows?

00:15:59: The answer lies in the prior year In twenty-twenty four kyogen launched an efficiency program And among other things discontinued a diagnostic device called new mode DX.

00:16:11: For that, just under three hundred million dollars in charges were booked.

00:16:16: Written down inventories written-down technology.

00:16:19: so the prior year is a contaminated comparison sample

00:16:23: and whoever compares against a contaminated sample then gets –in a certain sense–a hit that isn't really one at all.

00:16:30: So with this number on earnings development it's important you also put it into right context for yourself.

00:16:36: Exactly Corey.

00:16:38: The operating profit rose by around three hundred fifty million dollars.

00:16:42: Just under three-hundred million of that is solely the disappearance of this special charge.

00:16:48: What's left, Is a gain of good fifty million.

00:16:51: Certainly step forward but not leap.

00:16:54: So got better?

00:16:55: Yes Quadrupled

00:16:57: No!

00:16:57: Yes That important to keep in mind accordingly.

00:17:00: Then let now come two pieces evidence on our lab table that aren't labeled at all.

00:17:06: Last year, Kaia-Gen bought two companies – Parse Biosciences specialized in analyzing individual cells and Genux whose software evaluates genetic data with artificial intelligence.

00:17:19: Together around three hundred million dollars.

00:17:22: strategically both fit but how much revenue the to contribute?

00:17:26: Kaia gen doesn't quantify only that it isn't material.

00:17:31: If It Isn't Material why does That bother you?

00:17:34: because then I can't separate what's growing under its own power and what was bought in.

00:17:40: Okay, i see but isn't that still just a comparatively small detail?

00:17:45: No!

00:17:45: I wouldn't put it that way.

00:17:47: from my point of view It's something That certainly adds up over the years And absolutely should be kept in mind.

00:17:54: Whoever buys a company often pays more than The devices and buildings are worth for the customers the knowledge the hope Of future earnings and so on.

00:18:04: This surcharge is called goodwill.

00:18:06: Translated, you could call it paid-for hope.

00:18:10: at Kaia Gen around two point seven billion dollars of It are now on the balance sheet.

00:18:14: that's almost seventy percent Of total equity

00:18:18: So a large part of what belongs to The shareholders Is paid for Hope.

00:18:23: Right!

00:18:23: That not bad in itself as long As the acquisitions earn What they cost.

00:18:28: But thats exactly I can't check.

00:18:31: Yes true And all investors are in the same boat.

00:18:34: The figures required for this is simply missing, and companies should deliver

00:18:40: more

00:18:41: here.".

00:18:43: And for twenty-twenty six, there's no forecast in numbers.

00:18:59: In the annual report only in words Kyogen does at least publish concrete figures on the expected development elsewhere But I would still have wished for them in The Annual Report too.

00:19:11: So it's a bit like a test tube without a clear label.

00:19:14: You suspect that the right thing is inside but unfortunately you just can't be entirely sure because not everything Is really fully disclosed.

00:19:23: That's the point, Corey.

00:19:25: The return on capital I've of course calculated myself and i come to around eleven percent.

00:19:30: that's decent but it is my calculation not the corporations.

00:19:35: so going forward... ...I'd expect a more precise & complete label to be supplied by the corporation itself.

00:19:43: Warren if you sum up everything from your analysis where does company land with you?

00:19:47: Overall Kayajan gets second highest rating.

00:19:51: I award Four out of five, the zone is called strong.

00:19:55: The value thesis holds though with

00:19:57: reservations.".

00:19:59: And how exactly does this overall rating come together for you?

00:20:03: Today we're really only talking about a small part of your report.

00:20:07: In total I review eight dimensions from the business model through the balance sheet to innovation.

00:20:14: On average Kayajin lies a bit above middle between three and four.

00:20:19: The business and the balance sheet pull it up.

00:20:21: The research, and the missing figures pull it

00:20:23: down.".

00:20:25: So a four that's standing on the edge?

00:20:27: A four with little room below it?

00:20:29: yes!

00:20:30: The business carries it... ...the lab-and-the-missing labels keep it just barely there.

00:20:36: And what would you ask the new boss if he were sitting here?

00:20:38: Three things First Mr Pratt where is your floor for the research budget?

00:20:44: And how do you intend to achieve ten percent growth a year with the lab that has recently gotten smaller?

00:20:49: Second, what did pass and Janux concretely contribute in the first year.

00:20:55: I would like a clearer picture of the added value of the acquisitions... ...and third why don't you actually report key figures like return on capital in the annual report especially when you can show comparatively good numbers here?

00:21:09: Thanks Warren!

00:21:10: i'd sign off those questions right away.

00:21:12: What do I take away for the next annual report, no matter which company it's from?

00:21:42: And one more thought that goes beyond kaiogen.

00:21:45: When buyers circle a company, the conclusion is close at hand – The business and outlook must be good!

00:21:52: But you should always also pay attention to how solid the foundation is for what's still supposed to be sold in future….

00:21:59: …and even if this company has formulated ambitious growth targets from my point of view... ...the traces have gotten noticeably thinner with a view on future growth and it's in the new boss' hands whether our next sample turns out differently.

00:22:23: The

00:22:58: content of this episode is for general information purposes only.

00:23:02: It does not constitute investment advice or an invitation to buy, hold and sell any financial instrument.

00:23:09: All assessments are based on a model-driven, AI supported analytical approach.

00:23:15: Warren Wise is a fictional synthetic character – neither real person nor their estate or company connected to such persons.

00:23:24: Any reference to Benjamin Graham, Warren Buffett and Charlie Munger is purely descriptive of the investment philosophy attributed to them.

00:23:33: No endorsement, authorisation representation or other connection including to their estates or affiliated companies, exists.

00:23:42: All voices and audio content in this episode are synthetically

00:23:47: produced.