Activist Fivespan has a stake in Qiagen. Three levers to boost growth

Company: Qiagen NV (QGEN)

Business: Qiagen NV is a holding company based in the Netherlands. The company provides “Sample to Insight” solutions that transform biological samples into molecular insights. These solutions integrate sample and assay technologies, bioinformatics and automation systems. Its sample technologies are used for isolating and preparing deoxyribonucleic acid (DNA), ribonucleic acid (RNA) and proteins from blood or other liquids, tissue, plants or other materials. Its assay technologies make these biomolecules visible for analysis, such as identifying the genetic information of a pathogen or a gene mutation in a tumor. Its bioinformatics solutions interpret data to provide actionable insights. Qiagen’s automation platforms based on polymerase chain reaction (PCR), next-generation sequencing (NGS) and other technologies tie these together in molecular testing workflows from “Sample to Insight.”

Stock Market Value: $9.32B ($43.13 per share)

Activist: Fivespan Partners, LP

Ownership: n/a

Average Cost: n/a

Activist Commentary: Fivespan Partners, LP is a San Francisco-based investment firm founded by Dylan Haggart and Sarah Coyne. Prior to Fivespan, Haggart and Coyne were partners at ValueAct Capital and most of the investment team is from ValueAct. Fivespan, named after the unique five-stone arched bridge in Haggart’s hometown, views itself as a bridge between the market and companies. The firm prefers behind-the-scenes, collaborative and amicable activism, but it would resort to a proxy fight if it had no other choice. We believe that the firm would look for board seats in situations where it thinks it could add real value, but we do not expect Fivespan to pursue board representation as often as ValueAct does (i.e, roughly 50% of core portfolio positions). Haggart certainly has experience as a public company director. He served as a director of Seagate (2018 to the present) and Fiserv (2022 to 2024), at which he has delivered stellar returns over his tenures of 44.45% and 64.68%, respectively, versus 17.36% and 4.98% for the Russell 2000. Additionally, Haggart was an advisor to Seagate going back as far as 2016, over which time the company returned about 222%. Fivespan looks for high quality, idiosyncratic businesses with good, strategic assets. The firm does not advocate for the sale of its portfolio companies as a primary activist strategy, but like companies that people want to own. Accordingly, many of the firm’s activist campaigns could end with a sale of the company, providing two paths to shareholder value. The fund is a drawdown structure that holds investments for at least three to five years, aims to have six to eight investments at a time and averages $100 million to $300 million in each investment.

What’s happening

Fivespan Partners has built a position in Qiagen NV and has engaged in conversations with management.

Behind the scenes

Qiagen is a Netherlands-incorporated life sciences tools firm, dual-listed in the U.S. and Germany. The company provides sample technologies to isolate and process DNA, RNA and proteins; assay technologies to prepare these biomolecules for analysis; and automation solutions to bring these processes together. The company has two primary end markets from which it derives a balanced share of its revenue: Molecular Diagnostics (health-care providers) and Life Sciences (pharma/biotech research and other lab applications).  It operates in an extremely attractive and growing industry with high returns on invested capital (ROIC) and margins. Qiagen specifically enjoys a leading market position, has a great brand reputation and favorably derives about 90% of its sales from recurring consumables revenue, with the remainder from the sale of its instruments and related services, a razor-razorblade model. Despite its dual-listing and European heritage, Qiagen’s chairman and CEO are based in the U.S., and it generated 52% of its FY24 sales in North America, 32% in Europe, the Middle East and Africa, and 16% in Asia.

Fivespan looks for high quality, idiosyncratic businesses with good, strategic assets, and Qiagen fits this thesis nicely – a high-quality health-care business in a growing industry with secular tailwinds. However, despite having a respected name and a strong market position, the company has struggled to create shareholder value post-Covid, delivering 1-, 3-, and 5-year returns of 1%, -6%, and 1%, respectively. While peers trade at around 15 times EV/EBITDA, and leaders like Danaher 20 times, Qiagen currently trades at around 13 times. This contrasts with the stock historically trading at a significant multiple to peers.

Management has done the hard things right: investing in R&D, listening to the customers, and protecting the company’s industry-leading brand,…