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Author: C172M Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 208  
Subject: Re: CC Date: 11/1/2001 11:08 AM
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Magnetics are picking up in popularity mainly because they are scalable. If a customer only needs 0.5ug of DNA to use in their next application, and a typical Qiagen filter kit gives them 10, they still have to pay the same amount for the purification. With magnetics, they can use a small fraction of the reagents, and get the needed results. Also, if they only want to do a half plate's worth of samples, it's hard to only use half a plate of filter (possible, but a pain). Magnetics you just fill the wells you need. If they are screening millions of samples for a study, this amounts to big $'s. Filtration is also messy, and can give cross contamination. Qiagen's core - filtration - is quicker, and more established, but there are competitors moving in - namely the actual membrane and plastics manufacturers. They can sell quite a bit cheaper, and still have a margin greater than the Qiagens, but they don't have much expertise in the reagents. By coupling with Pall, Qiagen can head off some of the competition. One way to look at these collaborations is to see them as a hedge against margin errosion.

The other thing they get out of the collaboration is access to the latest magnetic and membrane surfaces that these groups are working on. While DNA and RNA purification markets continue to grow, it is slowing. The high growth markets of the future at the moment appear to be proteins (proteomics) and whole cells (cellomics). Qiagen will also undoubtedly direct the development of new surfaces within these groups. Because these markets are rather undeveloped at the moment, the margin potential is great. The problem is that everyone else knows this as well and are working towards the same ends.

So far, I've been completely unimpressed with Qiagen's magnetics, and Pall's filters. I'm confident Qiagen can straighten out Pall, whether they can be first to market with novel next generation applications - don't know yet - but they have a good track record. Worst case, they get stuck in the nucleic acid market for awhile, and contend with slower (10% vs 50%) growth. Not a bad situation to be in, but does it justify the P/E?

The press reports don't clue us in to any top secret work with these two collaborators, but they do push the right buttons.

Hope this helps.
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