Q I A G E N N . V .
F I N A N C I A L R E P O R T
Sample to Insight
Sample to Insight is our strategic framework that
puts the needs and challenges of our customers
front and center.
We identify the key challenges holding customers
back and deliver solutions so they can achieve
greater success, ultimately helping them exceed
their own expectations and gain the insights
critical for their work.
Content
Overview
Non-Financial Statement
008 Report of the Supervisory Board
102 Our Approach to Sustainability
012 The Executive Committee
015 Common Shares
103 Environment
107 Employees
110 Human Rights
110 Sustainable Supply Chain Management
112 Data and Cyber Security
Management Report
022 Business and Operating Environment
112 Business Ethics
117 Social Matters
045 Opportunities and Risks
063 Performance Review
075 Human Resources
077 Future Perspectives
Corporate Governance
Report
082 Corporate Structure
082 Managing Board
084 Supervisory Board
089 Diversity within the Management Board and
Supervisory Board
089 Compensation of Managing Board Members and
Supervisory Directors
093 Additional Information
Financial Results
124 Consolidated Financial Statements
134 Notes to Consolidated Financial Statements
194 List of Subsidiaries
195 Auditor’s Report
Appendix
199 Service
This document contains detailed financial information about
QIAGEN prepared under U.S. generally accepted accounting
standards (U.S. GAAP) and included in our Form 20-F annual
report filed with the U.S. Securities and Exchange Commission.
QIAGEN also publishes an Annual Report under IFRS accounting
standards, which is available on our website at www.QIAGEN.com.
Overview
008 Report of the Supervisory Board
012 The Executive Committee
015 Common Shares
Report of the Supervisory Board
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It is hard to imagine a larger and more dramatic challenge in our lifetime than what all of us are facing due
to the coronavirus pandemic. It is also clear that 2020 was a year quite unlike any other for QIAGEN.
Our QIAGENers – more than 5,600 employees worldwide – have stepped up to the tremendous challenges of these times. We took
steps to protect our associates as our highest priority, especially for those on the front lines working closely with our customers in
laboratories and hospitals around the world. It is with our deepest gratitude that we were able to support them in delivering critical
solutions that have been essential in the fight against this pandemic. This included developing more than 10 new solutions for COVID-
19 testing, while also significantly ramping up manufacturing capacity at our key sites in Germany and the United States. The
contributions of QIAGEN to society have never been more critical. All of this is being done with an overriding commitment to achieve
our vision of helping to make improvements in life possible.
We would like to thank our shareholders, customers, business partners and other stakeholders for honoring QIAGEN with their
continued collaboration and trust.
2020: A Year of Very Strong Results
QIAGEN delivered very strong results in 2020, supported by the demand for COVID-19 testing as well as improving sequential
quarterly trends in our non-COVID product groups as the year progressed. We agree with our leadership team that QIAGEN is
COVID-19 relevant, but not COVID-19 dependent.
QIAGEN exceeded our earnings and growth forecasts – which were repeatedly raised during the course of the year – for dynamic
growth in net sales and adjusted earnings per share. (Adjusted EPS excludes purchased intangibles amortization, long-lived asset
impairments and other items such as business integration, acquisition-related costs, litigation costs and restructuring.) We also
generated significant benefits from the strategic initiative launched in 2019 to reallocate resources to support business expansion in
our strategic growth areas.
Moving Forward After Tender Offer Outcome
As you know, the voluntary public takeover offer during 2020 by Thermo Fisher Scientific, Inc. did not achieve the minimum
acceptance threshold from QIAGEN shareholders. From the time the proposal was announced in March through to the outcome in
August, the magnitude and duration of the coronavirus pandemic have proven the increasingly critical importance of molecular
testing to society, and also significantly improved QIAGEN’s business prospects.
Our Managing Board members – Thierry Bernard, who was appointed Chief Executive Officer in early 2020 after serving on an
interim basis since October 2019, and Roland Sackers, our long-standing Chief Financial Officer – along with our Executive
Committee members subsequently announced that QIAGEN will continue to execute a successful growth strategy as an independent
company aiming to create significant value for shareholders and other stakeholders.
The anchor of this strategy is our focus on five pillars of growth. These are all product portfolio areas addressing markets with
significant growth potential and ones in which QIAGEN can achieve/maintain a leadership position: (1) Sample Technologies used
to isolate nucleic acids from biological samples, (2) the QuantiFERON technology used to measure immune response in patients to
diagnose life-threatening diseases such as latent tuberculosis (TB), (3) the automated clinical PCR testing platform NeuMoDx, (4) the
QIAstat-Dx solution used for syndromic testing, and (5) the QIAcuity series of digital PCR platforms. We are also supporting our
leadership team in developing QIAGEN’s corporate culture as a new program called EMPOWER is implemented to enhance and
strengthen a culture of greater accountability and agility with the organization.
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O v e r v i e w › Report of the Supervisory Board
My colleagues and I in the Supervisory Board have fully endorsed this strategy and look forward to working with our Managing
Board members on the implementation. QIAGEN is moving forward from a position of strength with robust growth prospects,
anchored by a differentiated portfolio and multiple new product launches in the pipeline. As we focus on greater value creation,
QIAGEN has a disciplined capital allocation policy anchored by a healthy balance sheet to support investment in our business along
with a commitment to increasing returns to shareholders.
Change in Supervisory Leadership and New Members
As is the case every year, the Supervisory Board carries out a review process as part of best-practice governance procedures. This
process in 2020 came amid the leadership of the Supervisory Board transitioning in August 2020 with my appointment as the new
Chairman. This came after Dr. Håkan Björklund decided to step down as Chairman and as a member of the Supervisory Board. On
behalf of my colleagues in the Supervisory Board, I would like to thank Dr. Björklund for his contributions to QIAGEN during his time
on the Board and wish him all the best in his future endeavors.
The review process for 2020 included a focus on the composition of the Supervisory Board and also the outcome of the tender offer
for QIAGEN that did not receive sufficient shareholder approval. This review process also included extensive discussions with our top
shareholders and other stakeholders. We intend to continue these discussions in the future as part of our commitment to pursue the
highest level of excellence in corporate governance.
As one of the outcomes of this review, we decided to further complement and enhance the Supervisory Board’s already extensive
experience in Life Sciences and diagnostics. This led to the appointment of two leading international healthcare executives as new
Supervisory Board members in recent months:
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Dr. Toralf Haag (appointed in January 2021) has served since October 2018 as Chairman of the Corporate Board of Management
of Voith GmbH & Co. KGaA, a global technology company in Germany with more than EUR 4 billion in annual sales and over
19,000 employees. Before joining Voith in October 2016 as Chief Financial Officer, he served for more than 11 years as CFO
and Member of the Executive Committee of Lonza Group AG.
Thomas Ebeling (appointed in February 2021) has been an advisor in recent years to various businesses after having served as the
CEO of the publicly-listed German media group ProSiebenSat.1 Media from 2009 to 2018. Prior to that, he worked for the global
healthcare company Novartis from 1997 to 2008, including roles as CEO of Novartis Pharmaceuticals and also as CEO of
Novartis Consumer Health.
The target profile of the Supervisory Board can be found on QIAGEN’s website, as well as in the Governance section of this Annual
Report. The current composition fully complies with this profile. Further information on the individual members of the Supervisory
Board, such as gender, age, nationality and other positions relevant to the performance of their duties as Supervisor Board member,
date of initial appointment and current term of office is set forth in the Corporate Governance and Compensation overview and on
our website at www.qiagen.com.
The Supervisory Board considers all members of the Supervisory Board to fulfill the independence criteria as defined by the Dutch
Corporate Governance Code.
Commitment to Sustainability
The actions of our leaders during 2020 and the response to the pandemic have brought scrutiny to what we do at QIAGEN as well
as how we do it. Indeed, how we operate as a company is driven above all by operating in a sustainable way. This commitment
includes reviewing our activities in terms of ESG – Environment, Social and Governance – perspectives.
QIAGEN has been implementing programs to reduce its environmental footprint. In 2019 we pledged to reduce our emissions in line
with a 1.5-degree Celsius climate target as laid out by the 2015 Paris Agreement. We have made good headway in 2020, with a
reduction of 9.4% in scope 1 and 2 greenhouse gas (GHG) emissions and a reduction in business travel emissions of 81.8%
compared to 2019 (the latter, in part due to the impact of COVID-19). We also far exceeded our 2020 goal to decrease plastic
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transportation packaging material by 3% below 2019. Our new goal for 2021 is to reduce by 9% below 2020 levels. Additionally,
QIAGEN has a commitment to developing a diverse and inclusive culture. This is paramount for our success, and driven by creating a
leadership team with a broad range of backgrounds, experience, skills and capabilities.
In nominating candidates for leadership roles, QIAGEN is committed to increasing diversity while pursuing individuals to join
QIAGEN with a unique blend of scientific and commercial expertise and experience that will contribute to our future business
success. Management development programs support the career advancement of leaders regardless of gender and other factors. As a
result, a number of women are in key leadership roles around the world at QIAGEN, with over 30% of its management roles currently
held by women. In line with this commitment, the Supervisory Board has had at least two women as members since 2011 and
continues to take diversity into account when proposing members for election or re-election without compromising QIAGEN’s
commitment to hiring the best individuals for positions without any discrimination.
In terms of governance, the Managing Board currently has two members, so achieving a diversity goal as measured solely by a
percentage of overall membership is not foreseen in the near future. At the same time, QIAGEN has significantly increased the
diversity of its senior leadership team and will continue to do so in the future. Our commitment remains as strong as ever to creating
a diverse and inclusive environment for our employees.
Supervisory Board Discussions During 2020
In accordance with the Dutch Corporate Governance Code, the Supervisory Board devoted considerable time to discussing,
monitoring and assessing QIAGEN's corporate strategy and its implementation, main risks and opportunities and the annual
Management Board assessment of the design and effectiveness of internal risk management and control systems as well as any
significant changes in them.
The Supervisory Board had five regular meetings and multiple ad-hoc meetings during 2020 that were held with the attendance of the
members of the Managing Board. The Supervisory Board also met to review and discuss agenda items in the absence of the
Managing Board members, such as performance and strategy as well as to discuss compensation matters.
All members of the Supervisory Board had adequate time available to give sufficient attention to the Company.
Committees of the Supervisory Board
The Supervisory Board has established the following committees:
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Audit Committee met seven times in 2020. The current members are Mr. Rosen (Chair), Elizabeth E. Tallett and Dr. Haag.
Compensation Committee met five times in 2020. The current members are Ms. Tallett (Chair), Prof. Dr. Elaine Mardis and Mr.
Rosen.
Selection and Appointment Committee met five times in 2020. The current members are Mr. Rosen (Chair), Dr. Metin Colpan and
Ms. Tallett.
Science and Technology Committee met four times in 2020. The current members Dr. Metin Colpan (Chair), Prof. Dr. Ross Levine
and Prof. Dr. Mardis.
The Supervisory Board reserves the right to establish other committees as deemed beneficial, and has approved charters under which
each of these committees operates. Charters are available on our website at www.qiagen.com.
The deliberations and findings of the committees were reported by the committee chairs to the Supervisory Board in its meetings on a
regular basis. All committee members attended all committee meetings in 2020 physically, by video conference or by phone.
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O v e r v i e w › Report of the Supervisory Board
Further detailed information on the composition of the Supervisory Board and its committees, the number of committee meetings held
in 2020 and the main topics of discussion, the remuneration of its members, as well as other information on the Supervisory Board,
can be found in the Corporate Governance and Compensation overview, which is an integral part of this Annual Report.
Evaluation
The Supervisory Board conducted a survey among its members to evaluate the functioning of the Supervisory Board, its individual
members, its Committees, the Managing Board and the individual members of the Managing Board and discussed the results of the
survey in one of its meetings. Over all, the Supervisory Board concluded that all of the aforementioned were functioning properly,
especially in view of the regulations set forth in the Dutch Corporate Governance Code, and should continue in the same manner.
Corporate Governance
A key objective of the Supervisory Board is to increase shareholder value on a long-term and sustainable basis. This is aligned with
the objectives of the Supervisory Board to represent the interests of all stakeholders, including shareholders, while pursing the highest
standards in Corporate Governance.
QIAGEN is committed to a corporate governance structure that best suits its business and stakeholders, and that complies with
relevant rules and regulations. QIAGEN follows the principles described in the Dutch Corporate Governance Code, although some
minor deviations, which are explained in detail in our Corporate Governance Report, may result from the impact of factors such as
legal requirements imposed on QIAGEN or industry standards.
QIAGEN’s common shares are registered and traded in the U.S. on the New York Stock Exchange (NYSE) as of January 2018
(formerly on the NASDAQ Global Select Market) and in Germany on the Frankfurt Stock Exchange in the Prime Standard segment.
Shareholders in Europe and the U.S. hold the majority of common shares. As a result of these listings for its Global Shares, QIAGEN
is subject to the rules regarding Corporate Governance set by the NYSE. QIAGEN believes all of its operations are carried out in
accordance with legal frameworks, including Dutch Corporate Law, U.S. laws and regulations, EU regulations and applicable
German capital market laws.
Financial Statements and Audits
In this Annual Report, the financial statements for 2020 are presented as prepared by the Managing Board and audited by KPMG
Accountants N.V. (Independent Registered Public Accounting Firm). We examined the financial statements, the proposal for the use of
the distributable profit, the consolidated financial statements and the Management report. The results have been approved by the
Supervisory Board and we have received an unqualified opinion from the external auditors.
In closing, the Supervisory Board would like to again thank all QIAGEN employees for the outstanding performance and commitment
during an eventful year.
Venlo, the Netherlands, April 2021
The Supervisory Board:
Lawrence A. Rosen
Chairman
11
The Executive Committee
Thierry Bernard
Chief Executive Officer and Managing
Director
Stephany Foster
Senior Vice President, Head of Human
Resources
Dr. Barthold Piening
Senior Vice President, Head of Global
Operations
Roland Sackers
Chief Financial Officer and Managing
Director
Dr. Thomas Schweins
Senior Vice President, Life Science Business
Area
Dr. Jonathan Sheldon
Senior Vice President, QIAGEN Digital
Insights Business Area
Jean-Pascal Viola
Senior Vice President, Head of Molecular
Diagnostics Business Area and Corporate
Business Development
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O v e r v i e w › The Executive Committee
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Chief Executive Officer and Managing Director
Mr. Bernard joined QIAGEN in February 2015 to lead our growing presence in Molecular Diagnostics, the application of Sample to
Insight solutions for molecular testing in human healthcare. He was named Chief Executive Officer in March 2020, after having
previously served in this role on an interim basis since late 2019. Mr. Bernard previously worked at bioMérieux, where he served in
roles of increasing responsibility for 15 years, most recently as Corporate Vice President, Global Commercial Operations, Investor
Relations and the Greater China Region. Prior to joining bioMérieux, he served in management roles in multiple international groups.
Mr. Bernard was appointed a member of the Board of Directors of T2 BioSystems in 2020. He has earned from Sciences Po (Paris),
Harvard Business School, London School of Economics and the College of Europe and is a member of French Foreign Trade Advisors.
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Senior Vice President, Head of Human Resources
Joined QIAGEN in 2005 as Head of Global Internal Audit and was most recently Vice President, Head of Human Resources. Ms.
Foster was also member of the NAELT (North America Executive Leadership Team) and steers the Diversity and Inclusion program at
QIAGEN. She was named to her current role in October 2019. Prior to joining QIAGEN, Stephany Foster worked in internal audit at
Morgan Franklin and Independence Air. She started her career at PricewaterhouseCoopers, specializing in Sarbanes Oxley Auditing.
Ms. Foster has a master’s degree in Accounting from the University of Notre Dame and is a Certified Public Accountant (CPA), a
Certified Internal and Information Systems Auditor (CIA / CISA) and Certified Fraud Examiner (CFE).
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Senior Vice President, Head of Global Operations
Joined QIAGEN in December 2018 as Senior Vice President, Head of Global Operations, and a member of the Executive Committee.
Dr. Piening has more than 30 years of experience in strategy and operations in the pharmaceutical, life science and medical device
industries. Prior to joining QIAGEN, he was Executive Board member in charge of production and technology for the German pharma
company STADA. Dr. Piening had previously served as Chief Operating Officer and EC member of Acino Pharma, and before that as
Head of Global Operations for Takeda Pharmaceuticals International. Earlier, he had roles of increasing responsibility at Byk Gulden,
ALTANA Pharma and Nycomed. After studying pharmaceutical sciences at the University of Kiel in Germany and the University of
Wales in Cardiff, U.K., he earned a degree in Pharmaceutics with Approbation and a Ph.D. in Pharmaceutical Chemistry from the
University of Kiel. He also earned an MBA at WHU-Vallendar in Germany and Northwestern University in the United States.
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Chief Financial Officer and Managing Director
Mr. Sackers joined QIAGEN in 1999 as Vice President Finance and has been Chief Financial Officer since 2004. He became a
member of the Managing Board in 2006. Between 1995 and 1999, he served as an auditor with Arthur Andersen
Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft. Mr. Sackers earned his Masters Degree in Business Administration
(Diplom-Kaufmann) from the University of Münster, Germany. In 2019, he joined the Supervisory Board of Evotec SE and is chair of
the audit committee. Mr Sackers is a board member of the industry association, BIO Deutschland. From 2011 to 2018, he was a non-
executive director and chair of the audit committee of Immunodiagnostic Systems Holding PLC (IDS) in the United Kingdom.
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Senior Vice President, Life Science Business Area
Joined QIAGEN in 2004 as Vice President Corporate Strategy and was appointed Vice President Marketing & Strategy in 2005,
where he was deeply involved in managing the global business toward Life Science customers. In late 2011, Dr. Schweins assumed
responsibility for Human Resources and initiated a multi-year transformation process to increase efficiency and effectiveness of the
function. In 2017, Dr. Schweins took over the leadership of the Life Science Business Area and consequently resigned from his role as
head of HR. Dr. Schweins came to QIAGEN from The Boston Consulting Group. He previously worked as Technology Manager, and
later as an Assistant to the Management Board at Hoechst / Aventis. Dr. Schweins earned an M.Sc. Degree in Biochemistry from the
University of Hanover. He obtained his Ph.D. at the Max Planck Society and received an M.Sc. from the University of Southern
California in Los Angeles, where he studied Business Administration and Chemistry.
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Senior Vice President, QIAGEN Digital Insights Business Area
Joined QIAGEN in 2018 as Senior Vice President, QIAGEN Digital Insights Business Area. He leads QIAGEN's growing presence in
bioinformatics, enabling customers to transform raw data from biological samples into valuable molecular insights. Dr. Sheldon came
to QIAGEN from Oracle, where he was Global Vice President leading Oracle's Healthcare business globally in the Health Sciences
Global Business Unit and served on the executive committee. Previously, he established the bioinformatics group and served as Head
of Bioinformatics at Roche (UK) Pharmaceuticals, as well as providing leadership in software firms serving the life science and
healthcare sectors. He serves on the Board of Directors of the Drug Information Association (DIA). He received his B.Sc. in
Biochemistry and Molecular Biology from the University of Manchester, and his Ph.D. in Biochemistry and Molecular Biology from the
University of Cambridge.
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Senior Vice President, Head of Molecular Diagnostics Business Area and Corporate Business Development
Joined QIAGEN in 2005 and worked in increasingly responsible roles until he was named Senior Vice President, Molecular
Diagnostics Business Area and Corporate Business Development, in 2015. In October 2019, Mr. Viola was appointed member of the
Executive Committee. He leads global efforts to expand QIAGEN’s portfolio through acquisitions and strategic partnerships, as well
as the protection of the company’s intellectual property. Among other business transactions, his track record includes the acquisitions
of Cellestis, Corbett Life Science, DxS and Enzymatics. Prior to joining QIAGEN, Mr. Viola served as President and CEO of Nextal
Biotechnologies Inc., a provider of technologies for protein crystallization, and when QIAGEN acquired Nextal in 2005 he joined as
Director of Protein Crystallization. Moving to Business Development in 2007, Mr. Viola led efforts in Asia-Pacific, the Americas,
Global M&A and Corporate Ventures. He completed a Bachelor of Science in Biochemistry from the University of Montreal, Canada.
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O v e r v i e w › The Executive Committee Common Shares
›
Common Shares
QIAGEN’s common share price varied widely during 2020, although it closed the year significantly higher
in both the U.S. and European markets. The performance was influenced by the unsuccessful tender offer for
QIAGEN to be acquired, the effects of the COVID-19 pandemic and initiatives to expand the business post-
pandemic. QIAGEN’s senior executives and Investor Relations team have been recognized for proactive,
transparent communications with the financial community. QIAGEN’s Investor Relations was ranked second
overall in Institutional Investor magazine’s 2020 European small- and mid-cap survey. We thank
shareholders for their continued support.
Market Environment
Stock markets globally moved up in 2020 despite the macro economic impact of the COVID-19 pandemic and against a strong
performance in 2019. In reaction to the onset of the pandemic, the U.S. Federal Reserve and the European Central Bank initiated
monetary policies to mitigate the economic uncertainty and also signaled interest rates will remain low to support economic recovery
in the midterm. Other governments and central banks around the globe have taken steps to provide substantial stimulus measures to
counter the negative economic impact of pandemic related shutdowns and restrictions. Markets rebounded during the second half
after the initial steep decline amid encouraging signs of a vaccine and a potential rebound of sectors most negatively impacted by
the pandemic.
Market benchmarks for the year were solid in 2020. The S&P 500 index in the United States finished up 16.3% in 2020. The DAX
index of the 30 largest companies in Germany rose 3.5% during the year, and Germany’s TecDAX, of which QIAGEN is a member,
improved by 6.6% for the year.
Global Shares Listed in the U.S. and Europe
QIAGEN’s global shares have been registered and traded in the United States since 1996, trading on the New York Stock Exchange
since January 10, 2018, after listing for more than 20 years on NASDAQ markets. The global shares also have traded in Germany
on the Frankfurt Stock Exchange since 1997, and the Prime Standard segment since its launch in 2003. The dual listing of global
shares on NYSE and the Frankfurt exchange offers advantages for QIAGEN, our shareholders and employees, increasing the
potential market opportunity to attract investors, particularly those in the U.S. that can only invest in U.S. dollar-denominated
investments, and enhances liquidity. Unlike American Depositary Receipts (ADRs), QIAGEN’s global shares provide equal rights for
all shareholders and can be traded on either exchange, in U.S. dollars or euros.
Share Price and Liquidity
QIAGEN’s share price varied widely in 2020, increasing 56.4% in U.S. dollars to $52.85 on the NYSE and rising 39.4% in euros to
EUR 42.45 on the Frankfurt Stock Exchange (XETRA). Our shares continued to offer high liquidity, with average daily trading volume
of approximately three million shares in 2020 (two million on the NYSE and other U.S. trading venues, and about one million on the
Frankfurt Stock Exchange (XETRA) and other German exchanges). QIAGEN continued its commitment to disciplined capital allocation
and shareholder returns. In 2020, QIAGEN repurchased 1.3 million shares on the Frankfurt Stock Exchange, under a program
announced in May 2019. This program ended December 17, 2020. Since 2019, a total of 3.3 million shares were repurchased for
a total of EUR 118.9 million at the times of purchases. As of December 31, 2020, the free float, which affects weighting of QIAGEN
shares in various indices, was approximately 99%.
Shareholder Structure
QIAGEN has a global investor base comprised of more than 300 identified institutional investors, including about half in North
America, about one-third in Europe and the remaining shares in the Asia-Pacific/Japan region. Members of the Managing Board and
the Supervisory Board, in total, own less than 1% of QIAGEN’s outstanding common shares at the end of 2020.
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Shareholder Structure
QIAGEN has a global investor base comprised of more than 300 identified institutional investors, including about half in North
America, about one-third in Europe and the remaining shares in the Asia-Pacific/Japan region. Members of the Managing Board and
the Supervisory Board, in total, own less than 1% of QIAGEN’s outstanding common shares at the end of 2020.
Annual Shareholder Meeting
At the Annual General Meeting on June 30, 2020, in Venlo, the Netherlands, shareholders voted on a number of annually recurring
items as well as a number of items relating to the offer of acquisition by Thermo Fisher. Many of the annually recurring items were
approved with majorities above 95% of the shares represented at the meeting. Shareholders present or represented at the meeting
held approximately 142.2 million shares, 61.6% of QIAGEN’s approximately 230.8 million issued shares as of the record date for
the meeting. Details of attendance and voting results are available at https://corporate.QIAGEN.com.
Investor Relations and Engagement with Shareholders
QIAGEN is committed to offering shareholders, analysts and communities around the world transparent, comprehensive and readily
accessible information on our performance, strategy and future prospects, as well as our vision and mission.
Interactions with existing and potential investors ramped up after the August announcement that Thermo Fisher did not achieve the
minimum acceptance threshold from QIAGEN shareholders. Due to the COVID-19 pandemic, many individual discussions with
investors were held virtually during 2020 as roadshows and investor conferences.
QIAGEN hosted a Virtual Deep Dive event on December 8, 2020 to provide investors insight into strategy and focus on our five
pillars of growth that was attended virtually by more than 125 market participants. More than 20 securities analysts, based in the
United States, France, Germany and the United Kingdom, followed QIAGEN in 2020.
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O v e r v i e w › Common Shares
QIAGEN Share Price Development and Average Trading Volume - NYSE 2020
Year-end price
High
Low
Average daily trading volume (in million shares)
22002200
$ 52.85
$ 55.27
$ 32.97
1.59
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QIAGEN Share Price Development and AvAA erage Trading Volume - Frankfurt Stock Exchange (XETRA) 2020
Year-end price
High
Low
Average daily trading volume (in million shares)
22002200
(cid:189) 42.45
(cid:189) 46.95
(cid:189) 29.55
0.90
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O v e r v i e w › Common Shares
Key Share Data
Year-end market capitalization (in $ million)
Year-end market capitalization (in (cid:189) million)
22002200
12,049
9,678
20(cid:211)(cid:228) Shareholder Structure by Geography
20(cid:211)(cid:228) Shareholder Structure by Investor Type
6%
14%
17%
3%
11%
United States
Germany
France
England
Other
Non-institutional
6%
3%
4%
12%
49%
18%
57%
GARP
Value
Index
Growth
Other
Non-institutional
(cid:54)(cid:82)(cid:88)(cid:85)(cid:70)(cid:72)(cid:29)(cid:3)(cid:52)(cid:44)(cid:36)(cid:42)(cid:40)(cid:49)(cid:3)(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:3)(cid:44)(cid:39)
(cid:54)(cid:82)(cid:88)(cid:85)(cid:70)(cid:72)(cid:29)(cid:3)(cid:52)(cid:44)(cid:36)(cid:42)(cid:40)(cid:49)(cid:3)(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:3)(cid:44)(cid:39)
19
Management
Report
022 Business and Operating Environment
045 Opportunities and Risks
063 Performance Review
075 Human Resources
077 Future Perspectives
Business and Operating Environment
QIAGEN is a global leader in Sample to Insight solutions that transform biological samples into valuable
molecular insights. Our mission is to enable customers across the continuum of molecular testing to unlock
valuable insights faster, better and more efficiently - from the raw biological sample to the final interpreted
result. Proven QIAGEN solutions and content are providing answers in hospitals and laboratories
worldwide, helping make sense of the increasing volumes and complexity of biological information, in
keeping with our vision of making improvements in life possible.
We began operations in 1986 as a pioneer in the emerging biotechnology sector, introducing a novel method that standardized and
accelerated extraction and purification of nucleic acids from biological samples. As molecular biology and genomic knowledge have
grown to influence many areas of life, we have expanded to serve the full spectrum of market needs. We believe our sample
technologies are unmatched in quality for isolating and preparing DNA (deoxyribonucleic acid), RNA (ribonucleic acid) and proteins
from blood or other liquids, tissue, plants or other materials. Our assay technologies amplify, enrich and make these biomolecules
accessible for analysis, such as identifying the genetic information of a pathogen or a gene mutation in a tumor. Our industry-leading
bioinformatics solutions allow users to analyze and interpret data with bioinformatics software and knowledge bases to provide
relevant, actionable insights. Our automation systems can be used to tie these technologies together in seamless and cost-effective
molecular testing workflows.
We have grown by developing new instruments, consumables and digital solutions to meet diverse and growing needs in the market,
partnering with researchers and pharma companies, and acquiring companies or technologies to complement our portfolio. We
believe the addressable global market for our portfolio of molecular testing products in life science research and molecular
diagnostics totals more than $11 billion. We continue to accelerate the growth of our portfolio of Sample to Insight solutions,
delivering efficiency and effectiveness, increasing the value of QIAGEN as an employer of choice and enhancing the customer
experience. Our growth strategy is anchored in our Five Pillars of Growth: sample technologies, the digital PCR platform QIAcuity,
the clinical PCR automation solutions QIAstat-Dx and NeuMoDx and the QuantiFERON technology platform used to detect diseases
such as latent tuberculosis.
We have funded our growth through internally generated funds, debt offerings, and private and public sales of equity securities. Our
global shares are listed on the New York Stock Exchange under the ticker symbol QGEN and on the Frankfurt Prime Standard as
QIA.
The company is registered under its commercial and legal name QIAGEN N.V. with the trade register (kamer van koophandel) of the
Dutch region Limburg Noord under file number 12036979. QIAGEN N.V. is a public limited liability company (naamloze
vennootschap) under Dutch law as a holding company. Our principal executive office is located at Hulsterweg 82, 5912 PL Venlo,
The Netherlands, and our telephone number is +31-77-355-6600.
As a holding company, QIAGEN conducts business through subsidiaries located throughout the world. Further information about
QIAGEN can be found at www.qiagen.com. By referring to our website, we do not incorporate the website or any portion of the
website by reference into this Annual Report.
22
M a n a g e m e n t R e p o r t › Business and Operating Environment
Operating Environment in 2020
Economic Environment
Global economic growth retracted by around 4% in 2020 as repeated waves of the SARS-CoV-2 virus triggered unprecedented
shutdowns that pushed economic activity to record lows. Advanced economies including the United States, the euro area and Japan
did not contract as much as initially feared and the Chinese economy recovered relatively quickly from the beginning of the year
slump. These economies were saved from worse by strong and quick policy responses from governments – including fiscal stimulus,
state aid for companies, and support payments for citizens – and central banks – including monetary easing, liquidity injections and
targeted credit support. On the other hand, most emerging market or developing economies had to deal with more acute problems
than initially expected. Nevertheless, the U.S. dollar ended a two-year period of steady strength as the COVID-19 crisis gripped the
United States. At the end of 2020, the U.S. Dollar Index, which tracks the currency’s value against other major currencies, was down
13% from its March highs and down 7% over the year.
Industry Environment
The molecular diagnostics market expanded during 2020 due to the significant demand for COVID-19 related testing solutions. The
expanding use of polymerase chain reaction (PCR), antigen, antibody and T-cell testing significantly raised public awareness of
molecular diagnostics and its potential. This unprecedented global attention is expected to fuel further acceptance of molecular
diagnostics in the coming years, likely spurring its expanded usage.
Molecular testing stepped up to meet additional demands for insights in diagnostics, life science research, pharmaceutical R&D and
public safety. Technologies for next-generation sequencing (NGS) and PCR continued to disseminate and evolve, making molecular
testing more accessible, faster and more efficient. Molecular diagnostics is growing dynamically and expanding into new areas of
medicine – enabling clinicians to evaluate and monitor cancers, infectious diseases, immune status, and prenatal or neonatal health.
The migration of genomic technologies from basic research into the mainstream remains a powerful driver for long-term growth of the
industry, increasing the need for scalable, user-friendly and efficient workflows from beginning to end in molecular testing.
In 2020, QIAGEN delivered 23% growth in net sales at constant exchange rates (CER) and 52% growth in adjusted earnings per
share CER. QIAGEN experienced significant demand for solutions used in the COVID-19 pandemic and saw improving trends in
other areas of the business during the second half of 2020. QIAGEN finished the year as an independent, stronger, and more
focused company, ready to execute on growth in the years after the pandemic.
QIAGEN aligned its strategy on five pillars of growth to focus on its largest and most attractive growth opportunities. In 2020, it
significantly raised its output of key consumables products such as sample technologies kits and QIAstat-Dx and NeuMoDx testing
cartridges. It innovated in anticipation of changing testing demands and overcame market challenges as the pandemic evolved.
QIAGEN developed over ten new solutions for use in the pandemic – and beyond the COVID-19 crisis. Having made over 3,300 new
placements last year, the company’s installed base of instruments saw accelerated growth – and is now ready to serve both ongoing
COVID and returning non-COVID applications. After the launch of the QIAcuity digital PCR platform in September 2020, QIAGEN
delivered over 200 devices by year-end. By acquiring the remaining 80.1% stake in NeuMoDx in September 2020, QIAGEN secured
the rights to commercialize its integrated PCR platforms in the U.S.
23
Our Products
Our leadership in molecular testing solutions leverages our product portfolio across a wide range of applications. We provide more
than 500 core consumable products (sample and assay kits), instruments and automation systems, and bioinformatics solutions for
analysis and interpretation. These products comprise two main categories: consumables and related revenues accounted for between
86% and 89% of total net sales during the last three years and includes sample and assay kits, bioinformatics solutions, royalties, co-
development milestone payments and services while instruments includes related services and contracts and accounted for between
11% and 14% of total net sales during the same time period.
In 2020, we worked closely with public authorities and customers to launch products based on molecular technologies to test for the
SARS-CoV-2 pathogen and the COVID-19 disease it triggers. We have built a comprehensive portfolio of solutions to cover the
phases of the pandemic including: a collection of RNA extraction kits and automation instrumentation from our sample technologies
portfolio, PCR testing workflows including QIAstat-Dx, NeuMoDx, and other PCR solutions, OEM components used by other
diagnostic suppliers, antigen and antibody tests, and genomic solutions. We are fully mobilized to serve our customers in the
pandemic response, providing existing solutions and developing a series of differentiated products. Dedicated COVID-19 solutions
brought to market in 2020 include:
QIAstat-Dx Respiratory SARS-CoV-2 Panel - a multiplex PCR test with EUA-authorization for the detection of SARS-CoV-2 plus more
than 20 other respiratory pathogens;
NeuMoDx - single-plex (also approved for saliva sample type) and multiplex;
QIAprep& rapid PCR test - a solution that streamlines RNA extraction and PCR analysis into one process, delivering a result in
under one hour and requiring less disposable laboratory plastic-ware than standard PCR tests, helping to avoid resource
bottlenecks;
QIAreach Antibody test - allows clinicians to detect immune status of individuals and has applications in determining vaccine
efficacy;
QuantiFERON SARS-CoV-2 T cell assay - enables researchers to explore longer-term immune responses to the virus and vaccines;
and
a suite of next generation sequencing (NGS) and bioinformatics tools - used for epidemiological studies.
(cid:0)
(cid:0)
(cid:0)
(cid:0)
(cid:0)
(cid:0)
24
M a n a g e m e n t R e p o r t › Business and Operating Environment
QIAGEN Product Groups
Sample Technologies
Sample technologies is the first of our Five Pillars of Growth and includes products involved in the first step of any molecular lab
process. Our broad portfolio of sample technologies includes consumables and instruments used in sample collection, stabilization,
storage, purification and quality control. Some of our consumables are designed to run on our instruments, while others are universal
kits designed for use with any molecular testing platform. These products are used in research and applied testing (forensics, human
identification and food safety) laboratories as well as clinical testing.
Saammpplee TTeecchhnnoolooggiieess
SSeeleecctteedd QQIAAGGEENN bbrraannddss
Primary sample technology consumables
• Nucleic stabilization and purification kits designed for
primary sample materials (DNA, RNA), manual and
automated processing for genotyping, gene expression, viral
and bacterial analysis
• QIAamp
• DNeasy
• RNeasy
• PAXgene
• AdnaTest
• MagAttract
• Mainly based on silica membrane and magnetic bead
technologies
• AllPrep
• QIAprep&
Secondary sample technology consumables
• Kits and components for purification of nucleic acids from
secondary sample materials (e.g. gel, plasmid DNA)
• QIAprep
• QIAquick
• DyeEx
• QIAGEN Plasmid
• QIAfilter
• R.E.A.L.
• HiSpeed
• EndoFree
Sample technology instruments
• Instruments for nucleic acid purification, quality control and
accessories
• QIAsymphony
• QIAcube Connect
• QIAcube HT
• EZ1
• QIAxpert
• QIAxcel
• TissueLyser
25
Diagnostic Solutions
Diagnostic solutions include our molecular testing platforms and consumables covering three of our five pillars of growth, which are
QuantiFERON, QIAstat-Dx and NeuMoDx, as well as Precision Medicine which involves companion diagnostic co-development
revenues from projects with pharmaceutical companies, regulated assays and solutions for laboratory developed tests. Additional
areas include Oncology and Sexual & Reproductive Health for detection of various diseases and for use in prenatal testing for
detection of infectious diseases and for other laboratory processes.
DDiiaaggnnoossttiicc SSooluuttiioonnss
SSeeleecctteedd QQIAAGGEENN bbrraannddss
Immune response consumables
• Interferon-Gamma Release Assay (IGRA) for TB testing
• QuantiFERON
• QIAreach
• Assays for post-transplant testing and viral load monitoring
Oncology and Sexual & Reproductive health consumables
• Assays for analysis of genomic variants such as mutations,
insertions, deletions and fusions
• Therascreen
• Ipsogen
• digene HC2
• Assays for prenatal testing and detection of sexually
transmitted diseases and HPV
• AmniSure /
PartoSure
Sample to Insight instruments
• One-step molecular analysis of hard-to-diagnose syndromes
• QIAstat-Dx
• NeuMoDx
• Fully integrated PCR testing
26
M a n a g e m e n t R e p o r t › Business and Operating Environment
PCR/Nucleic Acid Amplification
PCR/Nucleic Acid Amplification involves our research and applied PCR solutions and components. The product group includes
another of our Five Pillars of Growth: QIAcuity. We offer optimized solutions for end-point PCR, quantitative PCR and digital PCR.
Our kits, assays, instruments and accessories amplify and detect targets and streamline workflow for virtually any application.
PPCCRR//NNuuccleeiicc aacciidd aammppliiffiiccaattiioonn
SSeeleecctteedd QQIAAGGEENN bbrraannddss
Research PCR consumables
• Different generations of PCR, quantitative PCR, reverse
transcription and combinations (RT-PCR) kits for analysis of
gene expression, genotyping and gene regulation, running on
QIAGEN or third-party instruments and technologies
• QuantiTect
• QuantiFast
• QuantiNova
• OneStep RT-PCR
• Type-it
• OmniScript
• QIAGEN
Multiplex
• miRCURY
• miScript
• HotStarTaq
• TopTaq
Human ID/Forensics assay consumables
• STR assays for Human ID, additional assays for food
contamination
• Investigator
(human ID /
forensics)
• mericon (food
safety)
PCR instruments
• Digital PCR solutions
• QIAcuity
• QIAquant
• QIAamplifier 96
• Rotor-Gene Q
• QIAgility
OEM consumables
• Custom-developed and configured enzymes and PCR
solutions that are sold to OEM customers
• Provided on an
individualized
contract basis
27
Genomics/NGS
Genomics/NGS includes our universal NGS solutions as well as the full QIAGEN Digital Insights portfolio.
GGeennoommiiccss//NNGGSS
Universal NGS consumables
SSeeleecctteedd QQIAAGGEENN bbrraannddss
• Predefined and custom NGS gene panels (DNA, RNA),
library prep kits and components, whole genome
amplification, etc.
• QIAseq
• REPLI-g Epitect
QIAGEN Digital Insights solutions
• Bioinformatics solutions analyze and interpret data to deliver
actionable insights from NGS. This includes freestanding
software or cloud-based solutions and is also integrated into
many QIAGEN consumables and instruments
• QIAGEN
Clinical Insight
• CLC Genomics
Workbench
• QIAGEN
Knowledge Base
• N-of-One
• OmicSoft
• HGMD
• Ingenuity Variant
Analysis
• Ingenuity
Pathway Analysis
Custom laboratory and genomic services
• Custom services such as DNA sequencing, whole genome
amplification, and non-cGMP DNA production
• Provided on
an
individualized
contract basis
Other
Revenues from various sources including protein biology products, royalties, intellectual property and freight charges.
28
M a n a g e m e n t R e p o r t › Business and Operating Environment
Principal Markets
We sell our products to more than 500,000 customers in two broad customer groups: Molecular Diagnostics (clinical testing) and Life
Sciences (academia, pharmaceutical R&D and applied testing). We estimate the total addressable market has a volume of about $11
billion per year. The five pillars of growth – sample technologies, immune response, digital PCR, integrated PCR, syndromic testing –
account for $6 billion of this total.
Molecular Diagnostics
The molecular diagnostics market includes healthcare providers engaged in many aspects of patient care that require accurate
diagnoses and insights to guide treatment decisions in oncology, infectious diseases and immune monitoring.
We offer one of the broadest portfolios of molecular technologies for healthcare. The success of molecular testing in healthcare
depends on the ability to accurately analyze purified nucleic acid samples from sources such as blood, tissue, body fluids and stool.
Automated systems process tests reliably and efficiently, often handling hundreds of samples simultaneously. Our range of assays for
diseases and biomarkers speed up and simplify laboratory workflow and standardize many lab procedures.
Molecular testing is the most dynamic segment of the global in vitro diagnostics market, growing at an estimated annual rate in the
mid-single-digits at constant exchange rates even before COVID-19 struck. The pandemic has demonstrated the value of molecular
testing in healthcare and we expect the market to provide significant growth opportunities.
We have built a position as a preferred partner to co-develop companion diagnostics paired with targeted drugs. We have more
than 25 master collaboration agreements with pharmaceutical industry customers, some with multiple co-development projects. They
have created a rich pipeline of molecular tests that are transforming the treatment of cancer and other diseases. Companion
diagnostics can move through clinical trials and regulatory approvals, along with the paired drugs, to commercialization and
marketing to healthcare providers.
Molecular Diagnostics customers accounted for $904 million, $737 million, and $732 million of our sales in 2020, 2019 and 2018,
respectively.
Life Sciences
The Life Sciences market includes governments and biotechnology companies – and researchers who use molecular testing and
technologies and are generally served by public funding in areas such as medicine and clinical development, forensics and exploring
the secrets of life.
We partner with customers across diverse disciplines in academia and industry, providing sample technologies, assay technologies,
bioinformatics and services to universities and institutes, pharmaceutical and biotech companies, government and law enforcement
agencies.
We provide Sample to Insight solutions to academic and research institutions around the world. We focus on enabling researchers to
use reliable, fast, highly reproducible and high-quality technologies, sometimes replacing time-consuming traditional or in-house
methods. We often partner with leading institutions on research projects and develop customized solutions such as NGS panels for
the digital sequencing of multiple gene targets.
In the course of the COVID-19 pandemic, we served increased demand from viral and vaccine researchers for RNA extraction,
general PCR reagents and enzymes, and universal NGS solutions.
We are a global leader in solutions for governments and industry, particularly in forensic testing and human identification. The value
of genetic "fingerprinting" has been proven in criminal investigations and examinations of paternity or ancestry, as well as in food
safety and veterinary diagnostics. We provide sample collection and analytical solutions for law enforcement and human
identification labs, as well as advanced technologies for studies of microbiomes and their effect on health and the environment.
29
We have deep relationships with pharmaceutical and biotechnology companies. Drug discovery and translational research efforts
increasingly employ genomic information, both to guide research in diseases and to differentiate patient populations that are most
likely to respond to particular therapies. We estimate that about half of our sales to these companies supports research, while the
other half supports clinical development, including stratification of patient populations based on genetic information. Also, QIAGEN
Digital Insights solutions are widely used to guide pharmaceutical research.
Life Sciences customers accounted for $966 million, $789 million, and $770 million of our sales in 2020, 2019 and 2018,
respectively.
Competition
In sample technology products, we also experience competition in various markets from other companies providing sample
preparation products in kit form and assay solutions. These competitors include, but are not limited to, companies with a focus on
nucleic acid separation and purification, assay solutions, transfection reagents and protein fractionation products. We compete with
other suppliers through innovative technologies and products, offering a comprehensive solution for nucleic acid collection, pre-
treatment, separation and purification needs and providing significant advantages in speed, reliability, convenience, reproducibility
and ease of use.
Some of our other products within our molecular diagnostics customer class, such as tests for chlamydia, gonorrhea, hepatitis B virus,
herpes simplex virus and CMV, compete against existing screening, monitoring and diagnostic technologies, including tissue culture
and antigen-based diagnostic methodologies. We believe the primary competitive factors in the market for gene-based probe
diagnostics and other screening devices are clinical validation, performance and reliability, ease of use, standardization, cost,
proprietary position, competitors' market shares, access to distribution channels, regulatory approvals and reimbursement.
We believe our competitors typically do not have the same comprehensive approach to sample to insight solutions as we do, nor do
they have the ability to provide the broad range of technologies and depth of products and services that we offer. With our complete
range of manual and fully automated solutions, we believe we offer the value of standardization of procedures and, therefore, more
reliable results. We also believe our integrated strategic approach gives us a competitive advantage. The quality of sample
technologies - an area in which we have a unique market and leadership position - is a key prerequisite for reliable molecular assay
solutions, which increasingly are being applied in emerging markets such as Molecular Diagnostics and Applied Testing.
Current and potential competitors may be in the process of seeking FDA or foreign regulatory approvals for their respective products.
Our continued future success will depend in large part on our ability to maintain our technological advantage over competing
products, expand our market presence and preserve customer loyalty. There can be no assurance that we will be able to compete
effectively in the future or that development by others will not render our technologies or products non-competitive.
Global Presence by Category of Activity and Geographic Market
Product Category Information
Net sales for the product categories are attributed based on those revenues related to sample and assay products and related
revenues including bioinformatics solutions, and revenues derived from instrumentation sales.
NNeett SSaaleess ((iinn mmiilliioonnss))
Consumables and related revenues
$ 1,615.4
$ 1,354.1
$ 1,315.5
22002200
22001199
22001188
Instrumentation
TToottaal
30
254.9
172.3
186.4
$ 1,870.3
$ 1,526.4
$ 1,501.8
M a n a g e m e n t R e p o r t › Business and Operating Environment
Geographical Information
We currently market products in more than 130 countries. The following table shows total revenue by geographic market for the past
three years (net sales are attributed to countries based on the location of the customer, as certain subsidiaries have international
distribution):
NNeett SSaaleess ((iinn mmiilliioonnss))
United States
Other Americas
TToottaal AAmmeerriiccaass
Europe, Middle East and Africa
Asia Pacific, Japan and Rest of World
22002200
22001199
22001188
$ 728.6
$ 663.9
$ 632.7
96.9
58.1
60.4
825.5
722.0
693.0
682.3
487.5
490.3
362.6
317.0
318.5
TToottaal
$ 1,870.3
$ 1,526.4
$ 1,501.8
We have built an increasing presence in key emerging markets as a growth strategy. In 2020, the top seven emerging markets -
Brazil, Russia, India, China, South Korea, Mexico and Turkey - contributed approximately 15% of net sales.
Seasonality
Our business does not experience significant predictable seasonality. Historically, a significant portion of our sales has been to
researchers, universities, government laboratories and private foundations whose funding is dependent upon grants from government
agencies, such as the National Institutes of Health and similar bodies. To the extent that our customers experience increases,
decreases or delays in funding arrangements and budget approvals, and to the extent that customers' activities are slowed, such as
during times of higher unemployment, vacation periods or delays in approval of government budgets, we may experience fluctuations
in sales volumes during the year or delays from one period to the next in the recognition of sales. Additionally, we have customers
who are active in the diagnostics testing market, and sales to these customers fluctuate to the extent that their activities are impacted
by public health concerns such as the timing and severity of flu season.
Suppliers
We strive to ensure that our quality standards, compliance with laws and regulations as well as environmental and social standards
are maintained along the entire value chain of suppliers and partners. We demand the same from our business partners. Suppliers
are subjected to a risk analysis with regard to environmental and social criteria based on their geographic location. Our procurement
policy, which is available on our website, contains requirements with regard to legal compliance, bribery and corruption, labor
rights, non-discrimination and fair treatment, health and safety as well as environmental protection and conservation. In 2020, all
new suppliers have signed our procurement policy. In addition, first-tier suppliers must confirm REACH, RoHS and conflict minerals
compliance as appropriate.
As part of our supplier assessment procedures, we evaluate on a monthly basis the supply performance of our raw material and
component suppliers, and we assess on a continuous basis potential alternative sources of such materials and components, and on a
yearly basis the risks and benefits of reliance on our existing suppliers. We buy materials for our products from many suppliers, and
are not dependent on any one supplier or group of suppliers for our business as a whole. Raw materials generally include chemicals,
raw separation media, biologics, plastics, electronics and packaging. Raw materials are generally readily available at competitive,
stable prices from a number of suppliers. Certain raw materials are produced under our specifications. We have inventory
31
agreements with the majority of our suppliers and we closely monitor stock levels to maintain adequate supplies. We believe we
maintain inventories at a sufficient level to ensure reasonable customer service levels and to guard against normal volatility in
availability.
Research and Development
We are committed to expanding our global leadership in Sample to Insight solutions in Molecular Diagnostics and the Life Sciences.
We target our research and development resources at the most promising technologies to address the unmet needs of our customers
in healthcare and research labs in key geographic markets.
As a percentage of sales, our research and development investments are among the highest in our industry. 902 employees in
research and development work in QIAGEN centers of excellence on three continents.
Innovation at QIAGEN follows parallel paths:
Creating new systems for automation of workflows - platforms for laboratories, hospitals and other users of novel molecular
technologies.
Expanding our broad portfolio of novel content - including assays to detect and measure biomarkers for disease or genetic
identification.
Integrating QIAGEN Digital Insights with the testing process - software and cloud-based resources to interpret and transform raw
molecular data into useful insights.
Innovation in automation systems positions us in fast-growing fields of molecular testing, and generates ongoing demand for our
consumable products. We are developing and commercializing a deep pipeline of assays for preventive screening and diagnostic
profiling of diseases, detection of biomarkers to guide Precision Medicine in cancer and other diseases, and other molecular targets.
Our assay development program aims to commercialize tests that will add value to our QIAsymphony, QIAstat-Dx and NeuMoDx
automation systems in the coming years, as well as next-generation sequencing kits to support our universal NGS franchise and our in
vitro diagnostics partnership with Illumina. In 2020, we launched the QIAcuity digital PCR system which is designed to make digital
PCR technology available to Life Sciences laboratories worldwide.
We collaborate with many institutions and companies to create innovative molecular solutions. In 2020, we partnered with Ellume, an
Australian digital diagnostics company, to develop antigen and antibody tests. These tests provide rapid results through use of the
QIAGEN eHub, which gives an automated read-out in less than 15 minutes.
Our QIAGEN Digital Insights teams are developing new software and adding proprietary cloud-based content to support the latest
research and clinical trends in molecular testing, especially the interpretation of large volumes of NGS data. We also integrate
digital solutions with instruments and molecular content to provide our customers seamless Sample to Insight workflows.
Sales and Marketing
We market our products in more than 130 countries, mainly through subsidiaries in markets in the Americas, Europe, Australia and
Asia with the greatest sales potential. Experienced marketing and sales staff, many of them scientists with academic degrees in
molecular biology or related areas, sell our products and support our customers. Business managers oversee key accounts to ensure
that we serve customers’ commercial needs, such as procurement processes, financing, data on costs and the value of our systems,
and collaborative relationships. In many markets, we have specialized independent distributors and importers.
Our marketing strategy focuses on providing differentiated, high-quality products across the value chain from Sample to Insight,
integrating components into end-to-end solutions when possible, and enhancing relationships with commitment to technical excellence
and customer service. Our omni-channel approach seeks to engage customers through their preferred channels - online, by phone, in
person, etc. - and to optimize investment in different customer types.
32
M a n a g e m e n t R e p o r t › Business and Operating Environment
We have initiated actions to drive the growth of our digital marketing channels - including our website (www.qiagen.com), product-
specific sites and social media. Our eCommerce team works with clients to provide automated processes supporting a variety of
electronic transactions and all major eProcurement systems. Information contained on our website, or accessed through it, is not part
of this Annual Report.
My QIAGEN is an easy-to-use self-service portal that is personalized to our customers' needs and enables customers to manage
different activities in one central place. Customers can now easily reorder, place bulk orders, apply quotes to their cart, and then
track their order status. Functionality in the dashboard allows customers to monitor their instrument use and view the status of licenses
and service agreements. Additionally, customers can access our exclusive content and services, such as webinars, handbooks and
other documents.
Our GeneGlobe Design & Analysis Hub (www.geneglobe.com) is a valuable outreach to scientists in pharma and academia,
enabling researchers to search and order from approximately 25 million pre-designed and custom PCR assay kits, NGS assay panels
and other products. The new hub brings next-level experiment planning, execution and follow-up to life science researchers, linking
our QIAGEN Digital Insights solutions with ordering of assays to accelerate research.
We use a range of tools to provide customers with direct access to technical support, inform them of new product offerings, and
enhance our reputation for technical excellence, high-quality products and commitment to service. For example, our technical service
hotline allows existing or potential customers to discuss a wide range of questions about our products and molecular biology
procedures, online or via phone, with Ph.D. and M.Sc. scientists at QIAGEN. Frequent communication with customers enables us to
identify market needs, learn of new developments and opportunities, and respond with new products.
We also distribute publications, including our catalog, to existing and potential customers worldwide, providing new product
information, updates, and articles about existing and new applications. In addition, we hold numerous scientific seminars at clinical,
academic and industrial research institutes worldwide and at major scientific and clinical meetings. We conduct direct marketing
campaigns to announce new products and special promotions, and we offer personalized electronic newsletters and webinars
highlighting molecular biology applications.
For laboratories that frequently rely on our consumables, the QIAstock program maintains inventory on-site to keep up with their
requirements. QIAGEN representatives make regular visits to replenish the stock and help with other needs, and we are automating
this process with digital technologies. Easy-to-use online ordering, inventory monitoring and customer-driven changes make QIAstock
an efficient system for providing ready access to our products for the hundreds of customers worldwide who use this program.
Intellectual Property, Proprietary Rights and Licenses
We have made and expect to continue to make investments in intellectual property. In 2020, additions to our intangible assets
outside of business combinations totaled $24.0 million. While we do not depend solely on any individual patent or technology, we
are significantly dependent in the aggregate on technology that we own or license. Therefore, we consider protection of proprietary
technologies and products one of the major keys to our business success. We rely on a combination of patents, licenses and
trademarks to establish and protect proprietary rights. As of December 31, 2020, we owned 368 issued patents in the United States,
284 issued patents in Germany and 1,813 issued patents in other major industrialized countries. We had 546 pending patent
applications. Our policy is to file patent applications in Western Europe, the United States and Japan. Patents in most countries have
a term of 20 years from the date of filing the patent application. We intend to aggressively prosecute and enforce patents and to
otherwise protect our proprietary technologies. We also rely on trade secrets, know-how, continuing technological innovation and
licensing opportunities to develop and maintain our competitive position.
Our practice is to require employees, consultants, outside scientific collaborators, sponsored researchers and other advisers to
execute confidentiality agreements upon commencement of their relationships with us. These agreements provide that all confidential
information developed by or made known to the individual during the course of the relationship is to be kept confidential and not
disclosed to third parties, subject to a right to publish certain information in scientific literature in certain circumstances and to other
specific exceptions. In the case of our employees, the agreements provide that all inventions conceived by individuals in the course of
their employment will be our exclusive property.
See “Risk Factors” included in Opportunities and Risks section of this Annual Report for details regarding risks related to our reliance
on patents and proprietary rights.
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Government Regulations
We are subject to a variety of laws and regulations in the European Union, the United States and other countries. The level and
scope of the regulation varies depending on the country or defined economic region, but may include, among other things, the
research, development, testing, clinical trials, manufacture, storage, recordkeeping, approval, labeling, promotion and commercial
sales and distribution, of many of our products.
European Union Regulations
In the European Union, in vitro diagnostic medical devices (IVDs) have been regulated under EU-Directive 98/79/EC (IVD Directive)
and corresponding national provisions. The IVD Directive requires that medical devices meet the essential requirements set out in an
annex of the Directive. These requirements include information about the safety and efficacy of the devices. According to the IVD
Directive, the Member States presume compliance with these essential requirements in respect of devices which are in conformity with
the relevant national standards transposing the harmonized standards of which the reference numbers have been published in the
Official Journal of the European Communities. These harmonized standards include ISO 13485:2016, the quality standard for
medical device manufacturers.
IVD medical devices, other than devices for performance evaluation, must bear the CE marking of conformity when they are placed
on the market. The CE mark is a declaration by the manufacturer that the product meets all the appropriate provisions of the
applicable legislation implementing the relevant European Directive. As a general rule, the manufacturer must follow the procedure of
the EC Declaration of conformity to obtain this CE marking.
Each European country must adopt its own laws, regulations and administrative provisions necessary to comply with the IVD
Directive. Member States may not create any obstacle to the placing on the market or the putting into service within their territory of
devices bearing the CE marking according to the conformity assessment procedures.
In May 2022, the Directive will be replaced by the In Vitro Diagnostic Device Regulation (IVDR) (EU) 2017/746 that was published
in May 2017 and given a 5-year transition period until its full implementation on May 26, 2022. Unlike the Directive that specifies
certain results that must be achieved by each Member State and permits each Member State to decide how to transpose the Directive
into national law, the IVDR has binding legal force throughout every Member State and it will become effective on a set date in all
the Member States. The major goals of the IVDR are to standardize diagnostic procedures within the EU, increase reliability of
diagnostic analysis and enhance patient safety. Under the IVDR as enacted by the European Commission (EC), in vitro diagnostics
will be subject to additional legal regulatory requirements after it comes into full effect. Among other things, the IVDR introduces a
new risk-based classification system and requirements for conformity assessments. Products already certified by a Notified Body may
remain on the market until 25 May 2024 under some conditions including fulfillment of specific requirements in the IVDR, but
ultimately most products will have to be approved. Under the Directive nearly eighty (80) percent of QIAGEN products were under
the self-declaration classification, while under IVDR nearly ninety (90) percent of QIAGEN products will require pre-approval, and
those that are in the highest risk class will have to be tested by a Designated Reference Laboratory. In addition, there will also be a
greater emphasis on post-market surveillance and submission of post-market performance follow-up reports.
With respect to the current COVID-19 pandemic, the EC has classified SARS-CoV-2 assays as high risk, and designated five (5)
Notified Bodies under the IVDR, including QIAGEN’s Notified Body, TÜV Rheinland. MedTech Europe has issued guidance in several
areas, e.g., clinical benefit, technical documentation, state of art, accessories, and EUDAMED. Open points still being
addressed/defined are the designation of EU Reference Laboratories and Common Specification for high risk IVDs.
United Kingdom
The UK’s withdrawal from the EU will have major ramifications for IVD manufacturers that will, among other things have to follow new
procedures that will apply in the UK including appointment of a UK Responsible Person rather than relying on European Authorized
Representatives to manage their compliance efforts in the UK.
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M a n a g e m e n t R e p o r t › Business and Operating Environment
The UK Medicine and Healthcare Products Regulatory Agency (MHRA) issued a new guidance on how the country will regulate IVDs
after January 1, 2021. According to MHRA, IVDs in the future will require certification in the UK, which is defined as England,
Scotland and Wales, while companies will still be able to sell tests in Northern Ireland under existing EU IVD regulations. As
described in the guidance, MHRA will continue to recognize CE marks until June 30, 2023. Companies wishing to place IVDs on the
UK market will be required to register with MHRA after January 1, 2021, but will still be able to sell CE-IVD marked products for the
next two-and-a half years. After July 1, 2023, companies selling in the UK will have to obtain a new marking called a UK Conformity
Assessed mark (UKCA). More information about the new UK requirements should become available in the near future.
U.S. Regulations
In the United States, in vitro diagnostic products are subject to regulation by the FDA as medical devices to the extent that they are
intended for use in the diagnosis, treatment, mitigation or prevention of disease or other conditions.
They are subject to premarket review and postmarket controls which will differ depending on how the FDA classifies a specific IVD.
Certain types of tests like some that we manufacture and sell for research use only in the United States have not been subject to FDA’s
premarket review and controls because we do not promote these tests for clinical diagnostic use, and they are labeled “For Research
Use Only,” or RUO, as required by the FDA. Other tests, known as laboratory developed tests (LDTs) which are in vitro diagnostic
tests that are designed, manufactured and used within a single laboratory, have generally been subject to enforcement discretion,
which means that FDA generally has not enforced premarket review and other applicable FDA requirements. However, as LDTs have
increased in complexity, the FDA has begun to take a risk-based approach to their regulation. Congress has also signaled interest in
clarifying the regulatory landscape for LDTs. In 2020, the Verifying Accurate, Leading-edge IVCT Development (“VALID”) Act was
introduced in both chambers of Congress. If enacted, clinical laboratories that develop and offer LDTs and traditional IVD medical
device manufacturers would be subjected to the same regulatory oversight. The VALID Act defines both LDTs and IVDs as in vitro
clinical tests (“IVCT”) and would establish a new regulatory framework under the Food, Drug and Cosmetic Act (“FDCA”) for the
review and oversight of IVCTs. The proposed regulatory framework adopts various concepts from the FDCA, utilizing a risk-based
approach that aims to ensure that all marketed IVCTs have a reasonable assurance of both analytical and clinical validity.
The FDA regulates the sale or distribution of medical devices, including in vitro diagnostic test kits and some LDTs. The information
that must be submitted to the FDA in order to obtain clearance or approval to market a new medical device varies depending on how
the medical device is classified by the FDA. Medical devices are classified into one of three classes depending on the controls
deemed by the FDA to be necessary to reasonably ensure their safety and effectiveness. Class I devices are subject to general
controls, including labeling requirements, and adherence to the FDA’s quality system regulations (QSRs), which are device-specific
current good manufacturing practices. Class II devices are subject to premarket notification, QSRs, general controls and sometimes
special controls, including performance standards and post-market surveillance. Class III devices are subject to most of the previously
identified requirements as well as to pre-market approval. Class I devices are exempt from premarket review; most Class II devices
require 510(k) clearance, and all Class III devices must receive premarket approval before they can be sold in the United States. The
payment of a user fee, that is typically adjusted annually, to the FDA is usually required when a 510(k) notice or premarket approval
application is submitted.
510(k) Premarket Notification
A 510(k) premarket notification requires the sponsor to demonstrate that a medical device is substantially equivalent to another
marketed device, termed a “predicate device,” that is legally marketed in the United States and for which a premarket approval was
not required. A device is substantially equivalent to a predicate device if it has the same intended use and technological
characteristics as the predicate; or has the same intended use but different technological characteristics, where the information
submitted to the FDA does not raise new questions of safety and effectiveness and demonstrates that the device is at least as safe and
effective as the legally marketed device.
If the FDA believes that the device is not substantially equivalent to a predicate device, it will issue a “Not Substantially Equivalent”
(NSE) determination and designate the device as a Class III device, which will require the submission and approval of a PMA before
the new device may be marketed. A person who receives an NSE determination in response to a 510(k) submission may, within 30
days of receipt of the NSE determination, submit a de novo request for the FDA to make a risk-based evaluation for classification of
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the device into Class I or II. Devices that are classified through the de novo process may be marketed and used as predicates for
future 510(k) submissions. The FDA continues to reevaluate the 510(k) pathway and process and the de novo process, and has taken
what it describes as a risk-based approach to develop innovative regulatory policy to propose a more "contemporary" approach. In
October 2017, the FDA published a final guidance entitled, “De Novo Classification Process (Evaluation of Automatic Class III
Designation),” and in December 2018, the FDA published a proposed rule which if finalized is intended to provide structure, clarity
and transparency on the de novo classification process. In January 2021, it also published a final guidance entitled “Requests for
Feedback and Meetings for Medical Device Submissions: The Q-Submission Program.”
Premarket Approval
The PMA process is more complex, costly and time consuming than the 510(k) process. A PMA must be supported by more detailed
and comprehensive scientific evidence, including clinical data, to demonstrate the safety and efficacy of the medical device for its
intended purpose. If the device is determined to present a “significant risk,” the sponsor may not begin a clinical trial until it submits
an investigational device exemption (IDE) to the FDA and obtains approval to begin the trial.
After the PMA is submitted, the FDA has 45 days to make a threshold determination that the PMA is sufficiently complete to permit a
substantive review. If the PMA is complete, the FDA will file the PMA. The FDA is subject to a performance goal review time for a
PMA that is 180 days from the date of filing, although in practice this review time is longer. Questions from the FDA, requests for
additional data and referrals to advisory committees may delay the process considerably. The total process may take several years
and there is no guarantee that the PMA will ever be approved. Even if approved, the FDA may limit the indications for which the
device may be marketed. The FDA may also request additional clinical data as a condition of approval or after the PMA is approved.
Any changes to the medical device may require a supplemental PMA to be submitted and approved before changed medical device
may be marketed.
Any products sold by us pursuant to FDA clearances or approvals will be subject to pervasive and continuing regulation by the FDA,
including record keeping requirements, reporting of adverse experiences with the use of the device and restrictions on the advertising
and promotion of our products. Device manufacturers are required to register their establishments and list their devices with the FDA
and are subject to periodic inspections by the FDA and certain state agencies. Noncompliance with applicable FDA requirements can
result in, among other things, warning letters, fines, injunctions, civil penalties, recalls or seizures of products, total or partial
suspension of production, refusal of the FDA to grant 510(k) clearance or PMA approval for new devices, withdrawal of 510(k)
clearances and/or PMA approvals and criminal prosecution.
As a result of the COVID-19 pandemic, the US government declared a state of emergency which enabled the FDA to issue emergency
use authorizations (EUAs) to provide more timely access to critical medical products (including medicines and tests) that may help
during the emergency when there are no adequate, approved, and available alternative options. EUAs are in effect until the
emergency declaration ends but can be revised or revoked as FDA considers the needs during the emergency and new data on a
product’s safety and effectiveness, or as products meet the criteria to become approved, cleared, or licensed by the FDA.
Manufacturers of several types of SARS-CoV-2 assays have been granted EUAs, including QIAGEN. These authorizations are only
intended for the duration of the emergency declaration, and afterwards will be revoked. The FDA has indicated the withdrawal of the
EUA process will be done in a controlled ramp down.
Regulation of Companion Diagnostic Devices
If a sponsor or the FDA believes that a diagnostic test is essential for the safe and effective use of a corresponding therapeutic
product, the sponsor of the therapeutic product will typically work with a collaborator to develop an in vitro companion diagnostic
device. FDA issued a final guidance document in 2014, entitled “In Vitro Companion Diagnostic Devices” that is intended to assist
companies developing in vitro companion diagnostic devices and companies developing therapeutic products that depend on the use
of a specific in vitro companion diagnostic for the safe and effective use of the product. The FDA defined an IVD companion
diagnostic device as a device that provides information that is essential for the safe and effective use of a corresponding therapeutic
product. The FDA also noted that in some cases, if evidence is sufficient to conclude that the IVD companion diagnostic device is
appropriate for use with a class of therapeutic products, the intended use/indications for use should name the therapeutic class,
rather than each specific product within the class.
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In April 2020, FDA published a final guidance entitled, “Developing and Labeling In Vitro Companion Diagnostic Devices for a
Specific Group or Class of Oncology Therapeutic Products” that expands on that last issue in the 2014 final guidance and describes
considerations for the development and labeling of in vitro companion diagnostic devices to support the indicated uses of multiple
drug or biological oncology products, when appropriate.
The FDA also issued a draft guidance in July 2016, entitled, “Principles for Codevelopment of an In Vitro Companion Diagnostic
Device with a Therapeutic Product” to serve as a practical guide to assist therapeutic product sponsors and IVD sponsors in
developing a therapeutic product and an accompanying IVD companion diagnostic.
The FDA subsequently introduced the concept of complementary diagnostics that are distinct from companion diagnostics because
they provide additional information about how a drug is used or identify patients who are likely to derive the greatest benefit from
therapy without being required for the safe and effective use of that drug. The FDA has not yet provided much guidance on the
regulation and use of complementary diagnostics, but several have been approved.
The FDA indicated that it will apply a risk-based approach to determine the regulatory pathway for IVD companion diagnostic
devices, as it does with all medical devices. This means that the regulatory pathway will depend on the level of risk to patients, based
on the intended use of the IVD companion diagnostic device and the controls necessary to provide a reasonable assurance of safety
and effectiveness. The two primary types of marketing pathways for medical devices are clearance of a premarket notification under
Section 510(k) of the Federal Food, Drug, and Cosmetic Act, or 510(k), and approval of a premarket approval application, or PMA.
We expect that any IVD companion diagnostic device that we develop will utilize the PMA pathway and that a clinical trial
performed under an investigational device exemption, or IDE, will have to be completed before the PMA may be submitted.
The FDA expects that the therapeutic sponsor will address the need for an IVD companion diagnostic device in its therapeutic product
development plan and that, in most cases, the therapeutic product and its corresponding IVD companion diagnostic device will be
developed contemporaneously. If the companion diagnostic test will be used to make critical treatment decisions such as patient
selection, treatment assignment, or treatment arm, it will likely be considered a significant risk device for which a clinical trial will be
required.
The sponsor of the IVD companion diagnostic device will be required to comply with the FDA’s IDE requirements that apply to clinical
trials of significant risk devices. If the diagnostic test and the therapeutic drug are studied together to support their respective
approvals, the clinical trial must meet both the IDE and IND requirements.
Unique Device Identifier Requirements
In September 2013, the FDA issued its final rule on the Unique Device Identifier. This rule now requires an additional registered
identifier, including a special barcode, on all FDA regulated medical devices. The rule is implemented in phases with the first
deadline of September 24, 2014 being established for all Class III medical devices. For QIAGEN, this impacted the HC2,
QuantiFERON, artus, and therascreen products. We established a task force to ensure that the deadline was met but there is
additional administrative and regulatory burden on us related to the annual reporting of compliance of these products to the new
regulation. Class II and Class I products were required to have this same labeling as of September 24, 2016 and 2018, respectively.
QIAGEN was fully compliant with the new rule by September 2018. The new rule will also require additional compliance oversight
now that it has been implemented. The requirements are now confirmed as part of our annual reporting and PMA submissions. They
are also assessed during site inspections by the U.S. FDA.
Regulation of Research Use Only Products
Some of our products are sold for research purposes in the U.S., and labeled “For Research Use Only” (RUO) or “for molecular
biology applications.” In November 2013, the FDA issued a final Guidance for Industry and Food and Drug Administration Staff
entitled, “Distribution of In Vitro Diagnostic Products Labeled for Research Use Only or Investigational Use Only.” In the Guidance,
RUO refers to devices that are in the laboratory phase of development, and investigational use only, or IUO, refers to devices that
are in the product testing phase of development. These types of devices are exempt from most regulatory controls. Because we do not
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promote our RUOs for clinical diagnostic use or provide technical assistance to clinical laboratories with respect to these tests, we
believe that these tests are exempt from FDA’s premarket review and other requirements. If the FDA were to disagree with our
designation of any of these products, we could be forced to stop selling the product until we obtain appropriate regulatory clearance
or approval. Further, it is possible that some of our RUOs may be used by some customers without our knowledge in their LDTs, which
they develop, validate and promote for clinical use. However, as previously noted, we do not promote these products for use in LDTs
or assist in the development of the LDTs for clinical diagnostic use.
The 21st Century Cures Act (Cures Act) was enacted into law on December 13, 2016, after a bipartisan, multi-year effort. The Cures
Act primarily affects activities of the Department of Health and Human Services (HHS) and its agencies, including the Food and Drug
Administration (FDA or the Agency). On June 6, 2017, the Commissioner of Food and Drugs reported to Congress as required by the
Cures Act. This report included the Food & Drug Administration Work Plan and Proposed Funding Allocations of FDA Innovation
Account (Required by Section 1002 of the 21st Century Cures Act (Public Law 114-255). This is now being implemented with a broad
spectrum of initiatives within the FDA with the goal to support patients with improved and timely access to safe and efficacious
medical products. For industry, it is anticipated that some processes will become less burdensome with more rapid
approval/clearance cycles while others will continue to require significant investment.
HIPAA and Other Privacy and Security Laws
The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), established comprehensive federal standards for the
privacy and security of health information. The HIPAA standards apply to three types of organizations: health plans, healthcare
clearing houses, and healthcare providers that conduct certain healthcare transactions electronically (“Covered Entities”). Title II of
HIPAA, the Administrative Simplification Act, contains provisions that address the privacy of health data, the security of health data,
the standardization of identifying numbers used in the healthcare system and the standardization of certain healthcare transactions.
The privacy regulations protect medical records and other protected health information by limiting their use and release, giving
patients the right to access their medical records and limiting most disclosures of health information to the minimum amount necessary
to accomplish an intended purpose. The HIPAA security standards require the adoption of administrative, physical, and technical
safeguards and the adoption of written security policies and procedures.
On February 17, 2009, Congress enacted Subtitle D of the Health Information Technology for Economic and Clinical Health Act, or
HITECH, provisions of the American Recovery and Reinvestment Act of 2009. HITECH expanded and strengthened HIPAA, created
new targets for enforcement, imposed new penalties for noncompliance and established new breach notification requirements for
Covered Entities. Regulations implementing major provisions of HITECH were finalized on January 25, 2013 through publication of
the HIPAA Omnibus Rule (the “Omnibus Rule”).
Under HITECH's breach notification requirements, Covered Entities must report breaches of protected health information that has not
been encrypted or otherwise secured in accordance with guidance from the Secretary of the U.S. Department of Health and Human
Services (the “Secretary”). Required breach notices must be made as soon as is reasonably practicable, but no later than 60 days
following discovery of the breach. Reports must be made to affected individuals and to the Secretary and, in some cases depending
on the size of the breach, they must be reported through local and national media. Breach reports can lead to investigation,
enforcement and civil litigation, including class action lawsuits.
We are currently subject to the HIPAA regulations and maintain an active compliance program that is designed to identify security
incidents and other issues in a timely fashion and enable us to remediate, mitigate harm or report if required by law. We are subject
to prosecution and/or administrative enforcement and increased civil and criminal penalties for non-compliance, including a new,
four-tiered system of monetary penalties adopted under HITECH. We are also subject to enforcement by state attorneys general who
were given authority to enforce HIPAA under HITECH. To avoid penalties under the HITECH breach notification provisions, we must
ensure that breaches of protected health information are promptly detected and reported within the company, so that we can make all
required notifications on a timely basis. However, even if we make required reports on a timely basis, we may still be subject to
penalties for the underlying breach.
In addition to the federal privacy and security regulations, there are a number of state laws regarding the privacy and security of
health information and personal data that are applicable to our clinical laboratories. Many states have also implemented genetic
testing and privacy laws imposing specific patient consent requirements and protecting test results by strictly limiting the disclosure of
those results. State requirements are particularly stringent regarding predictive genetic tests, due to the risk of genetic discrimination
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against healthy patients identified through testing as being at a high risk for disease. We believe that we have taken the steps
required of us to comply with health information privacy and security statutes and regulations, including genetic testing and genetic
information privacy laws in all jurisdictions, both state and federal. However, these laws constantly change, and we may not be able
to maintain compliance in all jurisdictions where we do business. Failure to maintain compliance, or changes in state or federal laws
regarding privacy or security could result in civil and/or criminal penalties, significant reputational damage and could have a
material adverse effect on our business.
The Genetic Information Nondiscrimination Act of 2008, also referred to as GINA, is a federal law that protects individuals from
discrimination in the health insurance and employment contexts because of DNA characteristics that may affect their health. GINA
prohibits covered employers from requesting, obtaining, or using employees’ genetic information (subject to limited exceptions), and
prohibits covered health insurers from requesting genetic information or using any such information they may already have for
purposes of making eligibility, premium, or coverage-related decisions.
Many states have also adopted genetic testing and privacy laws. These laws typically require a specific, written consent for genetic
testing as well as consent for the disclosure of genetic test results and otherwise limit uses and disclosures of genetic testing results. A
few states have adopted laws that give their residents property rights in their genetic information.
Privacy and data security laws, including those relating to health information, are complex, overlapping and rapidly evolving. As our
activities evolve and expand, additional laws may be implicated. For example, the California Consumer Privacy Act of 2018, which
took effect on January 1, 2020, imposes requirements and protections upon the processing of personal data, aimed at giving
California consumers more visibility and control over their personal information. There are also non-U.S. privacy laws, such as the
General Data Protection Regulation (GDPR) of the European Union, that impose restrictions on the transfer, access, use, and
disclosure of health and other personal information. We have implemented the requirements set forth by the GDPR, which took effect
on May 25, 2018. All of these laws impact our business either directly or indirectly. Our failure to comply with applicable privacy or
security laws or significant changes in these laws could significantly impact our business and future business plans. For example, we
may be subject to regulatory action or lawsuits in the event we fail to comply with applicable privacy laws. We may face significant
liability in the event any of the personal information we maintain is lost or otherwise subject to misuse or other wrongful use, access
or disclosure.
The General Data Protection Regulation (“GDPR”), which applies to all EU member states from May 25, 2018, also applies to some
of our operations.
We are subject to laws and regulations related to the protection of the environment, the health and safety of employees and the
handling, transportation and disposal of medical specimens, infectious and hazardous waste and radioactive materials. For example,
the U.S. Occupational Safety and Health Administration (“OSHA”) has established extensive requirements relating specifically to
workplace safety for healthcare employers in the U.S. This includes requirements to develop and implement multi-faceted programs to
protect workers from exposure to blood-borne pathogens, including preventing or minimizing any exposure through needle stick
injuries. For purposes of transportation, some biological materials and laboratory supplies are classified as hazardous materials and
are subject to regulation by one or more of the following agencies: the U.S. Department of Transportation, the U.S. Public Health
Service, the United States Postal Service, the Office of Foreign Assets Control, and the International Air Transport Association. We
generally use third-party vendors to dispose of regulated medical waste, hazardous waste and radioactive materials and contractually
require them to comply with applicable laws and regulations.
Compliance with Fraud and Abuse Laws
We have to comply with various U.S. federal and state laws, rules and regulations pertaining to healthcare fraud and abuse,
including anti-kickback laws and physician self-referral laws, rules and regulations. Violations of the fraud and abuse laws are
punishable by criminal and civil sanctions, including, in some instances, exclusion from participation in federal and state healthcare
programs, including Medicare and Medicaid.
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Anti-Kickback Statute
The federal Anti-Kickback Statute prohibits persons from knowingly or willfully soliciting, receiving, offering or paying remuneration,
directly or indirectly, in exchange for or to induce:
(cid:0)
(cid:0)
The referral of an individual for a service or product for which payment may be made by Medicare, Medicaid or other government-
sponsored healthcare program; or
purchasing, ordering, arranging for, or recommending the ordering of, any service or product for which payment may be made by
a government-sponsored healthcare program.
The definition of “remuneration” has been broadly interpreted to include anything of value, including such items as gifts, certain
discounts, waiver of payments, and providing anything at less than its fair market value. In addition, several courts have interpreted
the law to mean that if “one purpose” of an arrangement is intended to induce referrals, the statute is violated.
The Anti-Kickback Statute is broad and prohibits many arrangements and practices that are lawful in businesses outside of the
healthcare industry. Recognizing that the Anti-Kickback Statute is broad and may technically prohibit many innocuous or beneficial
arrangements, the Office of Inspector General of the Department of Health and Human Services (OIG) has issued regulations,
commonly known as "safe harbors." These safe harbors set forth certain requirements that, if fully met, will insulate healthcare
providers, medical device manufacturers, and others, from prosecution under the Anti-Kickback Statute. Although full compliance with
these safe harbor provisions ensures against prosecution under the Anti-Kickback Statute, full compliance is often difficult and the
failure of a transaction or arrangement to fit within a specific safe harbor does not necessarily mean that the transaction or
arrangement is illegal or that prosecution under the Anti-Kickback Statute will be pursued. However, conduct and business
arrangements that do not fully satisfy each applicable safe harbor may result in increased scrutiny by government enforcement
authorities such as the OIG. The statutory penalties for violating the Anti-Kickback Statute include imprisonment for up to five years
and criminal fines of up to $25,000 per violation. In addition, through application of other laws, conduct that violates the Anti-
Kickback Statute can also give rise to False Claims Act lawsuits, civil monetary penalties and possible exclusion from Medicare and
Medicaid and other federal healthcare programs. In addition to the Federal Anti-Kickback Statute, many states have their own
kickback laws. Often, these laws closely follow the language of the federal law, although they do not always have the same scope,
exceptions, safe harbors or sanctions. In some states, these anti-kickback laws apply not only to payment made by a government
health care program but also with respect to other payors, including commercial insurance companies.
We have and may in the future, enter into various agreements with health care providers who perform services for us, including some
who make clinical decisions to use our products. All such arrangements have been structured with the intention of complying with all
applicable fraud and abuse laws, including the Anti-Kickback Statute.
Other Fraud and Abuse Laws
The federal False Claims Act (FCA) prohibits any person from knowingly presenting, or causing to be presented, a false claim or
knowingly making, or causing to be made, a false statement to obtain payment from the federal government. Those found in violation
of the FCA can be subject to fines and penalties of three times the damages sustained by the government, plus mandatory civil
penalties of between $5,500 and $11,000 for each separate false claim. Actions filed under the FCA can be brought by any
individual on behalf of the government, a "qui tam" action, and such individual, known as a "relator" or, more commonly, as a
"whistleblower," who may share in any amounts paid by the entity to the government in damages and penalties or by way of
settlement. In addition, certain states have enacted laws modeled after the FCA, and this legislative activity is expected to increase.
Qui tam actions have increased significantly in recent years, causing greater numbers of healthcare companies, including medical
device manufacturers, to defend false claim actions, pay damages and penalties or be excluded from Medicare, Medicaid or other
federal or state healthcare programs as a result of investigations arising out of such actions.
The federal ban on physician self-referrals, commonly known as the Stark Law, prohibits, subject to certain exceptions, physician
referrals of Medicare and Medicaid patients to an entity providing certain “designated health services” if the physician or an
immediate family member of the physician has any financial relationship with the entity. Penalties for violating the Stark Law include
fines, civil monetary penalties and possible exclusion from federal healthcare programs. In addition to the Stark Law, many states
have their own self-referral laws. Often, these laws closely follow the language of the federal law, although they do not always have
the same scope, exceptions or safe harbors.
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The anti-inducement law (Section 1128A(a)(5) of the Social Security Act), prohibits providers from offering anything of value to a
Medicare or Medicaid beneficiary to induce the beneficiary to use items or services covered by either program. Additionally, the
Civil Monetary Penalties Law (Section 1128A of the Social Security Act), authorizes the United States Department of Health and
Human Services to impose civil penalties administratively for various fraudulent or abusive acts.
The OIG also has authority to bring administrative actions against entities for alleged violations of a number of prohibitions,
including the Anti-Kickback Statute and the Stark Law. The OIG may seek to impose civil monetary penalties or exclusion from the
Medicare, Medicaid and other federal healthcare programs. Civil monetary penalties can range from $2,000 to $50,000 for each
violation or failure plus, in certain circumstances, three times the amounts claimed in reimbursement or illegal remuneration.
Typically, exclusions last for five years.
In addition, we must comply with a variety of other laws, such as laws prohibiting false claims for reimbursement under Medicare and
Medicaid, all of which can also be triggered by violations of federal anti-kickback laws; the Health Insurance Portability and
Accounting Act of 1996, which makes it a federal crime to commit healthcare fraud and make false statements; and the Federal
Trade Commission Act and similar laws regulating advertisement and consumer protections.
There are also an increasing number of state “sunshine” laws that require manufacturers to provide reports to state governments on
pricing and marketing information. Several states have enacted legislation requiring manufacturers, including medical device
companies to, among other things, establish marketing compliance programs, file periodic reports with the state, make periodic
public disclosures on sales and marketing activities, and to prohibit or limit certain other sales and marketing practices. In addition, a
federal law known as the Physician Payments Sunshine Act, requires manufacturers, including medical device manufacturers, to track
and report to the federal government certain payments and other transfers of value made to physicians and teaching hospitals and
ownership or investment interests held by physicians and their immediate family members. The federal government discloses the
reported information on a publicly available website. If we fail to track and report as required by these laws or to otherwise comply
with these laws, we could be subject to the penalty provisions of the pertinent state and federal authorities.
Despite extensive procedures to ensure compliance, we may also be exposed to liabilities under the U.S. Foreign Corrupt Practices
Act, or FCPA, which generally prohibits companies and their intermediaries from making corrupt payments to foreign officials for the
purpose of obtaining or maintaining business or otherwise obtaining favorable treatment, and requires companies to maintain
adequate record-keeping and internal accounting practices to accurately reflect the transactions of the company. We are also subject
to a number of other laws and regulations relating to money laundering, international money transfers and electronic fund transfers.
These laws apply to companies, individual directors, officers, employees and agents.
Environment, Health and Safety
We are subject to laws and regulations related to the protection of the environment, the health and safety of employees and the
handling, transportation and disposal of medical specimens, infectious and hazardous waste and radioactive materials. For example,
the U.S. Occupational Safety and Health Administration (OSHA) has established extensive requirements relating specifically to
workplace safety for healthcare employers in the U.S. This includes requirements to develop and implement multi-faceted programs to
protect workers from exposure to blood-borne pathogens, such as HIV and hepatitis B and C, including preventing or minimizing any
exposure through needle stick injuries. For purposes of transportation, some biological materials and laboratory supplies are
classified as hazardous materials and are subject to regulation by one or more of the following agencies: the U.S. Department of
Transportation, the U.S. Public Health Service, the United States Postal Service and the International Air Transport Association. The
U.S. Environmental Protection Agency (EPA) has also promulgated regulations setting forth importation, labelling, and registration
requirements, among others, which may apply to certain products and/or establishments of the company.
Other Country Specific Requirements
In many countries outside of the United States and the EU, coverage, pricing and reimbursement approvals are also required.
Additionally, many major markets are adopting regulations and requirements similar to those of the U.S. Food and Drug
Administration (FDA), which require additional submission activities and management of country-specific regulatory requirements. This
is being led by the International Medical Device Regulators Forum (IMDRF). This Forum consists of regulators from around the world
that have signed governmental agreements to align global regulations, especially around submissions and approvals. In the long term
this holds the promise of reducing volatility and complexity in the regulatory landscape.
41
Reimbursement
United States
In the United States, payments for diagnostic tests come from several sources, including third party payors such as health
maintenance organizations and preferred provider organizations; government health care programs such as Medicare or Medicaid;
and, in most cases, the patients themselves. For many years, federal and state governments in the United States have pursued
methods to reduce the cost of healthcare delivery. For example, in 2010, the United States enacted major healthcare reform
legislation known as the Patient Protection and Affordable Care Act (ACA). Such changes have had, and are expected to continue to
have, an impact on our business. At present, Medicare payment rates are affected by across-the-board federal budget cuts commonly
referred to as “sequestration.” Under sequestration, the Centers for Medicare & Medicaid Services (CMS), the federal agency
responsible for administering Medicare and Medicaid, reduced Medicare payments to providers by 2% annually beginning in 2013
and through 2023.
We frequently identify value propositions on our products and communicate them to payors, providers, and patient stakeholders and
attempt to positively impact coverage, coding and payment pathways. However, we have no direct control over payor decisions with
respect to coverage and payment levels for our products. The manner and level of reimbursement may depend on the site of care, the
procedure(s) performed, the final patient diagnosis, the device(s) and/or drug(s) utilized, the available budget, or a combination of
these factors, and coverage and payment levels are determined at each payor’s discretion. Changes in reimbursement levels or
methods may positively or negatively affect sales of our products in any given country for any given product. At QIAGEN, we work
with several specialized reimbursement consulting companies and maintain regular contact with payors.
As government programs seek to expand healthcare coverage for their citizens, they have at the same time sought to control costs by
limiting the amount of reimbursement they will pay for particular procedures, products or services. Many third-party payors have
developed payment and delivery mechanisms to support cost control efforts and to focus on paying for quality. Such mechanisms
include payment reductions, pay for performance metrics, quality-based performance payments, restrictive coverage policies, studies
to compare effectiveness and patient outcomes, and technology assessments. These changes have increased emphasis on the delivery
of more cost-effective and quality-driven healthcare.
Code Assignment
In the United States, a third-party payor's decisions regarding coverage and payment are impacted, in large part, by the specific
Current Procedural Terminology, or CPT, code used to identify a test. The American Medical Association, or AMA, publishes the CPT,
which identifies codes, along with descriptions, for reporting medical services and procedures. The purpose of the CPT is to provide a
uniform language that accurately describes medical, surgical, and diagnostic services and therefore to ensure reliable nationwide
communication among healthcare providers, patients, and third-party payors. CMS uses its own HCPCS codes for medical billing and
reimbursement purposes. Level I HCPCS codes reflect current CPT codes, while Level II codes primarily represent non-physician
services and Level III codes are local codes developed by Medicaid agencies, Medicare contractors and private insurers. Proprietary
Laboratory Analyses (PLA) Codes are an addition to the CPT ® code set approved by the AMA CPT ® Editorial Panel. They are alpha-
numeric CPT codes with a corresponding descriptor for labs or manufacturers that want to more specifically identify their test.
A manufacturer of in vitro diagnostic kits or a provider of laboratory services may request establishment of a Category I CPT code for
a new product or the PLA Code or both. In addition, Z-Code identifiers are unique five-character alphanumeric tracking codes
associated with a specific molecular diagnostic test. When a claim is submitted, it includes the associated CPT code and the Z-Code
identifier is entered as a device code. Assignment of a specific CPT code ensures routine processing and payment for a diagnostic
test by both private and government third-party payors.
The AMA has specific procedures for establishing a new CPT code and, if appropriate, for modifying existing nomenclature to
incorporate a new test into an existing code. If the AMA concludes that a new code or modification of nomenclature is unnecessary,
the AMA will inform the requestor how to use one or more existing codes to report the test.
42
M a n a g e m e n t R e p o r t › Business and Operating Environment
While the AMA's decision is pending, billing and collection may be sought under an existing, non-specific CPT code. A manufacturer
or provider may decide not to request assignment of a CPT code and instead use an existing, non-specific code for reimbursement
purposes. However, use of such codes may result in more frequent denials and/or requests for supporting clinical documentation from
the third-party payor and in lower reimbursement rates, which may vary based on geographical location.
CMS reimbursement rates for clinical diagnostic tests are defined by CPT and HCPS codes in the Clinical Laboratory Fee Schedule
(CLFS). In 2012, the AMA added 127 new CPT codes for molecular pathology services that became effective on January 1, 2013.
These new CPT codes are biomarker specific and were designed to replace the previous methodology of billing for molecular
pathology testing, which involved “stacking” a series of non-biomarker specific CPT codes together to describe the testing performed.
CMS issued final national reimbursement prices for the new CPT codes in November 2013. These federal reimbursement amounts are
widely acknowledged to be lower than the reimbursement obtained by the now outdated “stacking” method, but commercial insurers
and Medicare contractors are still in the process of solidifying their coverage and reimbursement policies for the testing described by
these new CPT codes.
As of January 1, 2018, in accordance with the Protecting Access to Medicare Act of 2014 (PAMA), CMS began calculating
Medicare reimbursement rates for certain clinical diagnostic tests using weighted median private payor rates, which are based on
rate information reported by applicable laboratories. This new rate methodology means the lower reimbursement rates previously
experienced in the field of molecular pathology testing now extends to additional diagnostic testing codes on the CLFS. On December
20, 2019, the President signed the Further Consolidated Appropriations Act, which included the Laboratory Access for Beneficiaries
Act, or the LAB Act. The LAB Act delays by one year the reporting of payment data under PAMA for clinical laboratory diagnostic
tests that are not advanced diagnostic laboratory tests. CDLT data for the collection period of January 1, 2019 through June 30,
2019, which was supposed to be reported in 2020, must now be reported between January 1, 2021 and March 31, 2021. Data
reporting will then resume on a three-year cycle beginning in 2024. Under PAMA, as amended by the LAB Act, any reduction to a
particular payment rate resulting from the new methodology is limited to 10% per test per year in 2020 and to 15% per test per year
in each of the years 2021 through 2023.
Coverage Decisions
When deciding whether to cover a particular diagnostic test, private and government third-party payors generally consider whether
the test is a medically necessary and, if so, whether the test will directly impact clinical decision making. For coverage, the testing
method should be considered scientifically valid to identify the specific gene biomarker or gene mutation, and must have been
demonstrated to improve clinical outcomes for the patient’s condition. Coverage of a drug therapy and its companion diagnostic are
usually validated by a NCCN category 1, 2A or 2B recommendation. However, most third-party payors do not cover experimental
services. Coverage determinations are often influenced by current standards of practice and clinical data, particularly at the local
level. CMS has the authority to make coverage determinations on a national basis, but most Medicare coverage decisions are made
at the local level by contractors that administer the Medicare program in specified geographic areas. Private and government third-
party payors have separate processes for making coverage determinations, and private third-party payors may or may not follow
Medicare's coverage decisions. If a third-party payor has a coverage determination in place for a particular diagnostic test, billing
for that test must comply with the established policy. Otherwise, the third-party payor makes reimbursement decisions on a case-by-
case basis.
Payment
Payment for covered diagnostic tests is determined based on various methodologies, including prospective payment systems and fee
schedules. In addition, private third-party payors may negotiate contractual rates with participating providers, establish fee schedule
rates, or set rates as a percentage of the billed charge. Diagnostic tests furnished to Medicare inpatients generally are included in the
bundled payment made to the hospital under Medicare's Inpatient Prospective Payment System, utilizing Diagnosis Related Groups
(DRGs) depending on the patient’s condition. Payment rates for diagnostic tests furnished to Medicare beneficiaries in outpatient
settings are the lesser of the amount billed, the local fee for a geographic area, or a national limit. Each year, the fee schedule is
updated for inflation and could be modified by Congress in accordance with the CLFS rules and provisions. Medicaid programs
generally pay for diagnostic tests based on a fee schedule, but reimbursement varies by geographic region.
43
European Union
In the European Union, the reimbursement mechanisms used by private and public health insurers vary by country. For the public
systems, reimbursement is determined by guidelines established by the legislator or responsible national authority. As elsewhere,
inclusion in reimbursement catalogues focuses on the medical usefulness, need, quality and economic benefits to patients and the
healthcare system. Acceptance for reimbursement comes with cost, use, and often volume restrictions, which again can vary by
country.
Organizational Structure
QIAGEN N.V. is the holding company for more than 50 consolidated subsidiaries, many of which have the primary function of
distributing our products and services on a regional basis. Certain subsidiaries also have research and development or production
activities. A listing of our significant subsidiaries and their jurisdictions of incorporation is included in this Annual Report.
Description of Property
Our production and manufacturing facilities for consumable products are located in Germany, the United States and China. Our
facilities for software development are located in the United States, Germany, Poland, Denmark and Romania. In recent years, we
have made investments in automated and interchangeable production equipment to increase our production capacity and improve
efficiency. Our production and manufacturing operations are highly integrated and benefit from sophisticated inventory control.
Production management personnel are highly qualified, and many have advanced degrees in engineering, business and science. We
also have installed and continue to expand production-planning systems that are included in our integrated information and control
system based on the SAP R/3 business software package from SAP SE. Worldwide, we use SAP software to integrate most of our
operating subsidiaries. Capital expenditures for property, plant and equipment totaled $132.8 million, $118.0 million and $109.8
million for 2020, 2019 and 2018, respectively.
We have an established quality system, including standard manufacturing and documentation procedures, intended to ensure that
products are produced and tested in accordance with the FDA's Quality System Regulations, which impose current Good
Manufacturing Practice (cGMP) requirements. For cGMP production, special areas were built in our facilities in Hilden, Germany,
Germantown, Maryland and Shenzhen, China. These facilities operate in accordance with cGMP requirements.
The consumable products manufactured at QIAGEN GmbH in Germany, and QIAGEN Sciences LLC in Maryland, are produced under
ISO 9001: 2008, ISO 13485:2012, ISO 13485:2003 CMDCAS. Our certifications form part of our ongoing commitment to provide
our customers with high-quality, state-of-the-art sample and assay technologies under our Total Quality Management system.
Our facilities in Hilden, Germany, currently occupy a total of approximately 786,000 square feet. In 2020, we made additional
investments to expand production lines to meet both current demand as well as future growth. Our production capacity is increased
through our manufacturing and research facilities in the United States. QIAGEN Sciences, LLC owns a 24-acre site in Germantown,
Maryland. The 285,000-square-foot Germantown facility consists of several buildings in a campus-like arrangement and can
accommodate over 500 employees. There is room for future expansion of up to 300,000 square feet of facility space. In 2020, we
announced our plans to renovate the manufacturing facility to accommodate expanded production of testing products, including for
COVID-19.
We lease facilities in Frederick, Maryland, comprising 42,000 square feet for manufacturing, warehousing, distribution and research
operations and also facilities in Beverly, Massachusetts, with 44,000 square feet for enzyme manufacturing. Additionally, we have
leased facilities in Redwood City, California, with 12,700 square feet for bioinformatics and 19,000 square feet in Minden,
Nevada, for Service Solutions. We have shared service centers that lease facilities in Wroclaw, Poland, (65,100 square feet) and
Manila, Philippines (29,300 square feet). Additionally, we lease facilities in Shenzhen, China, and Manchester, United Kingdom, for
research operations. Other subsidiaries throughout the world lease smaller amounts of space. Our corporate headquarters are
located in leased office space in Venlo, The Netherlands.
We believe our existing production and distribution facilities can support anticipated production needs for the next 36 months. Our
production and manufacturing operations are subject to various federal, state, and local laws and regulations including
environmental regulations. We do not believe we have any material issues relating to these laws and regulations.
44
M a n a g e m e n t R e p o r t › Business and Operating Environment Opportunities and Risks
›
Opportunities and Risks
QIAGEN’s business, like that of any other company, involves significant opportunities and risks. Effective
management is paramount in delivering sustainable value creation, and the central task of the leadership
team. To sustain our growth, effective execution is crucial in the development and commercialization of new
products; structure and implementation of acquisitions and strategic partnerships; and response to the wide
variety of developments in markets where we operate around the world. Managing opportunities and risks
is an integral part of the corporate governance system in place throughout QIAGEN, not the task of one
particular organizational unit. Management systems are in place to aggregate all risks and opportunities for
review at the Managing Board and Supervisory Board levels of QIAGEN N.V., and these are reviewed on a
routine basis. Based on our assessment at the end of 2020, we consider the opportunities and risks
manageable and the survival of QIAGEN not in danger. This assessment is supported by our strong balance
sheet and the current business outlook, and further supported by the positive historical response to our
external financing needs. We are confident in the future earnings strength of QIAGEN and have access to
the resources to pursue value-creating business opportunities.
Opportunities
Our mission is to make improvements in life possible by capturing growth opportunities as molecular technologies disseminate across
two customer classes: Molecular Diagnostics and Life Science. Due to increased life expectancies worldwide and the dynamic growth
of healthcare both in developed and emerging markets, the need for innovative diagnostics is increasing. The value of diagnostics is
above all being significantly enhanced by the COVID-19 pandemic and the dramatic increase in demand for testing solutions.
Diagnostics offer proven benefits to improve healthcare outcomes, particularly the use of companion diagnostics in precision
medicine, while still representing a small fraction of overall healthcare expenditures. Internal R&D activities of QIAGEN and
partnerships with other companies present major opportunities to develop new products and improve existing ones across our
portfolio of Sample to Insight solutions. We also continuously evaluate potential targeted acquisition opportunities to add new
technologies or enter growing markets. All of these factors represent future growth opportunities for QIAGEN.
Senior management at QIAGEN focuses strategic attention on identifying and assessing opportunities as early as possible, taking
actions to maximize the value of those opportunities and executing on initiatives to deliver business success. We evaluate organic
growth opportunities each year as part of our annual budget planning process, and during the year, especially in dynamically
changing areas of the business portfolio. These evaluations are based on proposals for new products, services and technologies
developed within QIAGEN. This cross-functional process involves a careful analysis of the market environment and competitive
positioning, as well as factors such as expected development timelines, regulatory processes and reimbursement issues, when
evaluating organic opportunities. Business plans include information about the product or service to be developed, along with profiles
on target customers and competitors, market size and barriers to entry. It also outlines the resources required for implementation. As
part of this process, these plans are subjected to a uniform profitability analysis to determine the net present value of an investment
and the opportunities to create value (as measured with QIAGEN Value Added, or QVA) and generate returns that exceed our cost of
capital after a multi-year period. The monitoring of growth initiatives is accomplished through regular reporting to the Supervisory
Board on the status and progress of key initiatives during the year. Project management and the supporting central functions report
directly to the Executive Committee.
45
Risk Factors
Risk Management:
Our risk management approach embodies the key elements of a sound risk management system including (1) active Supervisory
Board and senior management involvement; (2) adequate policies and procedures; (3) adequate risk management; monitoring and
information systems; and (4) comprehensive internal controls.
QIAGEN is managed by a Managing Board and an independent Supervisory Board appointed by the General Meeting of
Shareholders. One of the Managing Board's responsibilities is the oversight of the risk management system. The Managing Board has
developed and implemented strategies, controls and mitigation measures to identify current and developing risks as part of the risk
management system. These policies and procedures are embodied in our corporate governance, code of ethics and financial
reporting controls and procedures. A variety of functional experts evaluate these business risks, attempting to mitigate and manage
these risks on an ongoing basis.
Identified risks are subdivided into three types:
(cid:0)
(cid:0)
(cid:0)
A base business risk that is specific to us or our industry and threatens our existing business;
A business growth risk that is specific to us or our industry and threatens our future business growth; and
An underlying business risk that is not specific to us or our industry, but applies to a larger number of public companies.
All identified risks are evaluated based on their likelihood of occurring and their potential impact (estimated in monetary terms) in
disrupting our progress in achieving our business objectives. The overall risk management goal is to identify risks that could
significantly threaten our success and to allow management on a timely basis the opportunity to successfully implement mitigation
actions. The results of the risk assessment, and any updates, are reported to the Audit Committee of the Supervisory Board on a
regular basis. A detailed risk reporting update is provided each quarter to the Audit Committee for specific risks that have been
newly identified or have changed since the previous assessment. At least once on an annual basis, the Supervisory Board discusses
the corporate strategy and business risks as well as the results of an assessment by the Managing Board and the Audit Committee of
the structure and operations of the internal risk management and control systems, including any significant changes.
Our corporate governance structure is based on a strong framework that outlines the responsibilities of our Managing and
Supervisory Boards (discussed in more detail in the “Corporate Governance Report” section of this Annual Report) and the function of
the Audit Committee of the Supervisory Board (discussed in more detail in the “Corporate Governance Report” section of this Annual
Report). We maintain adequate internal controls over financial reporting to ensure the integrity of financial reporting, which is
described further in the “Corporate Governance Report” section of this Annual Report. Additionally, we have a Compliance
Committee that consists of senior executives from various functional areas who are responsible for ensuring compliance with legal
and regulatory requirements, as well as overseeing the communication of corporate policies, including our Code of Ethics as
described further in this Annual Report.
46
M a n a g e m e n t R e p o r t › Opportunities and Risks
Base Business Risk
• Identification and monitoring of competitive business threats
Riisskk TTyyppeess
• Monitoring complexity of product portfolio
• Monitoring dependence on key customers for single product groups
• Reviewing dependence on individual production sites or suppliers
• Evaluating purchasing initiatives, price controls and changes to reimbursements
• Monitoring production risks, including contamination prevention, high-quality product
assurance
• Ensuring ability to defend against intellectual property infringements and maintain
competitive advantage after expiration
Business Growth Risk
• Managing development and success of key R&D projects
• Managing successful integration of acquisitions to achieve anticipated benefits
Underlying Business Risk
• Evaluating financial risks, including economic risks and currency rate fluctuations
• Monitoring financial reporting risks, including multi-jurisdiction tax compliance
• Reviewing possible asset impairment events
• Assessing compliance and legal risks, including safety in operations and environmental
hazard risks, compliance with various regulatory bodies and pending product approvals
• Monitoring risks of FCPA (Foreign Corrupt Practices Act) or antitrust concerns arising
from a network of subsidiaries and distributors in foreign countries
The risks described below are listed in the order of our current view of their expected significance. Describing the risk factors in order
of significance does not imply that a lower listed risk factor may not have a material adverse impact on our results of operations,
liquidity or capital resources.
47
Risks
Rapid technological change and frequent new product introductions are typical in the markets we serve. Our success will depend in
part on continuous, timely development and introduction of new products that address evolving market requirements, for example
products in response to SARS-CoV-2. We believe successful new product introductions provide a significant competitive advantage
because customers make an investment of time in selecting and learning to use a new product and are reluctant to switch after these
efforts. To the extent that we fail to introduce new and innovative products, or such products suffer significant delays in development
or are not accepted in the market, we may lose market share to our competitors that would be difficult or impossible to regain. An
inability to successfully develop and introduce new products, for technological or other reasons, could reduce our growth rate or
otherwise have an adverse effect on our business. In the past, we have experienced delays in the development and introduction of
products, including regulatory approvals, or decisions to stop development of projects, and we may experience delays or make
decisions to stop certain products in the future.
As a result, we cannot assure you that we will keep pace with the rapid rate of change in our markets or that our new products will
adequately meet the requirements of the marketplace, achieve market acceptance or regulatory approval, or compete successfully
with companies offering similar or new technologies. Some of the factors affecting market acceptance of new products include:
availability, quality and price relative to existing competitor products;
the timing of introduction of the new product relative to competitive products;
opinions of the new product’s utility;
citation of the new product in published research;
regulatory trends and approvals; and
general trends in life sciences research, applied markets and molecular diagnostics.
In the development of new products we may make significant investments in intellectual property, software solutions and
manufacturing capacity. These investments increase our fixed costs, resulting in higher operational costs in the short term that will
negatively impact our gross profit and operating income until products potentially reach a minimum level of market acceptance. The
expenses or losses associated with unsuccessful product development activities or lack of market acceptance of our new products
could materially adversely affect our business, financial condition and results of operations.
Our continued growth depends significantly on the success of new products in the molecular testing markets we serve and our ability
to scale manufacturing capacities to meet customer demands. Important product programs include our modular medium-throughput
QIAsymphony automation platform, QIAstat-Dx system for one-step, fully integrated molecular analysis of hard-to-diagnose
syndromes, the high-throughput NeuMoDx 288 and mid-throughput NeuMoDx 96 fully integrated PCR automation systems, sample
and assay technologies designed for use with QIAGEN instruments or with "universal" automation systems and instruments, and
bioinformatics solutions to analyze and interpret complex genomic data. In addition, in 2020 we launched the QIAcuity digital PCR
series of platforms with fully-integrated solutions that simplify digital PCR workflows.
The speed and level of adoption of our new automation platforms will affect sales not only of instrumentation but also of consumables
– sample and assay kits – designed to run on the systems. The rollouts of new automation platforms are intended to drive the
dissemination and increasing sales of consumables for these systems. We are developing or co-developing new kits for each of these
platforms and seeking regulatory approvals for a number of these new products. In turn, the availability and regulatory approval of
more tests for processing on QIAsymphony, QIAstat-Dx and NeuMoDx systems, especially molecular assays for specific diseases or
companion diagnostics paired with new drugs, will influence the value of the instruments to prospective buyers. Slower adoption of
QIAsymphony, including the complete QIAsymphony RGQ system, the QIAstat-Dx, NeuMoDx and QIAcuity systems, could
significantly affect sales of products designed to run on these platforms.
48
M a n a g e m e n t R e p o r t › Opportunities and Risks
(cid:0)(cid:2)(cid:3)(cid:4)(cid:2)(cid:5)(cid:6)(cid:4)(cid:7)(cid:4)(cid:8)(cid:9)(cid:3)(cid:8)(cid:10)(cid:3)(cid:11)(cid:5)(cid:2)(cid:5)(cid:12)(cid:13)(cid:3)(cid:10)(cid:14)(cid:15)(cid:3)(cid:12)(cid:15)(cid:10)(cid:16)(cid:8)(cid:17)(cid:18)(cid:3)(cid:11)(cid:5)(cid:2)(cid:5)(cid:12)(cid:13)(cid:3)(cid:8)(cid:17)(cid:13)(cid:3)(cid:13)(cid:19)(cid:20)(cid:5)(cid:2)(cid:21)(cid:4)(cid:10)(cid:2)(cid:3)(cid:10)(cid:22)(cid:3)(cid:10)(cid:14)(cid:15)(cid:3)(cid:10)(cid:20)(cid:13)(cid:15)(cid:5)(cid:8)(cid:4)(cid:10)(cid:2)(cid:21)(cid:18)(cid:3)(cid:10)(cid:15)(cid:3)(cid:21)(cid:14)(cid:23)(cid:23)(cid:13)(cid:21)(cid:21)(cid:22)(cid:14)(cid:7)(cid:7)(cid:9)(cid:3)(cid:4)(cid:2)(cid:8)(cid:13)(cid:12)(cid:15)(cid:5)(cid:8)(cid:13)(cid:3)(cid:5)(cid:23)(cid:24)(cid:14)(cid:4)(cid:15)(cid:13)(cid:25)(cid:3)(cid:6)(cid:14)(cid:21)(cid:4)(cid:2)(cid:13)(cid:21)(cid:21)(cid:13)(cid:21)(cid:3)(cid:23)(cid:10)(cid:14)(cid:7)(cid:25)(cid:3)(cid:5)(cid:25)(cid:26)(cid:13)(cid:15)(cid:21)(cid:13)(cid:7)(cid:9)
(cid:5)(cid:22)(cid:22)(cid:13)(cid:23)(cid:8)(cid:3)(cid:10)(cid:14)(cid:15)(cid:3)(cid:6)(cid:14)(cid:21)(cid:4)(cid:2)(cid:13)(cid:21)(cid:21)(cid:27)
Our business has grown in recent years, with total net sales increasing to $1.87 billion in 2020 from $1.34 billion in 2016. We
have made a series of acquisitions in recent years, including the acquisitions of NeuMoDx Molecular, Inc. in 2020, N-of-One in
January 2019, STAT-Dx Life, S.L. in 2018, and OmicSoft Corporation in 2017, to complement internal research and development
activities. We intend to identify and acquire other businesses in the future that support our strategy to build on our global leadership
position in Sample to Insight solutions focused on molecular testing. The successful integration of acquired businesses requires a
significant effort and expense across all operational areas.
We continue to make investments to expand our existing business operations. These projects increase our fixed costs, resulting in
higher operational costs in the short term that will negatively impact our gross profit and operating income until we more fully utilize
the additional capacity of these facilities. In addition, we have invested in establishing and expanding shared service centers in
Poland and the Philippines, opening new commercial operations in emerging markets to expand our geographic footprint, and
implementing digitization of business processes to increase sales growth while also enhancing operational efficiencies. The
expansion of our business and the addition of new personnel may place a strain on our management and operational systems. As we
continue to upgrade our operating and financial systems, as well as expand the geographic presence of our operations, we intend to
continue to assess the need to reallocate existing resources or hire new employees, as well as increase responsibilities for both
existing and new management personnel.
Our future operating results will depend on our ability to continue to implement and improve our research, product development,
manufacturing, sales and marketing and customer support programs, enhance our operational and financial control systems, expand,
train and manage our employee base, integrate acquired businesses, and effectively address new issues related to our growth as they
arise. There can be no assurance that we will be able to manage our recent or any future expansion or acquisitions successfully, and
any inability to do so could have a material adverse effect on our results of operations.
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During the past several years, we have acquired and integrated a number of companies through which we have gained access to
new technologies, products and businesses that complement our internally developed product lines. In the future, we expect to
acquire additional technologies, products or businesses to expand our operations. Acquisitions expose us to new operating and
financial risks, including risks associated with the:
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assimilation of new products, technologies, operations, sites and personnel;
integration and retention of fundamental personnel and technical expertise;
application for and achievement of regulatory approvals or other clearances;
diversion of resources from our existing products, business and technologies;
generation of sales;
implementation and maintenance of uniform standards and effective controls and procedures;
exposure to cyber security risks or compromise of acquired entities;
maintenance of relationships with employees, customers and suppliers, and integration of new management personnel;
issuance of dilutive equity securities;
incurrence or assumption of debt and contingent liabilities;
amortization or impairment of acquired intangible assets or potential businesses; and
exposure to liabilities of and claims against acquired entities or personnel, including patent litigation.
49
Our failure to address the above risks successfully in the future may prevent us from achieving the anticipated benefits from any
acquisition in a reasonable time frame, or at all.
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Our results of operations could be materially affected by adverse general conditions in the global economy and financial markets.
Potentially adverse changes that may come from the United Kingdom's exit from the European Union ("Brexit") are not fully
understood, as the actual impact from Brexit will depend on many factors, including the ability of both the United Kingdom and
European Union authorities to provide a path forward with minimal disruption. In the near term we anticipate the largest potential
exposures to be on supply chain with our United Kingdom-based suppliers and the local operations for our domestic United Kingdom
business and pharma development activities. There also is a risk of loss of revenue, penalties due to delayed deliveries and currency
losses, or other unforeseen costs which would negatively impact margins.
During challenging economic times, access to financing in the global financial markets has also been adversely affected for many
businesses. The uncertainty surrounding the resolution of the economic and sovereign debt crisis in Europe continues to have a
negative impact on financial markets and economic conditions more generally. Our customers may face internal financing pressures
that adversely impact spending decisions or the ability to purchase our products, or that lead to a delay in collection of receivables
and thus negatively impact our cash flow. A severe or prolonged economic downturn could result in a variety of risks to our business
that would adversely impact our results of operations, including the reduction or delay in planned improvements to healthcare systems
in various countries, the reduction of funding for life sciences research, and intensified efforts by governments and healthcare payors
regarding cost-containment efforts.
Our results of operations could also be negatively impacted by any governmental actions or inaction resulting in automatic
government spending cuts (sequestration) that may take effect, particularly in terms of federal government funding in the United
States. These conditions may add uncertainty to the timing and budget for investment decisions by our customers, particularly
researchers, universities, government laboratories and private foundations whose funding is dependent upon grants from government
agencies, such as the U.S. National Institutes of Health (NIH) and similar bodies.
As is the case for many businesses, we face the following risks in regard to financial markets:
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severely limited access to financing over an extended period of time, which may affect our ability to fund our growth strategy and
could result in delays to capital expenditures, acquisitions or research and development projects;
failures of currently solvent financial institutions, which may cause losses from our short-term cash investments or our hedging
transactions due to a counterparty’s inability to fulfill its payment obligations;
inability to refinance existing debt at competitive rates, reasonable terms or sufficient amounts; and
increased volatility or adverse movements in foreign currency exchange rates.
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Our business involves operations around the world. Our primary consumable manufacturing facilities are located in Germany, the
U.S. and China. We have established sales subsidiaries in numerous countries and our products are sold through independent
distributors serving more than 40 additional countries. Our global footprint exposes us to unforeseen events, such as the December
2019 outbreak of the novel coronavirus (COVID-19) and the resulting global pandemic. Our facilities may be harmed by unforeseen
events, and in the event that we or our customers are affected by a disaster, we may experience delays or reductions in sales or
production, increased costs, or we may be required to identify alternate suppliers and/or rely on third-party manufacturers.
To the extent that our suppliers are impacted by a natural disaster or other disruption, we may experience periods of reduced
production. Any unexpected interruptions in our production capabilities may lead to delayed or lost sales and may adversely affect
our results of operations for the affected period.
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M a n a g e m e n t R e p o r t › Opportunities and Risks
In addition, to the extent we temporarily shut down any facility following such an unforeseen event, we may experience disruptions in
our ability to manufacture or ship products to customers or otherwise operate our business. Many of our products are manufactured in
a single location and we may experience adverse effects to the extent these manufacturing operations are disrupted. While our
global operations give us the ability to ship product from alternative sites, we may not be able to do so because our customers’
facilities are shut down or the local logistics infrastructure is not functioning, and our sales will suffer.
Damage to our property due to unforeseen events and the disruption of our business may be covered by insurance, but this insurance
may not be sufficient to cover all of our potential losses, and such insurance may not continue to be available to us on acceptable
terms, or at all. In addition, we may incur incremental costs following an unforeseen event, which will reduce profits and adversely
affect our results of operations.
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We buy materials to create our products from a number of suppliers and are not dependent on any one supplier or group of suppliers
for our business as a whole. However, key components of certain products, including certain instrumentation and chemicals, are
available only from a single source. If supplies from these vendors are delayed or interrupted for any reason, we may not be able to
obtain these materials in a timely manner or in sufficient quantities or qualities to produce certain products, and this could have an
adverse impact on our results of operations.
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Our customers in the scientific research markets typically keep only a modest inventory of our products on hand, and consequently
require overnight delivery of purchases. As a result, we rely heavily on air cargo carriers and logistic suppliers. If overnight services
are suspended or delayed, and other delivery carriers and logistic suppliers cannot provide satisfactory services, customers may
suspend a significant amount of their work. The lack of adequate delivery alternatives would have a serious adverse impact on our
results of operations.
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Our effective tax rate reflects the benefit of some income being partially exempt from income taxes due to various intercompany
operating and financing activities. The benefit also derives from our global operations, where income or loss in some jurisdictions is
taxed at rates higher or lower than The Netherlands’ statutory rate of 25%. Changes in tax laws or their application with respect to
matters such as changes in tax rates, transfer pricing and income allocation, utilization of tax loss carryforwards, intercompany
dividends, controlled corporations, and limitations on the deductibility of interest and foreign related-party expenses, and changes to
tax credit mechanisms, could increase our effective tax rate and adversely affect our results of operations and limit our ability to
repurchase our Common Shares without experiencing adverse tax consequences. The increased tax burden as a result of changes in
law may adversely affect our results of operations. Additionally, if our tax positions are challenged by tax authorities or other
governmental bodies, such as the European Commission, we could incur additional tax liabilities, which could have an adverse effect
on our results of operations, financial flexibility or cash flow.
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We rely heavily on communications and information systems to conduct our business. In the ordinary course of business, we collect
and store sensitive data, including our own intellectual property and other proprietary business information and that of our customers,
suppliers and business partners, as well as personally identifiable information of our customers and employees, in our data centers
and on our networks or in the cloud. Our operations rely on the secure processing, storage and transmission of confidential and other
information on both our own, or cloud-based, computer systems and networks. We have made significant investments to ensure our
employees are aware of cyber security risks facing our company and how to prevent data breaches. We have modernized our cyber
security tools, and are continually modernizing our cyber security processes, in an attempt to keep pace with evolving cyber security
risks. In spite of our efforts, we are unable to completely eliminate these risks and occasionally experience minor cyber security
51
incidents. External phishing emails (occurring outside of our computer services) are a growing threat our customers are facing. These
emails could lead to the disclosing of intellectual property or personally identifiable information, which could lead to financial harm
or reputational damage. While our cyber security team works diligently with our employees around the world, as well as with our
customers, to mitigate these threats by helping to identify and analyze phishing emails, we cannot guarantee that sensitive data will
not be lost or stolen.
A breach in cyber security due to unauthorized access to our computer systems or misuse could include the misappropriation of assets
or sensitive information, the corruption data or other operational disruption. Failures to our computer systems and networks could be
caused by internal or external events, such as incursions by intruders or hackers, computer viruses, failures in hardware or software,
or cyber terrorists. If we do experience a breach or failure of our systems, we could experience potentially significant operational
delays resulting from the disruption of systems, loss due to theft or misappropriation of assets or data, or negative impacts from the
loss of confidential data or intellectual property. We may face significant liability in the event personal information we maintain is
lost or otherwise subject to misuse or other wrongful use, access or disclosure. Further, we could experience negative publicity
resulting in reputation or brand damage with customers or partners.
Additionally, we are subject to privacy and data security laws across multiple jurisdictions, including those relating to the storage of
health information, which are complex, overlapping and rapidly evolving. In the U.S., individual states regulate requirements and
have authority over privacy and personal data protection. For example, the California Consumer Privacy Act of 2018, which took
effect on January 1, 2020, imposes expansive new requirements and protections upon the processing of personal data, aimed at
giving California consumers more visibility into and control over their personal information There are also European privacy laws,
such as the General Data Protection Regulation (GDPR) of the European Union, that impose restrictions on the transfer, access, use
and disclosure of health and other personal information. We have implemented the requirements set forth by the GDPR, which took
effect on May 25, 2018. As our activities continue to evolve and expand, we may be subject to additional laws that impose further
restrictions on the transfer, access, use and disclosure of health and other personal information, which may impact our business either
directly or indirectly. A failure to comply with applicable privacy or security laws or significant changes in these laws could subject
us to costly regulatory action or lawsuits and could adversely impact our reputation, business and future business plans. For example,
we may be subject to regulatory action or lawsuits in the event we fail to comply with applicable privacy laws.
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Changes in the availability or reimbursement of our diagnostic testing products by insurance providers and health maintenance
organizations could also have a significant adverse impact on our results of operations. Third-party payors are often reluctant to
reimburse healthcare providers for the use of medical tests that involve new technologies or provide novel diagnostic information. In
addition, third-party payors are increasingly limiting reimbursement coverage for medical diagnostic products and, in many
instances, are exerting pressure on suppliers to reduce their prices. Since each third-party payor often makes reimbursement decisions
on an individual patient basis, obtaining such approvals is a time-consuming and costly process that requires us to provide scientific
and clinical data supporting the clinical benefits of each of our products. As a result, there can be no assurance that reimbursement
approvals will be obtained, and the process can delay the broad market introduction of new products. If third-party reimbursement is
not consistent or financially adequate to cover the cost of our products, this could limit our ability to sell our products or cause us to
reduce prices, which would adversely affect our results of operations.
Further, the ability of many of our customers to successfully market their products depends in part on the extent to which
reimbursement for the costs of these products is available from governmental health administrations, private health insurers and other
organizations. Governmental and other third-party payors are increasingly seeking to contain healthcare costs and to reduce the
price of medical products and services. With evolving political realities in the United States, certain sections of the Patient Protection
and Affordable Care Act of 2010 (ACA) have not been fully implemented and the direction of healthcare policy is unpredictable.
Uncertainty around the future of the ACA, and in particular the impact to reimbursement levels, may lead to uncertainty or delay in
the purchasing decisions of our customers, which may in turn negatively impact our product sales. In accordance with the Protecting
Access to Medicare Act of 2014 (PAMA), the Centers for Medicare & Medicaid Services calculate Medicare reimbursement rates for
certain clinical diagnostic tests using weighted median private payor rates, which are based on rate information reported by
applicable laboratories. This new rate methodology means the lower reimbursement rates previously experienced in the field of
molecular pathology testing now extend to additional diagnostic testing codes on the Clinical Laboratory Fee Schedule (CLFS). If there
are not adequate reimbursement levels, our business and results of operations could be adversely affected.
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M a n a g e m e n t R e p o r t › Opportunities and Risks
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Our customers include researchers at pharmaceutical and biotechnology companies, academic institutions, and government and
private laboratories. Fluctuations in the research and development budgets of these organizations could have a significant adverse
effect on demand for our products. Research and development budgets are affected by changes in available resources, the mergers
of pharmaceutical and biotechnology companies, changes in spending priorities and institutional budgetary policies. Our results of
operations could be adversely affected by any significant decrease in expenditures for life sciences research and development by
pharmaceutical and biotechnology companies, academic institutions, and government and private laboratories. In addition, short-term
changes in administrative, regulatory or purchasing-related procedures can create uncertainties or other impediments that can have
an adverse impact on our results of operations.
In recent years, the pharmaceutical and biotechnology industries have undergone substantial restructuring and consolidation.
Additional mergers or consolidation within the pharmaceutical and biotechnology industries could cause us to lose existing customers
and potential future customers, which could have a material adverse impact on our results of operations.
Approximately 26% of our sales are generated by demand for use of our products at universities, government laboratories and
private foundations, whose funding is dependent on grants from government agencies, such as the NIH (National Institutes of Health)
in the United States. Although the level of research funding has been increasing in recent years, we cannot ensure that this trend will
continue given federal and state budget constraints. Government funding of research and development is subject to the political
process, which is inherently unpredictable. Future sales may be adversely affected if our customers delay purchases as a result of
uncertainties regarding the approval of government or industrial budget proposals. Also, government proposals to reduce or eliminate
budgetary deficits have sometimes included reduced allocations to the NIH and government agencies in other countries that fund life
sciences research and development activities. A reduction in government funding for the NIH or government research agencies in
other countries could have a serious adverse impact on our results of operations.
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The markets for most of our products are very competitive. Competitors may have significant advantages in financial, operational,
sales and marketing resources as well as experience in research and development. These competitors may have developed, or could
develop in the future, new technologies that compete with our products or even render our products obsolete. Some competitors may
obtain regulatory approval from the FDA or similar non-U.S. authorities and market-approved products. Our competitors’ development
of alternative products offering superior technology, greater cost-effectiveness or regulatory approval could have a material adverse
effect on our sales and results of operations.
The growth of our business depends in part on the continued conversion of users from competitive products to our sample and assay
technologies and other solutions. Lack of conversion could have a material adverse effect on our sales and results of operations.
It can be difficult for users of our products to switch from their current supplier of a particular product, primarily due to the time and
expense required to properly integrate new products into their operations. As a result, if we are unable to be the first to develop and
supply new products, our competitive position may suffer, resulting in a material adverse effect on our sales and results of operations.
For our commercial clinical assays, we often compete with solutions developed by our laboratory customers, and driving conversion
from such laboratory-developed tests (LDTs) to commercial diagnostics assays can be challenging.
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We and our customers operate in a highly regulated environment characterized by frequent changes in the governing regulatory
framework. Genetic research activities and products commonly referred to as “genetically engineered” (such as certain food and
therapeutic products) are subject to extensive governmental regulation in most developed countries, especially in the major markets
for pharmaceutical and diagnostic products such as the European Union, the U.S., China and Japan. In recent years, several highly
publicized scientific events (notably in genomic research, gene editing and cloning) have prompted intense public debates on the
53
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ethical, philosophical and religious implications of an unlimited expansion in genetic research and the use of products emerging from
this research. As a result of this debate, some key countries may increase or establish regulatory barriers, which could adversely
affect demand for our products and prevent us from fulfilling our growth expectations. Furthermore, there can be no assurance that
any future changes in applicable regulations will not require further expenditures or an alteration, suspension or liquidation of our
operations in certain areas, or even in their entirety.
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Changes in the existing regulations or adoption of new requirements or policies could adversely affect our ability to sell our approved
or cleared products or to seek approvals for new products in other countries around the world. Sales of certain products now in
development may be dependent upon us successfully conducting pre-clinical studies, clinical trials and other tasks required to gain
regulatory approvals and meet other requirements from the FDA in the U.S. and regulatory agencies in other countries. If we are not
able to meet the applicable requirements, we will not be able to commercialize our products and tests, which will have a material
adverse effect on our business.
Several of our key products and programs are medical devices that are subject to extensive regulation by the FDA under the U.S.
Food, Drug and Cosmetic Act. We plan to apply for FDA clearance or approval of additional products in the future. Regulatory
agencies in other countries also have medical device and IVD approval requirements that are becoming more extensive. These
regulations govern most commercial activities associated with medical devices, including indications for the use of these products as
well as other aspects that include product development, testing, manufacturing, labeling, storage, record-keeping, advertising and
promotion. Compliance with these regulations is expensive and time-consuming.
Our cleared or approved devices, including diagnostic tests and related equipment, are subject to numerous post-approval
requirements. We are subject to inspection and marketing surveillance by the FDA to determine our compliance with regulatory
requirements. If the FDA determines that we have failed to comply, it can institute a wide variety of enforcement actions, ranging from
warning letters to more severe sanctions such as fines, injunctions and civil penalties, recalls or seizures of our products, operating
restrictions, partial suspension or total shutdown of production, denial of our requests for 510(k) clearance or pre-market approval of
product candidates, withdrawal of 510(k) clearance or pre-market approval already granted and civil or criminal prosecution. Any
enforcement action by the FDA may affect our ability to commercially distribute these products in the U.S.
Some of our products are sold for research purposes in the U.S. We do not promote these products for clinical diagnostic use, and
they are labeled “For Research Use Only” (RUO) or “for molecular biology applications.” If the FDA were to disagree with our
designation of a product as having RUO status, we could be forced to stop selling it until appropriate regulatory clearance or
approval has been obtained.
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The biotechnology industry has been characterized by extensive litigation regarding patents and other intellectual property rights,
particularly since industry competitors gravitate around common technology platforms. We are aware that patents have been applied
for and/or issued to third parties claiming technologies for sample and assay technologies that are closely related to those we use.
From time to time, we receive inquiries requesting confirmation that we do not infringe patents of third parties. We endeavor to
follow developments in this field, and we do not believe that our technologies or products infringe any proprietary rights of third
parties. However, there can be no assurance that third parties will not challenge our activities or, if so challenged, that we will
prevail. In addition, the patent and proprietary rights of others could require that we alter our products or processes, pay licensing
fees or cease certain activities, and there can be no assurance that we will be able to license any technologies that we may require
on acceptable terms. In addition, litigation, including proceedings that may be declared by the U.S. Patent and Trademark Office or
the International Trade Commission, may be necessary to respond to any assertions of infringement, enforce our patent rights and/or
determine the scope and validity of our proprietary rights or those of third parties. Litigation, or threatened litigation, could involve
substantial cost, and there can be no assurance that we would prevail in any proceedings.
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Our long-term business strategy involves entering into strategic alliances as well as marketing and distribution arrangements with
academic, corporate and other partners relating to the development, commercialization, marketing and distribution of certain of our
existing and potential products. We may be unable to continue to negotiate these collaborative arrangements on acceptable terms,
and these relationships also may not be scientifically or commercially successful. In addition, we may be unable to maintain these
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M a n a g e m e n t R e p o r t › Opportunities and Risks
relationships, and our collaborative partners may pursue or develop competing products or technologies, either on their own or in
collaboration with others.
Our Precision Medicine business includes projects with pharmaceutical and biotechnology companies to co-develop companion
diagnostics paired with drugs that those companies either market currently or are developing for future use. The success of these co-
development programs, including regulatory approvals for the companion diagnostics, depends upon the continued commitment of
our partners to the development of their drugs, the outcome of clinical trials for the drugs and diagnostics, and regulatory approvals
of the tests and drugs. In addition, the future level of sales for companion diagnostics depends to a high degree on the commercial
success of the related medicines for which the tests have been designed. More companion diagnostics would be sold in combination
with a widely prescribed drug than one with limited use.
The successful marketing of QIAGEN products, in some cases, depends on commercial relationships such as joint ventures or
distributorships, particularly in emerging markets where we partner with local companies to augment our less-established commercial
relationships and infrastructure. The continued commitment of our partners to these ventures, as well as the management of the
commercial efforts, could influence QIAGEN's sales and profitability in these markets.
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Our top seven emerging markets are Brazil, China, India, South Korea, Mexico, Russia and Turkey, which together accounted for
approximately 15% of total sales in 2020. We expect to continue to focus on expanding our business in these or other fast-growing
markets, including those in the Middle East and Asia. In addition to the currency and operating risks described above, our
international operations are subject to a variety of risks arising from the economy, political outlook, language and cultural barriers in
countries where we have operations or do business. In many of these emerging markets, we may face several risks that are more
significant than in other countries in which we have a history of doing business. These risks include economies that may be dependent
on only a few products and are therefore subject to significant fluctuations, weak legal systems that may affect our ability to enforce
contractual rights, exchange controls, unstable governments, and privatization or other government actions affecting the flow of
goods and currency. In conducting our business, we move products from one country to another and may provide services in one
country from a subsidiary located in another country. Accordingly, we are vulnerable to abrupt changes in customs and tax regimes
that could have significant negative impacts on our results of operations.
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Some of our customers have developed purchasing initiatives to reduce the number of vendors from which they purchase products in
order to lower their supply costs. In some cases, these customers have established agreements with large distributors, which include
discounts and direct involvement in the distributor’s purchasing process. These activities may force us to supply large distributors with
our products at discounts in order to continue providing products to some customers. For similar reasons, many larger customers,
including the U.S. government, have requested, and may request in the future, special pricing arrangements, which can include
blanket purchase agreements. These agreements may limit our pricing flexibility, which could harm our business and affect our results
of operations. For a limited number of customers, and at the customers' request, we have conducted sales transactions through
distribution and other value-added partners. If sales grow through these intermediaries, this could adversely impact our results of
operations, in particular our gross profit.
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Given that we currently market our products throughout the world, a significant portion of our business is conducted in currencies
other than the U.S. dollar, our reporting currency. As a result, fluctuations in value relative to the U.S. dollar of the currencies in
which we conduct our business have caused and will continue to cause foreign currency transaction gains and losses. Foreign
currency transaction gains and losses arising from normal business operations are charged against earnings in the period when
incurred. Due to the number of currencies involved, the variability of currency exposures and the potential volatility of currency
exchange rates, we cannot predict the effects of future exchange rate fluctuations. While we may engage in foreign exchange
hedging transactions to manage our foreign currency exposure, there can be no assurance that our hedging strategy will adequately
protect our operating results from the effects of future exchange rate fluctuations.
55
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Although we have not experienced any difficulties attracting or retaining management and scientific staff, our ability to recruit and
retain qualified, skilled employees will continue to be critical to our success. Given the intense competition for experienced scientists
and managers among pharmaceutical and biotechnology companies, as well as academic and other research institutions, there can
be no assurance that we will be able to attract and retain employees critical to our success on acceptable terms. Initiatives to expand
QIAGEN will also require additional employees, including management with expertise in areas such as research and development,
manufacturing, digitization, sales and marketing, and the development of existing managers to lead a growing organization. The
failure to recruit and retain qualified employees, or develop existing employees, could have a material adverse impact on our results
of operations.
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In the markets we serve, a high percentage of purchase orders are typically received in the final few weeks or days of each quarter.
Although this varies from quarter to quarter, many customers make a large portion of their purchase decisions late in each quarter, in
particular because they receive new information during this period on their budgets and requirements. Additionally, volatility in the
timing of revenue from companion diagnostic partnerships can be difficult to predict. As a result, even late in each quarter, we
cannot predict with certainty whether our sales forecasts for the quarter will be achieved.
Historically, we have been able to rely on the overall pattern of customer purchase orders during prior periods to project with
reasonable accuracy our anticipated sales for the current or coming quarters. However, if customer purchasing trends during a
quarter vary from historical patterns, as may occur with changes in market and economic conditions, our quarterly financial results
could deviate significantly from our projections. As a result, our sales forecasts for any given quarter may prove not to be accurate.
We also may not have sufficient, timely information to confirm or revise our sales projections for a specific quarter. If we fail to
achieve our forecasted sales for a particular quarter, the value of our Common Shares could be significantly affected.
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We have a significant amount of debt and debt service obligations and restrictive covenants imposed by our lenders. A high level of
indebtedness increases the risk that we may default on our debt obligations, and restrictive covenants may prevent us from borrowing
additional funds. There is no assurance that we will be able to generate sufficient cash flow to pay the interest on our debt and
comply with our debt covenants or that future working capital, borrowings or equity financing will be available to repay or refinance
our debt. If we are unable to generate sufficient cash flow to pay the interest on our debt and comply with our debt covenants, we
may have to delay or curtail our research and development programs. The level of our indebtedness could, among other things:
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make it difficult for us to make required payments on our debt;
make it difficult for us to obtain financing in the future necessary for working capital, capital expenditures, debt service
requirements or other purposes;
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; and
make us more vulnerable in the event of a downturn in our business.
The Financial Conduct Authority of the United Kingdom plans to phase out the London Interbank Offered Rate (LIBOR) by the end of
2021. Presently, we do hold debt and derivative instruments that use LIBOR. While certain agreements do contain language for the
determination of interest rates in the event the LIBOR rate is not available, changes to these agreements may be required, and we
could be negatively impacted by any newly determined alternative benchmark.
56
M a n a g e m e n t R e p o r t › Opportunities and Risks
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Our future capital requirements and level of expenses will depend on numerous factors, including the costs associated with:
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marketing, sales and customer support efforts;
research and development activities;
expansion of our facilities;
consummation of possible future acquisitions of technologies, products or businesses;
demand for our products and services;
repayment or refinancing of debt; and
payments in connection with our hedging activities and/or taxes.
We currently anticipate that our short-term capital requirements will be satisfied by cash flow from our operations and/or cash on
hand. As of December 31, 2020, we had outstanding long-term debt of $1.9 billion, of which $42.5 million was current. We may
need to refinance these liabilities.
If at some point in time our existing resources should be insufficient to fund our activities, we may need to raise funds through public
or private debt or equity financings. The funds for the refinancing of existing liabilities or for the ongoing funding of our business may
not be available or, if available, not on terms acceptable to us. If adequate funds are not available, we may be required to reduce or
delay expenditures for research and development, production, marketing, capital expenditures and/or acquisitions, which could have
a material adverse effect on our business and results of operations. To the extent that additional capital is raised through the sale of
equity or convertible securities, the issuance of any securities could result in dilution to our shareholders.
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We will settle any conversions of the Cash Convertible Notes described under the heading “Other Factors Affecting Liquidity and
Capital Resources” elsewhere in this report, entirely in cash. Accordingly, the conversion option that is part of the Cash Convertible
Notes will be accounted for as a derivative pursuant to accounting standards relating to derivative instruments and hedging activities.
Refer to Note 14 "Derivatives and Hedging" and Note 16 "Debt", of the Notes to Consolidated Financial Statements. In general, this
resulted in an initial valuation of the conversion option separate from the debt component of the Cash Convertible Notes, resulting in
an original issue discount. The original issue discount will be accreted to interest expense over the term of the Cash Convertible
Notes, which will result in an effective interest rate reported in our financial statements significantly in excess of the stated coupon
rates of the Cash Convertible Notes. This accounting treatment will reduce our earnings. For each financial statement period after the
issuance of the Cash Convertible Notes, a gain (or loss) will be reported in our financial statements to the extent the valuation of the
conversion option changes from the previous period. The Call Options issued in connection with the Cash Convertible Notes will also
be accounted for as derivative instruments, substantially offsetting the gain (or loss) associated with changes to the valuation of the
conversion option. This may result in increased volatility to our results of operations.
(cid:0)(cid:2)(cid:3)(cid:4)(cid:6)(cid:5)(cid:15)(cid:2)(cid:4)(cid:6)(cid:7)(cid:9)(cid:16)(cid:3)(cid:14)(cid:10)(cid:11)(cid:17)(cid:18)(cid:3)(cid:4)(cid:9)(cid:7)(cid:10)(cid:3)(cid:4)(cid:2)(cid:3)(cid:20)(cid:12)(cid:3)(cid:4)(cid:5)(cid:9)(cid:20)(cid:4)(cid:19)(cid:5)(cid:14)(cid:14)(cid:5)(cid:9)(cid:10)(cid:4)(cid:10)(cid:14)(cid:5)(cid:9)(cid:15)(cid:5)(cid:6)(cid:10)(cid:11)(cid:7)(cid:9)(cid:15)(cid:4)(cid:19)(cid:3)(cid:4)(cid:3)(cid:9)(cid:10)(cid:3)(cid:14)(cid:3)(cid:20)(cid:4)(cid:11)(cid:9)(cid:10)(cid:7)(cid:4)(cid:11)(cid:9)(cid:4)(cid:6)(cid:7)(cid:9)(cid:9)(cid:3)(cid:6)(cid:10)(cid:11)(cid:7)(cid:9)(cid:4)(cid:19)(cid:11)(cid:10)(cid:2)(cid:4)(cid:10)(cid:2)(cid:3)(cid:4)(cid:11)(cid:15)(cid:15)(cid:8)(cid:5)(cid:9)(cid:6)(cid:3)(cid:4)(cid:7)(cid:13)(cid:4)(cid:7)(cid:8)(cid:14)(cid:4)(cid:25)(cid:5)(cid:15)(cid:2)(cid:4)(cid:25)(cid:7)(cid:9)(cid:16)(cid:3)(cid:14)(cid:10)(cid:11)(cid:17)(cid:18)(cid:3)(cid:4) (cid:7)(cid:10)(cid:3)(cid:15)
(cid:24)(cid:5)(cid:23)(cid:4)(cid:9)(cid:7)(cid:10)(cid:4)(cid:22)(cid:14)(cid:7)(cid:16)(cid:11)(cid:20)(cid:3)(cid:4)(cid:10)(cid:2)(cid:3)(cid:4)(cid:17)(cid:3)(cid:9)(cid:3)(cid:13)(cid:11)(cid:10)(cid:15)(cid:4)(cid:19)(cid:3)(cid:4)(cid:5)(cid:9)(cid:10)(cid:11)(cid:6)(cid:11)(cid:22)(cid:5)(cid:10)(cid:3)!(cid:4)(cid:5)(cid:9)(cid:20)(cid:4)(cid:24)(cid:5)(cid:23)(cid:4)(cid:2)(cid:5)(cid:16)(cid:3)(cid:4)(cid:5)(cid:4)(cid:20)(cid:11)(cid:18)(cid:8)(cid:10)(cid:11)(cid:16)(cid:3)(cid:4)(cid:3)(cid:13)(cid:13)(cid:3)(cid:6)(cid:10)(cid:4)(cid:7)(cid:9)(cid:4)(cid:7)(cid:8)(cid:14)(cid:4)(cid:6)(cid:7)(cid:24)(cid:24)(cid:7)(cid:9)(cid:4)(cid:15)(cid:10)(cid:7)(cid:6)"(cid:31)
Concurrently with the issuance of the Cash Convertible Notes, we entered into Call Options and issued Warrants. We entered into
the Call Options with the expectation that they would offset potential cash payments by us in excess of the principal amount of the
Cash Convertible Notes upon conversion of the Cash Convertible Notes. In the event that the hedge counterparties fail to deliver
potential cash payments to us, as required under the Call Options, we would not receive the benefit of such transaction. Separately,
we also issued Warrants. The Warrants could separately have a dilutive effect to the extent that the market price per share of our
common stock, as measured under the terms of the Warrants, exceeds the strike price of the Warrants.
57
#(cid:9)(cid:4)(cid:11)(cid:24)(cid:22)(cid:5)(cid:11)(cid:14)(cid:24)(cid:3)(cid:9)(cid:10)(cid:4)(cid:7)(cid:13)(cid:4)(cid:12)(cid:7)(cid:7)(cid:20)(cid:19)(cid:11)(cid:18)(cid:18)(cid:4)(cid:5)(cid:9)(cid:20)(cid:4)(cid:11)(cid:9)(cid:10)(cid:5)(cid:9)(cid:12)(cid:11)(cid:17)(cid:18)(cid:3)(cid:4)(cid:5)(cid:15)(cid:15)(cid:3)(cid:10)(cid:15)(cid:4)(cid:6)(cid:7)(cid:8)(cid:18)(cid:20)(cid:4)(cid:14)(cid:3)(cid:20)(cid:8)(cid:6)(cid:3)(cid:4)(cid:7)(cid:8)(cid:14)(cid:4)(cid:3)(cid:5)(cid:14)(cid:9)(cid:11)(cid:9)(cid:12)(cid:15)(cid:31)
At December 31, 2020, our consolidated balance sheet reflected $2.4 billion of goodwill and $726.2 million of intangible assets.
Goodwill is recorded when the purchase price of a business exceeds the fair value of the tangible and separately measurable
intangible net assets. U.S. generally accepted accounting principles (U.S. GAAP) require us to test goodwill for impairment on an
annual basis or when events or circumstances occur indicating that goodwill might be impaired. Long-lived assets, such as intangible
assets with finite useful lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. The impairment review often cannot be done at the level of the individual asset and it must instead
be applied to a group of assets. For the purpose of our annual goodwill impairment testing based on the current circumstances of
how we manage our business, this group of assets is the Company as a whole. If we determine that any of our goodwill or intangible
assets were impaired, we will be required to take an immediate charge to earnings and our results of operations could be adversely
affected.
(cid:0)(cid:2)(cid:3)(cid:4)(cid:5)(cid:6)(cid:3)(cid:7)(cid:6)(cid:8)(cid:9)(cid:10)(cid:11)(cid:4)(cid:8)(cid:12)(cid:2)(cid:10)(cid:6)(cid:13)(cid:4)(cid:10)(cid:14)(cid:15)(cid:8)(cid:5)(cid:6)(cid:16)(cid:8)(cid:14)(cid:6)(cid:5)(cid:4)(cid:16)(cid:7)(cid:13)(cid:4)(cid:3)(cid:8)(cid:5)(cid:2)(cid:17)(cid:6)(cid:4)(cid:10)(cid:14)(cid:4)(cid:17)(cid:18)(cid:5)(cid:5)(cid:8)(cid:5)(cid:19)
We have made, and may continue to make, strategic investments in businesses as opportunities arise. We periodically review the
carrying value of these investments for impairment, considering factors that include the most recent stock transactions, book values
from the most recent financial statements, and forecasts and expectations of the investee. The results of these valuations may fluctuate
due to market conditions and other conditions over which we have no control.
Estimating the fair value of non-marketable equity investments in life science companies is inherently subjective. If actual events differ
from our assumptions and unfavorable fluctuations in the valuations of the investments are indicated, we could be required to write
down the investment. This could result in future charges on our earnings that could materially adversely affect our results of
operations. It is uncertain whether or not we will realize any long-term benefits from these strategic investments.
(cid:20)(cid:18)(cid:10)(cid:14)(cid:9)(cid:4)(cid:21)(cid:2)(cid:5)(cid:10)(cid:14)(cid:8)(cid:5)(cid:5)(cid:4)(cid:10)(cid:14)(cid:6)(cid:8)(cid:3)(cid:14)(cid:7)(cid:6)(cid:10)(cid:18)(cid:14)(cid:7)(cid:17)(cid:17)(cid:13)(cid:4)(cid:11)(cid:3)(cid:8)(cid:7)(cid:6)(cid:8)(cid:5)(cid:4)(cid:11)(cid:8)(cid:3)(cid:6)(cid:7)(cid:10)(cid:14)(cid:4)(cid:3)(cid:10)(cid:5)(cid:22)(cid:5)(cid:19)
Our business involves operations in several countries outside of the U.S. Our consumable manufacturing facilities are located in
Germany, China and the U.S. We source raw materials and subcomponents to manufacture our products from different countries. We
have established sales subsidiaries in many countries. In addition, our products are sold through independent distributors serving
more than 40 other countries. Conducting and launching operations on an international scale requires close coordination of activities
across multiple jurisdictions and time zones and consumes significant management resources. We have invested heavily in
computerized information systems in order to manage more efficiently the widely dispersed components of our operations. If we fail
to coordinate and manage these activities effectively, our business and results of operations will be adversely affected.
Our operations are subject to other risks inherent in international business activities, such as the general economic and public health
conditions in the countries in which we operate, trade restrictions and changes in tariffs, longer accounts receivable payment cycles
in certain countries, overlap of different tax structures, unexpected changes in regulatory requirements, and compliance with a variety
of foreign laws and regulations. Other risks associated with international operations include import and export licensing
requirements, exchange controls and changes in freight rates, as may occur as a result of rising energy costs. As a result of these
conditions, an inability to successfully manage our international operations could have a material adverse impact on our business and
results of operations.
(cid:23)(cid:14)(cid:8)(cid:6)(cid:24)(cid:10)(cid:11)(cid:7)(cid:17)(cid:4)(cid:21)(cid:8)(cid:24)(cid:7)(cid:15)(cid:10)(cid:18)(cid:3)(cid:4)(cid:7)(cid:14)(cid:25)(cid:4)(cid:14)(cid:18)(cid:14)(cid:26)(cid:11)(cid:18)(cid:16)(cid:27)(cid:17)(cid:10)(cid:7)(cid:14)(cid:11)(cid:8)(cid:4)(cid:28)(cid:10)(cid:6)(cid:24)(cid:4)(cid:17)(cid:7)(cid:28)(cid:5)(cid:4)(cid:21)(cid:13)(cid:4)(cid:18)(cid:2)(cid:3)(cid:4)(cid:5)(cid:7)(cid:17)(cid:8)(cid:5)(cid:4)(cid:3)(cid:8)(cid:27)(cid:3)(cid:8)(cid:5)(cid:8)(cid:14)(cid:6)(cid:7)(cid:6)(cid:10)(cid:15)(cid:8)(cid:5)(cid:29)(cid:4)(cid:18)(cid:6)(cid:24)(cid:8)(cid:3)(cid:4)(cid:8)(cid:16)(cid:27)(cid:17)(cid:18)(cid:13)(cid:8)(cid:8)(cid:5)(cid:29)(cid:4)(cid:11)(cid:18)(cid:14)(cid:5)(cid:2)(cid:17)(cid:6)(cid:7)(cid:14)(cid:6)(cid:5)(cid:29)(cid:4)(cid:11)(cid:18)(cid:16)(cid:16)(cid:8)(cid:3)(cid:11)(cid:10)(cid:7)(cid:17)(cid:4)(cid:27)(cid:7)(cid:3)(cid:6)(cid:14)(cid:8)(cid:3)(cid:5)(cid:4)(cid:18)(cid:3)
(cid:25)(cid:10)(cid:5)(cid:6)(cid:3)(cid:10)(cid:21)(cid:2)(cid:6)(cid:18)(cid:3)(cid:5)(cid:4)(cid:18)(cid:3)(cid:4)(cid:8)(cid:16)(cid:27)(cid:17)(cid:18)(cid:13)(cid:8)(cid:8)(cid:5)(cid:4)(cid:11)(cid:18)(cid:2)(cid:17)(cid:25)(cid:4)(cid:5)(cid:8)(cid:3)(cid:10)(cid:18)(cid:2)(cid:5)(cid:17)(cid:13)(cid:4)(cid:24)(cid:7)(cid:3)(cid:16)(cid:4)(cid:18)(cid:2)(cid:3)(cid:4)(cid:21)(cid:2)(cid:5)(cid:10)(cid:14)(cid:8)(cid:5)(cid:5)(cid:19)
Our business in countries with a history of corruption and transactions with foreign governments increases the risks associated with
our international activities. Based on our international operations, we are subject to the U.S. Foreign Corrupt Practices Act (FCPA),
the U.K. Bribery Act and other laws that prohibit improper payments or offers of payments to foreign governments and their officials
and political parties by business entities for the purpose of obtaining or retaining business. We have operations, agreements with
third parties and sales in countries known to experience corruption. Further international expansion may involve increased exposure
to such practices. Our activities in these countries and others create risks of unauthorized payments or offers of payments, non-
compliance with laws, or other unethical behavior by any of our employees, consultants, sales agents or distributors, that could be in
58
M a n a g e m e n t R e p o r t › Opportunities and Risks
violation of various laws, including the FCPA, even though these parties are not always subject to our control. Our policy is to
implement safeguards to discourage these or other unethical practices by our employees and distributors including online and in-
person employee trainings, periodic internal audits and standard reviews of our distributors. However, our existing safeguards and
any future improvements may not prove to be effective, and our employees, consultants, sales agents or distributors may engage in
conduct for which we might be held responsible. Violations of the FCPA and other laws may result in criminal or civil sanctions,
which could be severe, and we may be subject to other liabilities, which could negatively affect our business, results of operations
and financial condition.
(cid:0)(cid:2)(cid:3)(cid:4)(cid:2)(cid:5)(cid:2)(cid:6)(cid:4)(cid:3)(cid:7)(cid:6)(cid:3)(cid:5)(cid:8)(cid:9)(cid:2)(cid:6)(cid:9)(cid:10)(cid:3)(cid:8)(cid:6)(cid:4)(cid:3)(cid:5)(cid:11)(cid:7)(cid:5)(cid:11)(cid:12)(cid:2)(cid:9)(cid:8)(cid:11)(cid:13)(cid:3)(cid:11)(cid:12)(cid:14)(cid:15)(cid:9)(cid:10)(cid:3)(cid:9)(cid:15)(cid:8)(cid:9)(cid:3)(cid:16)(cid:8)(cid:13)(cid:3)(cid:17)(cid:8)(cid:12)(cid:18)(cid:3)(cid:9)(cid:7)(cid:3)(cid:5)(cid:11)(cid:7)(cid:9)(cid:2)(cid:19)(cid:9)(cid:3)(cid:7)(cid:20)(cid:11)(cid:3)(cid:21)(cid:20)(cid:10)(cid:12)(cid:6)(cid:2)(cid:10)(cid:10)(cid:22)
Our success depends to a large extent on our ability to develop proprietary products and technologies and to establish and protect
our patent and trademark rights in these products and technologies. As of December 31, 2020, we owned 368 issued patents in the
United States, 284 issued patents in Germany and 1,813 issued patents in other major industrialized countries. In addition, at
December 31, 2020, we had 546 pending patent applications, and we intend to file applications for additional patents as our
products and technologies are developed. The patent positions of technology-based companies involve complex legal and factual
questions and may be uncertain, and the laws governing the scope of patent coverage and the periods of enforceability of patent
protection are subject to change. In addition, patent applications in the United States are maintained in secrecy until patents issue,
and publication of discoveries in the scientific or patent literature tends to lag behind actual discoveries by several months. Therefore,
no assurance can be given that patents will issue from any patent applications that we own or license, or if patents do issue, that the
claims allowed will be sufficiently broad to protect our technology. In addition, no assurance can be given that any issued patents
that we own or license will not be challenged, invalidated or circumvented, or that the rights granted thereunder will provide us
competitive advantages. Further, as issued patents expire, we may lose some competitive advantage as others develop competing
products and as a result, we may lose revenue.
Some of our products incorporate patents and technologies that are licensed from third parties and for certain products, these in-
licensed patents together with other patents provide us with a competitive advantage. These licenses impose various
commercialization, sublicensing and other obligations on us. Our failure to comply with these requirements could result in the
conversion of the applicable license from being exclusive to non-exclusive or, in some cases, termination of the license, and as a
result, we may lose some competitive advantage and experience a loss of revenue.
We also rely on trade secrets and proprietary know-how, which we seek to protect through confidentiality agreements with our
employees and consultants. There can be no assurance that any confidentiality agreements that we have with our employees,
consultants, outside scientific collaborators and sponsored researchers and other advisors will provide meaningful protection for our
trade secrets or adequate remedies in the event of unauthorized use or disclosure of such information. There also can be no
assurance that our trade secrets will not otherwise become known or be independently developed by competitors.
We currently engage in, and may continue to engage in, collaborations with academic researchers and institutions. There can be no
assurance that under the terms of such collaborations, third parties will not acquire rights in certain inventions developed during the
course of these collaborations.
(cid:23)(cid:20)(cid:11)(cid:3)(cid:21)(cid:20)(cid:10)(cid:12)(cid:6)(cid:2)(cid:10)(cid:10)(cid:3)(cid:2)(cid:24)(cid:5)(cid:7)(cid:10)(cid:2)(cid:10)(cid:3)(cid:20)(cid:10)(cid:3)(cid:9)(cid:7)(cid:3)(cid:5)(cid:7)(cid:9)(cid:2)(cid:6)(cid:9)(cid:12)(cid:8)(cid:18)(cid:3)(cid:5)(cid:11)(cid:7)(cid:4)(cid:20)(cid:19)(cid:9)(cid:3)(cid:18)(cid:12)(cid:8)(cid:21)(cid:12)(cid:18)(cid:12)(cid:9)(cid:13)(cid:22)
The marketing and sale of our products and services for certain applications entail a potential risk of product liability. Although we
are not currently subject to any material product liability claims, product liability claims may be brought against us in the future.
Further, there can be no assurance that our products will not be included in unethical, illegal or inappropriate research or
applications, which may in turn put us at risk of litigation. We carry product liability insurance coverage, which is limited in scope
and amount. There can be no assurance that we will be able to maintain this insurance at a reasonable cost and on reasonable
terms, or that this insurance will be adequate to protect us against any or all potential claims or losses.
We are subject to various laws and regulations generally applicable to businesses in the different jurisdictions in which we operate,
including laws and regulations applicable to the handling and disposal of hazardous substances. The risk of accidental
contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, we could be held
liable for any damages that result, and any such liability could have a material adverse impact on us.
59
(cid:23)(cid:20)(cid:11)(cid:3)(cid:7)(cid:5)(cid:2)(cid:11)(cid:8)(cid:9)(cid:12)(cid:6)(cid:14)(cid:3)(cid:11)(cid:2)(cid:10)(cid:20)(cid:18)(cid:9)(cid:10)(cid:3)(cid:16)(cid:8)(cid:13)(cid:3)(cid:25)(cid:8)(cid:11)(cid:13)(cid:3)(cid:10)(cid:12)(cid:14)(cid:6)(cid:12)(cid:17)(cid:12)(cid:19)(cid:8)(cid:6)(cid:9)(cid:18)(cid:13)(cid:3)(cid:17)(cid:11)(cid:7)(cid:16)(cid:3)(cid:5)(cid:2)(cid:11)(cid:12)(cid:7)(cid:4)(cid:3)(cid:9)(cid:7)(cid:3)(cid:5)(cid:2)(cid:11)(cid:12)(cid:7)(cid:4)(cid:3)(cid:8)(cid:6)(cid:4)(cid:3)(cid:9)(cid:15)(cid:12)(cid:10)(cid:3)(cid:16)(cid:8)(cid:13)(cid:3)(cid:8)(cid:17)(cid:17)(cid:2)(cid:19)(cid:9)(cid:3)(cid:9)(cid:15)(cid:2)(cid:3)(cid:16)(cid:8)(cid:11)(cid:26)(cid:2)(cid:9)(cid:3)(cid:5)(cid:11)(cid:12)(cid:19)(cid:2)(cid:3)(cid:7)(cid:17)(cid:3)(cid:7)(cid:20)(cid:11)(cid:3)(cid:27)(cid:7)(cid:16)(cid:16)(cid:7)(cid:6)(cid:3)(cid:28)(cid:15)(cid:8)(cid:11)(cid:2)(cid:10)(cid:22)
Our operating results may vary significantly from quarter to quarter, and also year to year, since they are dependent upon a broad
range of factors that include demand for our products, the level and timing of customer research budgets and commercialization
efforts, the timing of government funding budgets of our customers, the timing of our research and development activities and related
regulatory approvals, the impact of sales and marketing expenses, restructuring activities, introduction of new products by us or our
competitors, competitive market conditions, exchange rate fluctuations and general economic conditions. Our expense levels are
based in part on our expectations as to future sales trends. As a result, sales and earnings may vary significantly from quarter to
quarter or from year to year, and actual sales and earnings results in any one period will not necessarily be indicative of results to be
anticipated in subsequent periods. Our results may also fail to meet or exceed the expectations of securities analysts or investors,
which could cause a decline in the market price of our Common Shares.
(cid:0)(cid:2)(cid:3)(cid:4)(cid:5)(cid:6)(cid:7)(cid:8)(cid:9)(cid:10)(cid:11)(cid:4)(cid:12)(cid:6)(cid:13)(cid:14)(cid:15)(cid:10)(cid:16)(cid:4)(cid:17)(cid:18)(cid:3)(cid:2)(cid:12)(cid:18)(cid:2)(cid:3)(cid:19)(cid:4)(cid:13)(cid:15)(cid:20)(cid:19)(cid:17)(cid:4)(cid:2)(cid:17)(cid:4)(cid:8)(cid:19)(cid:14)(cid:19)(cid:10)(cid:8)(cid:19)(cid:10)(cid:18)(cid:4)(cid:6)(cid:10)(cid:4)(cid:18)(cid:5)(cid:19)(cid:4)(cid:6)(cid:14)(cid:19)(cid:3)(cid:15)(cid:18)(cid:9)(cid:6)(cid:10)(cid:17)(cid:4)(cid:6)(cid:21)(cid:4)(cid:6)(cid:2)(cid:3)(cid:4)(cid:17)(cid:2)(cid:22)(cid:17)(cid:9)(cid:8)(cid:9)(cid:15)(cid:3)(cid:9)(cid:19)(cid:17)(cid:23)
QIAGEN N.V. is incorporated under Dutch law as a public limited liability company (naamloze vennootschap), and is organized as
a holding company. Currently, the material assets are the outstanding shares of the QIAGEN subsidiaries, intercompany receivables
and other financial assets such as cash, short-term investments and derivative instruments. As a result, QIAGEN N.V. is dependent
upon payments, dividends and distributions from the subsidiaries for funds to pay operating and other expenses as well as to pay
future cash dividends or distributions, if any, to holders of our Common Shares. Dividends or distributions by subsidiaries in a
currency other than the U.S. dollar may result in a loss upon a subsequent conversion into U.S. dollars.
(cid:0)(cid:2)(cid:3)(cid:4)(cid:24)(cid:6)(cid:13)(cid:13)(cid:6)(cid:10)(cid:4)(cid:25)(cid:5)(cid:15)(cid:3)(cid:19)(cid:17)(cid:4)(cid:13)(cid:15)(cid:16)(cid:4)(cid:5)(cid:15)(cid:26)(cid:19)(cid:4)(cid:15)(cid:4)(cid:26)(cid:6)(cid:7)(cid:15)(cid:18)(cid:9)(cid:7)(cid:19)(cid:4)(cid:14)(cid:2)(cid:22)(cid:7)(cid:9)(cid:12)(cid:4)(cid:18)(cid:3)(cid:15)(cid:8)(cid:9)(cid:10)(cid:11)(cid:4)(cid:14)(cid:3)(cid:9)(cid:12)(cid:19)(cid:23)
The market price of our Common Shares since our initial public offering in September 1996 has increased significantly and been
highly volatile. Since January 10, 2018, our shares have been listed on the New York Stock Exchange (NYSE). Before that, our
shares were listed on the NASDAQ through January 9, 2018. In the last two years, the price of our Common Shares has ranged from
a high of $55.27 to a low of $25.04. On the Frankfurt Stock Exchange our Common Shares have ranged from a high of (cid:189)46.95 to
a low of (cid:189)22.54 during the last two years. In addition to overall stock market fluctuations, factors that may have a significant impact
on the price of our Common Shares include:
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announcements of technological innovations or the introduction of new products by us or our competitors;
developments in our relationships with collaborative partners;
quarterly variations in our operating results or those of our peer companies;
changes in government regulations, tax laws or patent laws;
developments in patent or other intellectual property rights;
developments in government spending budgets for life sciences-related research;
general market conditions relating to the diagnostics, applied testing, pharmaceutical and biotechnology industries; and
impact from foreign exchange rates.
The stock market has from time to time experienced extreme price and trading volume fluctuations that have particularly affected the
market for technology-based companies. These fluctuations have not necessarily been related to the operating performance of these
companies. These broad market fluctuations may adversely affect the market price of our Common Shares.
(cid:27)(cid:6)(cid:7)(cid:8)(cid:19)(cid:3)(cid:17)(cid:4)(cid:6)(cid:21)(cid:4)(cid:6)(cid:2)(cid:3)(cid:4)(cid:24)(cid:6)(cid:13)(cid:13)(cid:6)(cid:10)(cid:4)(cid:25)(cid:5)(cid:15)(cid:3)(cid:19)(cid:17)(cid:4)(cid:17)(cid:5)(cid:6)(cid:2)(cid:7)(cid:8)(cid:4)(cid:10)(cid:6)(cid:18)(cid:4)(cid:19)(cid:28)(cid:14)(cid:19)(cid:12)(cid:18)(cid:4)(cid:18)(cid:6)(cid:4)(cid:3)(cid:19)(cid:12)(cid:19)(cid:9)(cid:26)(cid:19)(cid:4)(cid:8)(cid:9)(cid:26)(cid:9)(cid:8)(cid:19)(cid:10)(cid:8)(cid:4)(cid:9)(cid:10)(cid:12)(cid:6)(cid:13)(cid:19)(cid:23)
QIAGEN has not paid an annual dividend since its inception, and does not intend to implement one at this time. At the same time, in
January 2017 we completed a synthetic share repurchase that combined a direct capital repayment with a reverse stock split.
60
M a n a g e m e n t R e p o r t › Opportunities and Risks
Although we do not anticipate paying any cash dividends on a regular basis, the distribution of any cash dividends through another
synthetic share repurchase in a currency other than the U.S. dollar will be subject to the risk of foreign currency transaction losses.
Investors should not invest in our Common Shares if they are seeking dividend income; the only return that may be realized through
investing in our Common Shares would be through an appreciation in the share price.
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QIAGEN has conducted share repurchase programs in the past through open-market transactions. The purpose of our share
repurchases has been to hold the shares in treasury in order to satisfy obligations from exchangeable debt instruments, warrants
and/or employee share-based remuneration plans and thus to reduce dilution to existing holders of our Common Shares. In 2019, we
began net share withholding on the vesting of stock-based awards and as a result, fewer shares are issued than the number of
awards outstanding. We may decide not to continue such programs in the future, our covenants with lenders may limit our ability to
use available cash to do so, or the market price of our Common Shares may make such repurchases less desirable. In any of these
cases, holders of our Common Shares may suffer dilution from conversion of our indebtedness or issuance of shares pursuant to
employee remuneration plans that would otherwise be at least partially offset by repurchased shares.
(cid:26)(cid:10)(cid:18)(cid:10)(cid:6)(cid:5)(cid:8)(cid:7)(cid:16)(cid:3)(cid:5)(cid:7)(cid:8)(cid:16)(cid:13)(cid:4)(cid:8)(cid:20)(cid:7)(cid:7)(cid:10)(cid:16)(cid:13)(cid:21)(cid:5)(cid:7)(cid:8)(cid:2)(cid:9)(cid:8)(cid:2)(cid:10)(cid:6)(cid:8)(cid:11)(cid:2)(cid:12)(cid:12)(cid:2)(cid:13)(cid:8)(cid:14)(cid:15)(cid:16)(cid:6)(cid:5)(cid:7)(cid:8)(cid:21)(cid:2)(cid:10)(cid:3)(cid:4)(cid:8)(cid:16)(cid:4)(cid:27)(cid:5)(cid:6)(cid:7)(cid:5)(cid:3)(cid:17)(cid:8)(cid:16)(cid:9)(cid:9)(cid:5)(cid:21)(cid:18)(cid:8)(cid:2)(cid:10)(cid:6)(cid:8)(cid:7)(cid:18)(cid:2)(cid:21)(cid:22)(cid:8)(cid:23)(cid:6)(cid:20)(cid:21)(cid:5)(cid:25)
Any future sale or issuance of a substantial number of our Common Shares in the public market, or any perception that a sale may
occur, could adversely affect the market price of our Common Shares. Under Dutch law, a company can issue shares up to its
authorized share capital provided for in its Articles of Association. Pursuant to our Articles of Association, our authorized share
capital amounts to EUR 9.0 million, which is divided into 410.0 million common shares, 40.0 million financing preference shares and
450.0 million preference shares, with all shares having a EUR 0.01 par value. As of December 31, 2020, a total of approximately
228.0 million Common Shares were outstanding along with approximately 5.6 million additional shares reserved for issuance upon
exercise or release of outstanding stock options and awards, of which 0.4 million were vested. A total of approximately 14.4 million
Common Shares are reserved and available for issuances under our stock plans as of December 31, 2020, including the shares
subject to outstanding stock options and awards. The majority of our outstanding Common Shares may be sold without restriction,
except shares held by our affiliates, which are subject to certain limitations on resale. Additionally, convertible debt issued in 2020
and Warrants issued in connection with the Cash Convertible Notes cover an aggregate of 26.8 million underlying shares of common
stock or up to a maximum of 42.5 million shares, subject to customary adjustments under certain circumstances.
(cid:14)(cid:15)(cid:16)(cid:6)(cid:5)(cid:15)(cid:2)(cid:3)(cid:4)(cid:5)(cid:6)(cid:7)(cid:8)(cid:28)(cid:15)(cid:2)(cid:8)(cid:16)(cid:6)(cid:5)(cid:8)(cid:29)(cid:13)(cid:20)(cid:18)(cid:5)(cid:4)(cid:8)(cid:14)(cid:18)(cid:16)(cid:18)(cid:5)(cid:7)(cid:8)(cid:6)(cid:5)(cid:7)(cid:20)(cid:4)(cid:5)(cid:13)(cid:18)(cid:7)(cid:8)(cid:21)(cid:2)(cid:10)(cid:3)(cid:4)(cid:8)(cid:19)(cid:5)(cid:8)(cid:7)(cid:10)(cid:19)(cid:30)(cid:5)(cid:21)(cid:18)(cid:8)(cid:18)(cid:2)(cid:8)(cid:10)(cid:13)(cid:9)(cid:16)(cid:27)(cid:2)(cid:6)(cid:16)(cid:19)(cid:3)(cid:5)(cid:8)(cid:18)(cid:16)(cid:31)(cid:8)(cid:18)(cid:6)(cid:5)(cid:16)(cid:18)(cid:12)(cid:5)(cid:13)(cid:18)(cid:25)
We may be classified as a “passive foreign investment company,” or a PFIC, for U.S. federal income tax purposes if certain tests are
met. Our treatment as a PFIC could result in a reduction in the after-tax return to holders of Common Shares and would likely cause a
reduction in the value of these shares. If we were determined to be a PFIC for U.S. federal income tax purposes, highly complex rules
would apply to our U.S. shareholders. We would be considered a PFIC with respect to a U.S. shareholder if for any taxable year in
which the U.S. shareholder held the Common Shares, either (i) 75% or more of our gross income for the taxable year is passive
income; or (ii) the average value of our assets (during the taxable year) which produce or are held for the production of passive
income is at least 50% of the average value of all assets for such year. Based on our income, assets and activities, we do not believe
that we were a PFIC for U.S. federal income tax purposes for our taxable year ended December 31, 2020, and do not expect to be a
PFIC for the current taxable year or any future taxable year. No assurances can be made, however, that the Internal Revenue Service
will not challenge this position or that we will not subsequently become a PFIC.
(cid:6)(cid:2)(cid:27)(cid:20)(cid:7)(cid:20)(cid:2)(cid:13)(cid:7)(cid:8)(cid:2)(cid:9)(cid:8)(cid:2)(cid:10)(cid:6)(cid:8)!(cid:6)(cid:18)(cid:20)(cid:21)(cid:3)(cid:5)(cid:7)(cid:8)(cid:2)(cid:9)(cid:8)!(cid:7)(cid:7)(cid:2)(cid:21)(cid:20)(cid:16)(cid:18)(cid:20)(cid:2)(cid:13)(cid:8)(cid:16)(cid:13)(cid:4)(cid:8)"(cid:10)(cid:18)(cid:21)(cid:15)(cid:8)(cid:3)(cid:16)(cid:28)(cid:8)(cid:16)(cid:13)(cid:4)(cid:8)(cid:16)(cid:13)(cid:8)(cid:2)(cid:23)(cid:18)(cid:20)(cid:2)(cid:13)(cid:8)(cid:28)(cid:5)(cid:8)(cid:15)(cid:16)(cid:27)(cid:5)(cid:8)(cid:24)(cid:6)(cid:16)(cid:13)(cid:18)(cid:5)(cid:4)(cid:8)(cid:12)(cid:16)(cid:17)(cid:8)(cid:12)(cid:16)(cid:22)(cid:5)(cid:8)(cid:20)(cid:18)(cid:8)(cid:4)(cid:20)(cid:9)(cid:9)(cid:20)(cid:21)(cid:10)(cid:3)(cid:18)(cid:8)(cid:18)(cid:2)(cid:8)(cid:6)(cid:5)(cid:23)(cid:3)(cid:16)(cid:21)(cid:5)(cid:8)(cid:2)(cid:6)(cid:8)(cid:6)(cid:5)(cid:12)(cid:2)(cid:27)(cid:5)
(cid:12)(cid:16)(cid:13)(cid:16)(cid:24)(cid:5)(cid:12)(cid:5)(cid:13)(cid:18)(cid:8)(cid:16)(cid:13)(cid:4)(cid:8)(cid:12)(cid:16)(cid:17)(cid:8)(cid:20)(cid:13)(cid:15)(cid:20)(cid:19)(cid:20)(cid:18)(cid:8)(cid:2)(cid:6)(cid:8)(cid:4)(cid:5)(cid:3)(cid:16)(cid:17)(cid:8)(cid:16)(cid:8)(cid:18)(cid:16)(cid:22)(cid:5)(cid:2)(cid:27)(cid:5)(cid:6)(cid:25)
Our Articles of Association (Articles) provide that our shareholders may only suspend or dismiss our Managing Directors and
Supervisory Directors against their wishes with a vote of two-thirds of the votes cast if such votes represent more than 50% of our
issued share capital. If the proposal was made by the joint meeting of the Supervisory Board and the Managing Board, a simple
majority is sufficient. The Articles also provide that if the members of our Supervisory Board and our Managing Board have been
nominated by the joint meeting of the Supervisory Board and Managing Board, shareholders may only overrule this nomination with
a vote of two-thirds of the votes cast if such votes represent more than 50% of our issued share capital.
61
Certain other provisions of our Articles allow us, under certain circumstances, to prevent a third party from obtaining a majority of the
voting control of our Common Shares through the issuance of Preference Shares. Pursuant to our Articles and the resolution adopted
by our General Meeting of Shareholders, our Supervisory Board is entitled to issue Preference Shares in case of an intended takeover
of our company by (i) any person who alone or with one or more other persons, directly or indirectly, have acquired or given notice
of an intent to acquire (beneficial) ownership of an equity stake which in aggregate equals 20% or more of our share capital then
outstanding or (ii) an “adverse person” as determined by the Supervisory Board. If the Supervisory Board opposes an intended
takeover and authorizes the issuance of Preference Shares, the bidder may withdraw its bid or enter into negotiations with the
Managing Board and/or Supervisory Board and agree on a higher bid price for our Shares.
In 2004, we granted an option to the Stichting Preferente Aandelen QIAGEN, or the Foundation (Stichting), subject to the conditions
described in the paragraph above, which allows the Foundation to acquire Preference Shares from us. The option enables the
Foundation to acquire such number of Preference Shares as equals the number of our outstanding Common Shares at the time of the
relevant exercise of the option, less one Preference Share. When exercising the option and exercising its voting rights on these
Preference Shares, the Foundation must act in our interest and the interests of our stakeholders. The purpose of the Foundation option
is to prevent or delay a change of control that would not be in the best interests of our stakeholders. An important restriction on the
Foundation’s ability to prevent or delay a change of control is that a public offer must be announced by a third party before it can
issue (preference or other) protective shares that would enable the Foundation to exercise rights to 30% or more of the voting rights
without an obligation to make a mandatory offer for all shares held by the remaining shareholders. In addition, the holding period for
these shares by the Foundation is restricted to two years, and this protective stake must fall below the 30% voting rights threshold
before the two-year period ends.
62
M a n a g e m e n t R e p o r t › Opportunities and Risk Performance Review
›
Performance Review
Our future operating results may be affected by various risk factors, many of which are beyond our control.
Certain statements included in this Annual Report and the documents incorporated herein by reference may be forward-looking
statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities
Exchange Act of 1934, as amended, including statements regarding potential future net sales, gross profit, net income and liquidity.
These statements can be identified by the use of forward-looking terminology such as “believe,” “hope,” “plan,” “intend,” “seek,”
“may,” “will,” “could,” “should,” “would,” “expect,” “anticipate,” “estimate,” “continue” or other similar words. Reference is made in
particular to the description of our plans and objectives for future operations, assumptions underlying such plans and objectives, and
other forward-looking statements. Such statements are based on management’s current expectations and are subject to a number of
factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.
We caution investors that there can be no assurance that actual results or business conditions will not differ materially from those
projected or suggested in such forward-looking statements as a result of various factors. Factors which could cause such results to
differ materially from those described in the forward-looking statements include those set forth in the risk factors below. As a result,
our future success involves a high degree of risk. When considering forward-looking statements, you should keep in mind that the risk
factors could cause our actual results to differ significantly from those contained in any forward-looking statement.
Results of Operations
Overview
We are a leading global provider of Sample to Insight solutions that enable customers to gain valuable molecular insights from
samples containing the building blocks of life. Our sample technologies isolate and process DNA, RNA and proteins from blood,
tissue and other materials. Assay technologies make these biomolecules visible and ready for analysis, such as identifying the DNA of
a virus or a mutation of a gene. QIAGEN Digital insights integrate software and cloud-based resources to interpret increasing
volumes of biological data and report relevant, actionable insights. Our automation solutions tie these together in seamless and cost-
effective molecular testing workflows.
We sell our products - consumables, automated instrumentation systems using those technologies, and bioinformatics to analyze and
interpret the data - to two major customer classes:
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guide treatment decisions in oncology, infectious diseases and immune monitoring. Includes Precision Medicine and companion
- healthcare providers engaged in many aspects of patient care requiring accurate diagnosis and insights to
diagnostics.
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- customers including government, biotechnology companies and researchers who utilize molecular testing and
technologies who are generally served by public funding including areas such as medicine and clinical development efforts,
forensics and exploring the secrets of life. Includes Pharma, Academia and Applied Testing customers.
We market products in more than 130 countries, mainly through subsidiaries in markets we believe have the greatest sales potential
in Europe, Asia, the Americas and Australia. We also work with specialized independent distributors and importers. As of December
31, 2020, we employed more than 5,600 people in more than 35 locations worldwide.
63
Recent Acquisitions
We have made a number of strategic acquisitions and implemented other strategic transactions aiming to achieve market-leading
positions with innovative technologies in high-growth areas of molecular diagnostics and research. These transactions have enhanced
our product offerings and technology platforms, as well as our geographic footprint. They include:
In September 2020, we acquired the remaining 80.1% of NeuMoDx, a company that designs and develops molecular diagnostic
solutions for hospital and clinical reference laboratories. Prior to acquisition, we held a 19.9% investment in NeuMoDx and
entered a strategic partnership in 2018 to commercialize next-generation, fully integrated automation systems for PCR testing. The
NeuMoDx 288 (high-throughput version) and NeuMoDx 96 (mid-throughput) systems help clinical laboratories process increasing
molecular test volumes and deliver more rapid diagnostic insights. We distribute these systems in Europe and other markets outside
the United States.
In January 2019, we began developing next-generation systems for digital PCR and acquired the digital PCR assets of Formulatrix,
Inc., a developer of laboratory automation solutions. In 2020, we began commercialization of fully integrated digital PCR
solutions, combining QIAGEN technologies and automation with the Formulatrix assets we acquired. Known as QIAcuity digital
PCR, the system offers highly automated workflows, quicker time-to-result, and higher multiplexing and throughput flexibility than
current digital PCR platforms. Digital PCR is one of the fastest-growing molecular testing applications in the life sciences industry.
We paid Formulatrix $125.0 million in cash upon closing and paid $135.9 million during 2020 for the remaining milestone
payments.
Also in January 2019, we acquired N-of-One, Inc., a pioneer in molecular oncology decision support services, to strengthen our
bioinformatics leadership in clinical NGS interpretation. The acquisition broadened the QIAGEN Digital Insights offering of
software, content and service-based solutions. N-of-One’s services and content have been integrated into QIAGEN Clinical Insights
(QCI), adding medical interpretation and real-world evidence insights. The N-of-One somatic cancer database, drawing upon more
than 125,000 anonymized patient samples, has increased our lead as the provider of the industry’s largest genomics knowledge
base.
Our financial results include the impacts of recent acquisitions from their effective dates.
Year Ended December 31, 2020, Compared to 2019
Net Sales
((iinn mmiilliioonnss))
PPrroodduucctt ttyyppee
22002200
22001199
NNeett ssaaleess
%% ooff nneett ssaaleess
NNeett ssaaleess
%% ooff nneett ssaaleess
%% cchhaannggee
Consumables and related revenues
$ 1,615.4
86%
$ 1,354.1
Instruments
Net Sales
254.9
14%
172.3
$ 1,870.3
$ 1,526.4
89%
11%
+19%
+48%
+23%
Non-COVID-19 products
$ 1,252.4
67%
$ 1,383.1
91%
-9%
COVID-19 products
617.9
33%
143.3
9%
+331%
Net Sales
$ 1,870.3
$ 1,526.4
+23%
64
M a n a g e m e n t R e p o r t › Performance Review
In 2020, we experienced significant demand for solutions used in the COVID-19 pandemic and experienced improving trends in
other areas of the business during the second half of 2020.
The instruments portfolio saw strong sales growth across multiple product categories including sample preparation platforms as well
as general and integrated PCR equipment and platforms. Consumables and related revenues benefited from increased output of key
consumable products including sample technologies kits and testing cartridges for QIAstat-Dx and NeuMoDx instruments. Net sales
were positively impacted by two percentage points from favorable currency movements against the U.S. dollar.
((iinn mmiilliioonnss))
22002200
22001199
CCuussttoommeerr cclaassss
NNeett ssaaleess
%% ooff nneett ssaaleess
NNeett ssaaleess
%% ooff nneett ssaaleess
%% cchhaannggee
Molecular Diagnostics
$ 904.0
48%
$ 737.1
Life Sciences
Net Sales
Product group
Sample technologies
Diagnostic solutions
PCR / Nucleic acid amplification
Genomics / NGS
Other
Net Sales
966.4
52%
789.3
$ 1,870.3
$ 1,526.4
$ 803.9
43%
$ 548.4
460.8
363.6
165.6
76.6
25%
19%
9%
4%
465.5
224.7
183.8
104.1
$ 1,870.3
$ 1,526.4
48%
52%
36%
30%
15%
12%
7%
+23%
+22%
+23%
+47%
-1%
+62%
-10%
-26%
+23%
Sample technologies were driven by strong growth in both consumables and instruments. Key drivers of this product group, which
represents products involved in the first step in any molecular lab process, included COVID-19 solutions such as automated RNA
extraction kits along with the launch of QIAprep& and improving trends in non-COVID products in the later portion of 2020.
Diagnostic solutions includes molecular testing platforms and products as well as Precision Medicine and companion diagnostic co-
development revenues. This product group experienced growth due to sales of COVID testing solutions including QIAstat-Dx and
NeuMoDx that was more than offset by the steep declines experienced earlier in 2020 for QuantiFERON-TB test sales that did see
improving trends during the later portion of 2020 but finished the year down 21% compared to 2019.
PCR / Nucleic acid amplification involves research and applied PCR solutions and components and includes the QIAcuity digital PCR
platform launched in September 2020. This product group was driven by strong growth across consumables and instruments in 2020
and also saw strong demand for OEM solutions and enzymes used in third-party diagnostic kits for COVID-19 testing.
Genomics / NGS includes universal NGS solutions as well as the full QIAGEN Digital Insights portfolio. This product group faced
slower customer demand during the pandemic. Universal NGS sales were supported by initial orders of NGS-based kits used for
epidemiological research of positive COVID-19 samples for viral variants during the second half of 2020.
65
GGeeooggrraapphhiicc rreeggiioonn ((iinn mmiilliioonnss))
Americas
Europe, Middle East and Africa
Asia Pacific, Japan and Rest of World
22002200
$ 825.5
682.3
362.6
22001199
$ 722.0
487.5
317.0
Net Sales
$ 1,870.3
$ 1,526.4
%% cchhaannggee
+14%
+40%
+14%
+23%
Top 7 emerging markets: Brazil, Russia, India, China, South Korea, Mexico and Turkey (2020: $287 million, 2019: $250 million,
+14%)
EMEA led the geographic regions with 40% sales growth in 2020 due to strong performance in countries including France, the
United Kingdom, Italy and Germany. EMEA was supported by one percentage point of sales growth from positive currency
movements in 2020. Asia Pacific, Japan and Rest of World experienced gains during 2020 in China in part from strong QIAstat-Dx
instrument sales as well as overall gains in other countries including Japan and Australia that more than offset a decline in South
Korea particularly in QuantiFERON-TB tests. The Americas region benefited from significant increased demand in Brazil and Mexico
throughout the year and gains in the United States in other areas of the portfolio more than offset the decline in QuantiFERON-TB
tests for the full-year.
Gross Profit
((iinn mmiilliioonnss))
Gross Profit
Gross Margin
22002200
22001199
%% cchhaannggee
$ 1,232.7
$ 1,005.3
+23%
65.9%
65.9%
Generally, our consumables and related products have a higher gross margin than our instrumentation products and service
arrangements and fluctuations in the sales levels of these products and services can result in changes in gross margin between
periods. Gross profit in 2020 includes the shift in product mix where lower margin instrument products advanced at a faster pace
than consumable products as well as higher material costs. These adverse impacts were offset by lower amortization expenses related
to developed technology and patent and license rights, which have been acquired in business combinations or asset acquisitions. The
amortization expense on acquisition-related intangibles within cost of sales decreased to $63.2 million in 2020 from $71.5 million in
2019. The decrease follows the full amortization of assets previously acquired in 2007. We expect that our acquisition-related
intangible amortization will increase as a result of the acquisition of NeuMoDx as further discussed in Note 5 "Acquisitions and
Divestitures" and in the event of future acquisitions.
66
M a n a g e m e n t R e p o r t › Performance Review
Operating Expenses
22002200
22001199
((iinn mmiilliioonnss))
EExxppeennsseess
%% ooff nneett ssaaleess
EExxppeennsseess
%% ooff nneett ssaaleess
%% cchhaannggee
Research and development
$ 149.1
8.0%
$ 157.4
Sales and marketing
General and administrative
Acquisition-related intangible amortization
Restructuring, acquisition, integration and other,
net
413.7
111.7
20.8
150.0
22.1%
391.9
6.0%
1.1%
8.0%
112.3
30.0
199.8
10.3%
25.7%
7.4%
2.0%
13.1%
-5%
+6%
-1%
-31%
-25%
Long-lived asset impairments
1.0
0.1%
140.0
9.2%
-99%
Total operating expenses
$ 846.3
45.2%
$ 1,031.4
Income (loss) from operations
$ 386.4
20.7%
$ (26.1)
67.6%
(1.7)%
2020 results include the expenses from the discontinued tender offer while 2019 includes expense related to the decision to stop
NGS instrument development and targeted efficiency improvement initiatives.
Research and Development
The overall decrease is the result of the suspended development of NGS-related instrument systems in connection with the 2019
restructuring measures discussed in Note 6 "Restructuring". In 2020, additional costs include costs associated with QIAstat menu
expansion, the launch of new products including QIAprep& and QIAcuity as well as costs incurred following the acquisition of
NeuMoDx. As we continue to discover, develop and acquire new products and technologies, we expect to incur additional expenses
related to facilities, licenses and employees engaged in research and development. Overall, research and development costs are
expected to increase as a result of seeking regulatory approvals, including U.S. FDA Pre-Market Approval (PMA), U.S. FDA 510(k)
clearance and EU CE approval of certain assays or instruments. Further, business combinations, along with the acquisition of new
technologies, may increase research and development costs in the future. We have a strong commitment to innovation and expect to
continue to make investments in our research and development efforts.
Sales and Marketing
Sales and marketing expenses were primarily associated with personnel, commissions, advertising, trade shows, publications, freight
and logistics expenses, and other promotional expense. Higher costs in 2020 reflect higher share-based compensation expense as a
result of an increase in estimated performance achievement and increases in freight and commissions due to higher sales, partially
offset from the lockdowns and limitations resulting from the COVID-19 pandemic, such as restricted travel and postponed trade shows
and exhibits. When pandemic lockdowns and restrictions are lifted, we anticipate that absolute sales and marketing costs will
increase along with new product introductions and growth in sales of our products.
General and Administrative
The decrease in general and administrative expenses reflects lower share-based compensation following the 2019 restructuring
measures partially offset by continued investments in information technology systems, including cyber security, across the
organization as well as an increase in the personnel expenses from performance achievements due to sales volume increases.
67
Acquisition-Related Intangible Amortization
Amortization expense related to developed technology and patent and license rights acquired in a business combination is included
in cost of sales. Amortization of trademarks and customer base acquired in a business combination is recorded in operating expense
under the caption “acquisition-related intangible amortization.” Amortization expenses of intangible assets not acquired in a business
combination are recorded within cost of sales, research and development, or sales and marketing line items based on the use of the
asset.
During 2020, amortization expense on acquisition-related intangibles within operating expense decreased to $20.8 million,
compared to $30.0 million in 2019. The decrease follows the full amortization of assets previously acquired in 2007. Our
acquisition-related intangible amortization will increase in the event of future acquisitions.
Restructuring, Acquisition, Integration and Other, net
Restructuring, acquisition, integration and other, net expenses totaled $150.0 million during the year ended December 31, 2020 and
includes acquisition expenses related to the unsuccessful acquisition attempt by Thermo Fisher of $125.5 million, including a $95.0
million expense reimbursement. Additionally, we incurred net acquisition, integration and other expenses of $21.2 million, including
charges for NeuMoDx as well as the $11.7 million gain on the value of our interest held on the acquisition date. We also incurred
$3.3 million of charges related to the 2019 Restructuring program as discussed further in Note 6. As we continue the integration of
NeuMoDx, we expect to incur additional integration costs in 2021.
During 2019, $199.8 million of restructuring, acquisition, integration and other, net expenses were incurred including $163.0
million for the 2019 Restructuring program. Additionally, we incurred net acquisition, integration and other expenses of $36.8
million, including charges for the 2019 acquisitions as well as a $7.4 million gain from the reduction in the fair value of contingent
consideration.
Long-lived Asset Impairments
In 2020, $1.0 million impairments to property, plant and equipment were recorded and in 2019, $140.0 million impairments
including both intangible assets and property, plant and equipment were recorded primarily in connection with the 2019
restructuring measures as further discussed in Note 6 "Restructuring and Impairments".
Other Income (Expense)
((iinn mmiilliioonnss))
Interest income
Interest expense
Other income, net
Total other income (expense), net
22002200
$ 10.0
(71.3)
114.3
$ 53.0
22001199
$ 22.1
(74.2)
0.4
%% cchhaannggee
-55%
-4%
$ (51.6)
+203%
Interest income includes interest earned on cash, cash equivalents and short-term investments, income related to certain interest rate
derivatives as discussed in Note 14 "Derivatives and Hedging" and other components including the interest portion of operating
lease transactions. Interest income earned in 2019 included interest on higher cash balances following the issuance of cash
convertible notes in November 2018.
68
M a n a g e m e n t R e p o r t › Performance Review
Interest expense primarily relates to debt, discussed in Note 16 "Debt" in the accompanying consolidated financial statements.
During 2020, the majority of the 2021 Notes were repaid and we issued new zero coupon convertible debt due in 2027.
Other income, net the for year ended December 31, 2020 includes a gain of $123.3 million for the sale of our investment in
ArcherDX, $5.0 million of income from equity method investees and a total of $1.6 million in gains related to prior sales of assets.
These gains were partially offset by $9.3 million in unrealized losses recognized for the change in fair market value of all marketable
equity securities, $4.1 million net losses on foreign currency transactions and a $2.3 million loss from the sale of an equity security
investment.
Other income, net was $0.4 million of income for the year ended December 31, 2019. Other income includes $7.8 million of
upward adjustments resulting from observable price changes for non-marketable investments not accounted for under the equity
method, $2.1 million in income from equity-method investments and a $0.7 million gain from receipt of shares in settlement of a zero-
book value financial instrument held with a third party. This income was partially offset by impairments, including $4.8 million of
impairments in non-marketable investments accounted for under the equity method and net losses on foreign currency of $5.7 million
for the year ended December 31, 2019.
Income Tax Expense (Benefit)
((iinn mmiilliioonnss))
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
Effective tax rate
22002200
$ 439.5
80.3
$ 359.2
18.3%
22001199
$ (77.8)
(36.3)
$ (41.5)
46.7%
%% cchhaannggee
+665%
+321%
Our effective tax rates differ from The Netherlands statutory tax rate of 25% due in part to our operating subsidiaries being exposed
to effective tax rates ranging from zero to 35%. Fluctuations in the distribution of pre-tax (loss) income among our operating
subsidiaries can lead to fluctuations of the effective tax rate in the consolidated financial statements. In 2020 and 2019, our effective
tax rates were 18.3% and 46.7%, respectively. The comparison is impacted by pre-tax book income which was higher in 2020
reflecting higher operating income in the current year due to the significant demand for solutions used in COVID-19 testing. This
compares to pre-tax book loss in 2019 which reflects the restructuring charges incurred during the third quarter of 2019.
Additionally, we record partial tax exemptions on foreign income primarily derived from operations in Germany, the Netherlands and
Singapore. These foreign tax benefits are due to a combination of favorable tax laws, rules, and exemptions in these jurisdictions,
including intercompany foreign royalty income in Germany which is statutorily exempt from trade tax. Further, we have intercompany
financing arrangements in which the intercompany income is nontaxable or partially exempt. During 2020, we have intercompany
financing arrangements through Dubai, and through mid-2019 had arrangements through Luxembourg and Ireland.
See Note 17 "Income Taxes" to the consolidated financial statements for a full reconciliation of the effective tax rate to The
Netherlands statutory rate.
In future periods, our effective tax rate may fluctuate from similar or other factors as discussed in “Changes in tax laws or their
application could adversely affect our results of operations or financial flexibility” in the “Opportunities and Risks” section.
69
Foreign Currencies
QIAGEN N.V.’s reporting currency is the U.S. dollar, and most of our subsidiaries’ functional currencies are the local currencies of
the countries in which they are headquartered. All amounts in the financial statements of entities whose functional currency is not the
U.S. dollar are translated into U.S. dollar equivalents at exchange rates as follows: (1) assets and liabilities at period-end rates, (2)
income statement accounts at average exchange rates for the period, and (3) components of shareholders’ equity at historical rates.
Translation gains or losses are recorded in shareholders’ equity, and transaction gains and losses are reflected in net income. The net
loss on foreign currency transactions is included in other income, net, and in 2020, 2019 and 2018 was $4.1 million, $5.7 million,
and $12.3 million, respectively.
Derivatives and Hedging
In the ordinary course of business, we use derivative instruments, including swaps, forwards and/or options, to manage potential
losses from foreign currency exposures and variable rate debt. The principal objective of such derivative instruments is to minimize
the risks and/or costs associated with global financial and operating activities. We do not utilize derivative or other financial
instruments for trading or speculative purposes. We recognize all derivatives as either assets or liabilities on the balance sheet,
measure those instruments at fair value and recognize the change in fair value in earnings in the period of change, unless the
derivative qualifies as an effective hedge that offsets certain exposures. In determining fair value, we consider both the counterparty
credit risk and our own creditworthiness, to the extent that the derivatives are not covered by collateral agreements with the
respective counterparties. To determine our own credit risk, we estimated our own credit rating by benchmarking the price of our
outstanding debt to publicly-available comparable data from rated companies. Using the estimated rating, we quantify our credit risk
by reference to publicly-traded debt with a corresponding rating.
Foreign Currency Derivatives
As a globally active enterprise, we are subject to risks associated with fluctuations in foreign currencies in our ordinary operations.
This includes foreign currency-denominated receivables, payables, debt, and other balance sheet positions including intercompany
items. We manage our balance sheet exposure on a group-wide basis using foreign exchange forwards, options and cross-currency
swaps.
Interest Rate Derivatives
We use interest rate derivative contracts on certain borrowing transactions to hedge interest rate exposures. We have entered into
interest rate swaps in which we agree to exchange, at specified intervals, the difference between fixed and floating interest amounts
calculated by reference to an agreed-upon notional principal amount.
We also make use of economic hedges. Further details of our derivative and hedging activities can be found in Note 14 "Derivatives
and Hedging" to the accompanying consolidated financial statements.
Liquidity and Capital Resources
To date, we have funded our business primarily through internally generated funds, debt, and private and public sales of equity. Our
primary use of cash has been to support continuing operations and our investing activities including capital expenditure requirements
and acquisitions. As of December 31, 2020, we had cash and cash equivalents of $598.0 million and short-term investments of
$117.2 million. As of December 31, 2019, we had cash and cash equivalents of $623.6 million, restricted cash of $5.7 million and
short-term investments of $129.6 million. Cash and cash equivalents are primarily held in U.S. dollars and euros, other than those
cash balances maintained in the local currency of subsidiaries to meet local working capital needs. At December 31, 2020, cash and
cash equivalents had decreased by $31.4 million from December 31, 2019, primarily as a result of cash used in investing activities
of $443.3 million and cash used financing activities of $50.1 million, partially offset by cash provided by operating activities of
$457.8 million. As of December 31, 2020 and 2019, we had working capital of $1.05 billion and $618.9 million, respectively.
70
M a n a g e m e n t R e p o r t › Performance Review
Cash Flow Summary
((iinn mmiilliioonnss))
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Effect of exchange rate changes on cash, cash
equivalents and restricted cash
Net decrease in cash, cash equivalents and
restricted cash
Operating Activities
22002200
$ 457.8
$ (443.3)
$ (50.1)
$ 4.2
22001199
$ 330.8
$ (222.3)
$ (639.1)
$ 0.8
$ (31.4)
$ (529.7)
For the years ended December 31, 2020 and 2019, we generated net cash from operating activities of $457.8 million and $330.8
million, respectively. While net income was $359.2 million in 2020, non-cash components in income included $205.0 million of
depreciation and amortization, a gain of $121.8 million on sales of investments primarily related to the sale of the investment in
ArcherDX as discussed in Note 10 "Investments", $42.3 million of amortization of debt discount and issuance costs and $40.9
million of share-based compensation expense. Operating cash flows include a net decrease in working capital of $130.2 million
excluding changes in fair value of derivative instruments. The current period change in working capital is primarily due to increased
inventories in order to meet the increase in demand and decreased accrued and other current liabilities following cash payments
made in connection with the 2019 restructuring measures. Because we rely heavily on cash generated from operating activities to
fund our business, a decrease in demand for our products, longer collection cycles or significant technological advances of
competitors would have a negative impact on our liquidity.
Investing Activities
Approximately $443.3 million of cash was used in investing activities during 2020, compared to $222.3 million during 2019.
Investing activities during 2020 consisted principally of $239.6 million in cash paid for acquisitions, net of cash acquired primarily
for NeuMoDx, $171.5 million paid for intangible assets including $135.9 million of the remaining milestone payments for the digital
PCR assets acquired from Formulatrix in 2019, $132.8 million in cash paid for purchases of property and equipment which includes
the investments we are making in expanded production capacity, $53.4 million paid for collateral assets and $49.8 million for
purchases of short-term investments. This was partially offset by $181.2 million from the sale of short-term investments and $25.6
million net proceeds from sales of investments in privately held companies as discussed in Note 10 "Investments".
Cash used in investing activities during 2019 includes $156.9 million paid for intangible assets primarily related to the asset
acquisition from Formulatrix, $294.0 million for purchases of short-term investments and $118.0 million purchases of property, plant
and equipment partially offset by $396.1 million from the sale of short-term investments.
71
Financing Activities
For the year ended December 31, 2020, cash used in financing activities was $50.1 million compared to cash provided by financing
activities of $639.1 million in 2019. Financing activities during 2020 consisted primarily of net payments of $468.6 million in
connection with the final conversion, redemption and termination of the 2021 Cash Convertible Notes and warrants as discussed
further in Note 16 "Debt" as well as $64.0 million for repurchases of QIAGEN shares. This was partially offset by $497.6 million in
proceeds from issuance of the 2027 Zero Coupon Convertible Notes.
In 2019, cash used in financing activities totaled $639.1 million primarily due to $506.4 million repayments of long-term debt and
repurchases of QIAGEN shares totaled $74.5 million in 2019.
Other Factors Affecting Liquidity and Capital Resources
As of December 31, 2020, we carry $1.9 billion of long-term debt, of which $42.5 million is current.
In December 2020, we issued $500.0 million aggregate principal amount of zero coupon Convertible Notes due in 2027 (2027
Notes). The 2027 Notes will mature on December 17, 2027 unless converted in accordance with their terms prior to such date as
described more fully in Note 16 "Debt".
In November 2018, we issued $500.0 million aggregate principal amount of Cash Convertible Senior Notes which is due in 2024
(2024 Notes). Interest on the 2024 Notes is payable semiannually in arrears at a rate of 1.000% per annum. The 2024 Notes will
mature on November 13, 2024 unless repurchased or converted in accordance with their terms prior to such date.
In September 2017, we issued $400.0 million aggregate principal amount of Cash Convertible Senior Notes which are due in 2023
(2023 Notes). Interest on the 2023 Notes is payable semiannually in arrears at a rate of 0.500% per annum. The 2023 Notes will
mature on September 13, 2023 unless repurchased or converted in accordance with their terms prior to such date.
Additionally in 2017, we completed a German private placement consisting of several tranches denominated in either U.S. dollars or
Euro at either floating or fixed rates and due at various dates through June 2027 as described in Note 16 "Debt".
In December 2020, we obtained a (cid:189)400 million syndicated revolving credit facility with a contractual life of three years with the
ability to extend by one year two times. No amounts were utilized at December 31, 2020. The facility can be utilized in Euro and
bears interest of 0.525% to 1.525% above EURIBOR, and is offered with interest periods of one, three or six months. The interest rate
is linked to our environmental, social and governance (ESG) performance. We have additional credit lines totaling (cid:189)27.0 million
with no expiration date, none of which were utilized as of December 31, 2020.
In March 2014, we issued Cash Convertible Senior Notes of which $0.2 million remains outstanding as of December 31, 2020 and
will be repaid at maturity on March 19, 2021.
In October 2012, we completed a U.S. private placement with three series at a weighted average interest rate of 3.66%. The
following two series remain outstanding at December 31, 2020: (1) $300 million 10-year term due in 2022 (3.75%); and (2) $27
million 12-year term due in 2024 (3.90%).
In connection with certain acquisitions, we could be required to make additional contingent cash payments totaling up to $26.6
million based on the achievement of certain revenue and operating results milestones as further discussed in Note 20 "Commitments
and Contingencies".
72
M a n a g e m e n t R e p o r t › Performance Review
In May 2019, we announced our sixth share repurchase program of up to $100 million of our common shares. During 2020, we
repurchased 1.3 million QIAGEN shares for $64.0 million (including transaction costs). This program ended in December 2020.
Repurchased shares will be held in treasury in order to satisfy various obligations, which include employee share-based remuneration
plans.
We expect that cash from financing activities will continue to be impacted by issuances of our common shares in connection with our
equity compensation plans and that the market performance of our stock will impact the timing and volume of the issuances.
Additionally, we may make future acquisitions or investments requiring cash payments, the issuance of additional equity or debt
financing.
We believe that funds from operations, existing cash and cash equivalents, together with the proceeds from any public and private
sales of equity, and availability of financing facilities, will be sufficient to fund our planned operations and expansion during the
coming year. However, any global economic downturn may have a greater impact on our business than currently expected, and we
may experience a decrease in the sales of our products, which could impact our ability to generate cash. If our future cash flows from
operations and other capital resources are not adequate to fund our liquidity needs, we may be required to obtain additional debt or
equity financing or to reduce or delay our capital expenditures, acquisitions or research and development projects. If we could not
obtain financing on a timely basis or at satisfactory terms, or implement timely reductions in our expenditures, our business could be
adversely affected.
Off-Balance Sheet Arrangements
We did not use special purpose entities and do not have off-balance sheet financing arrangements as of and during the years ended
December 31, 2020, 2019 and 2018.
Contractual Obligations
As of December 31, 2020, our future contractual cash obligations are as follows:
Coonnttrraaccttuuaal OObbliiggaattiioonnss
PPaayymmeennttss DDuuee bbyy PPeerriioodd
((iinn mmiilliioonnss))
TToottaal
22002211
22002222
22002233
22002244
22002255
TThheerreeaafftteerr
Long-term debt (1)
$ 1,980.0
$ 64.7
$ 505.3
$ 370.2
$ 578.9
$ 0.3
$ 460.7
Purchase obligations
250.8
199.8
117.0
30.0
25.4
10.0
42.6
21.0
7.2
5.4
16.3
4.5
3.0
10.8
2.6
-
6.7
2.3
-
36.9
3.4
$ 2,377.9
$ 299.9
$ 576.1
$ 396.3
$ 595.3
$ 9.3
$ 501.0
Operating leases
License and royalty
payments
Toottaal ccoonnttrraaccttuuaal ccaasshh
oobbliiggaattiioonnss
(1) Amounts include required principal, stated at the current carrying values, and interest payments.
73
In addition to the above, and pursuant to the purchase agreements for certain acquisitions and other contractual arrangements, we
could be required to make additional contingent cash payments totaling up to $26.6 million based on the achievement of certain
revenue and operating results milestones as follows:
((iinn mmiilliioonnss))
2021
2022
$ 8.9
17.7
$ 26.6
Of the $26.6 million total contingent obligation, we have assessed the fair value at December 31, 2020 to be $23.6 million which is
included in accrued and other current liabilities in the accompanying consolidated balance sheet.
Liabilities associated with uncertain tax positions, including interest and penalties, are currently estimated at $104.9 million as of
December 31, 2020 and are not included in the table above, as we cannot reasonably estimate when, if ever, an amount would be
paid to a government agency. Ultimate settlement of these liabilities is dependent on factors outside of our control, such as
examinations by each agency and expiration of statutes of limitation for assessment of additional taxes.
Dividend
QIAGEN has not paid a cash dividend since its inception and does not intend to pay any dividends in the foreseeable future. We
intend to retain any earnings for the development of the business.
Credit Rating
QIAGEN is currently not rated by any credit rating agency.
74
M a n a g e m e n t R e p o r t › Performance Review Human Resources
›
Human Resources
The skills, knowledge, dedication and passion of our employees are critical for the success of QIAGEN. We
want to recruit, support and retain the best employees, offering performance-based remuneration,
development opportunities and measures to balance work and family life. We are committed to diversity in
our teams, fueling innovation and engagement with our customers and business partners. In a fast-
changing, competitive business environment, QIAGEN has a significant commitment to being an employer
of choice and further enhancing our position as a great place to work. At the end of 2020, QIAGEN had
5,610 full-time equivalent employees, an increase of 10% from 5,096 at the end of 2019.
Recognizing that our employees are the key to our success, we seek to be a great place to work. In 2020, we were once again
recognized as a “Top Employer” in Germany by the Top Employer Institute, a global authority on recognizing excellence in people
practices. Also in 2020, our subsidiary in Brazil was certified for the first time as a “Great Place to Work,” and awarded one of the
“Best Workplaces” in healthcare as well as Top 5 in diagnostic medicine. Finally, our U.S. headquarters in Germantown, Maryland,
was awarded five different awards by the Alliance for Workplace Excellence (AWE), including the Workplace Excellence Seal of
Approval, Diversity Champion Award, and Best Practices Supporting Workers 50+.
We are committed to creating an environment that is rich in diversity and empowers all employees. Diverse teams strengthen our
organization through the variety of ideas, perspectives and approaches they bring to our business. Our teams outperform and
succeed when they are composed of individuals with the widest possible range of personalities, backgrounds and traits. That’s why
we value each person’s uniqueness and maintain an environment where all individuals can contribute to our success based on their
strengths and characteristics. In 2020, our multicultural workforce was composed of at least 80 nationalities with an average age of
40.1. With 48% women, we are well balanced in terms of gender on an aggregate level. Our strategic initiative on gender diversity,
which began in 2018, has yielded remarkable results in the past years, particularly with regard to leadership positions. The
participation of women in leadership roles rose from just under 28% in 2018 to just under 32% in 2020 as a result of a series of
initiatives to drive awareness, engagement, and development of this area among our leadership team.
Employee development is viewed as integral to the success of creating lasting value for our customers, patients, colleagues, partners,
and shareholders. We offer opportunities to work on exciting tasks and projects in an engaging work environment. Employees join
QIAGEN and stay with QIAGEN because they can see how their work makes a difference to people’s lives everywhere in the world.
We offer various training platforms that provide the possibility to either use our global e-learning portfolio or to participate in
personal trainings usually offered in a blended format. The focus is on job-specific skills, compliance, competencies and leadership
development. In 2020, we ran a mix of virtual instructor-led and e-learning courses. All in person trainings were put on hold in 2020
due to the COVID-19 pandemic.
Internal and external ratings have improved significantly and support our preferred position in the global working environment.
Specific retention targets have been met with a 9% voluntary turnover rate for the total workforce and a voluntary turnover rate of 5%
for the management level in 2020.
Since the creation of QIAGEN, management has formed a culture that seeks to attract and retain the best talent worldwide and
reward associates for performance. This compensation system fosters a focus on achieving corporate strategic initiatives as well as
personal accountability. We participate in various compensation benchmarking surveys that provide information on the level and mix
of compensation awarded by companies and industries for a broad range of positions around the world. In the case of QIAGEN,
these include many peer life science and diagnostics companies based in the U.S. QIAGEN has a “pay for performance” culture,
with the compensation of employees linked to the achievement of corporate financial and individual performance goals. Business
goals are established by senior management. These goals are set at ambitious levels each year to motivate and drive performance,
with a focus on both short-term and long-term quantifiable objectives. Furthermore, to align our compensation programs with the
interests of shareholders, management levels receive a portion of their total compensation in the form of long-term compensation,
which is granted as equity as a reward for performance.
75
In 2020 as a consequence of the global pandemic, a large portion of our employees worked remotely beginning in the first quarter
of 2020 and continuing throughout the year. For our essential workers and in our locations where a small number of employees
continued to work on site, we implemented safety measures including routine on-site testing at critical manufacturing facilities to
reduce the risk of COVID-19 transmission.
Employees worldwide
Americas
EMEA
APAC & RoW
ToTottaal
22001188
1230
2670
1052
4952
22001199
1132
2820
1144
5096
2018
2019
2020
Production
22%
Production
23%
Production
R&D
Sales
Marketing
Admin
21%
R&D
40%
Sales
19%
R&D
40%
Sales
6%
Marketing
6%
Marketing
11%
Admin
12%
Admin
22002200
1328
3059
1223
5610
28%
16%
39%
6%
11%
76
M a n a g e m e n t R e p o r t › Human Resources Future Perspectives
›
Future Perspectives
QIAGEN Perspectives for 2021
With a differentiated portfolio of Sample to Insight solutions for molecular testing, QIAGEN announced in February 2021 that it
expects an 18-20% rise in sales (at constant exchange rates, CER) in 2021 and adjusted earnings per share (EPS) to increase to
$2.42-2.46 (CER) from $2.15 in 2020. We estimate the total addressable market at about $11 billion per year. QIAGEN’s five
pillars of growth – Sample technologies, QuantiFERON, QIAcuity digital PCR, NeuMoDx, QIAstat-Dx – account for more than $6
billion of this total.
QIAGEN expects its 2021 results to reflect both the ongoing strong demand for COVID-19 test solutions during the course of the first
half of the year as widespread vaccines are expected to be available by the middle of 2021 as well as continued improvements in
non-COVID-19 areas of its portfolio throughout the year. These expectations are also based on plans for significant investments in
R&D and clinical trials to strengthen the competitive profile of QIAGEN’s five pillars of growth. In particular, the company is planning
initiatives to expand the test menu for the NeuMoDx and QIAstat-Dx automated PCR systems in the U.S. and Europe.
As vaccination programs gain traction around the world, the demand for COVID-19 testing is expected to change. QIAGEN
anticipates demand for PCR and antigen testing solutions to continue during the first half of 2021, but could recede to a lower level
during the second half. This outcome depends significantly on the impact of new viral variants. QIAGEN plans to continue investing
in upscaling its production lines which are serving pandemic testing demands as well as supporting future growth of many products
for non-COVID applications.
QIAGEN is encouraged for the future as it continues to serve COVID-19 testing demands while capturing strong growth opportunities
in non-COVID related applications once the pandemic has been brought under control. The company is managing the increase in
demand for non-COVID categories and planning for a steady sales increases as clinical testing volumes return for oncology and
infectious diseases and research activities resume in academia and pharma projects. The company is focused on investments in its
five pillars of growth to fuel its success beyond the pandemic and create long term shareholder value. QIAGEN aims to maintain our
leading position in sample technologies, grow the QuantiFERON franchise anchored by its tuberculosis test, expand the QIAcuity
digital PCR platforms and the NeuMoDx integrated PCR systems for clinical diagnostics, and drive the use of the QIAstat-Dx
syndromic testing platform.
Global Economic Perspectives for 2021
The world economy entered a recession in 2020 as the COVID-19 pandemic took hold, but is now expected to grow again in 2021
as vaccination programs strengthen economic activity, especially in developed countries. In January 2021, the International Monetary
Fund said the world economy would grow 5.5 percent this year, while the World Bank forecast a 4 percent annual increase.
However, considerable pandemic-related risks mean any outlook is unusually uncertain: unforeseen changes to lockdown measures,
vaccine rollouts, and general financial conditions and commodity prices could hamper – or boost – growth more than expected.
Aside from indications that vaccination programs will gain pace this year, fiscal stimulus measures across major economies and a
continuation of accommodative monetary policy by central banks are expected to underpin a positive economic development. But,
even then, recovery is expected to be subdued and challenging. Economic momentum tends to benefit our performance, while
downturn can limit spending by customers. Currency exchange rates also positively or negatively affect the company’s results as these
are reported in U.S. dollars.
77
Industry Perspectives for 2021
The demand for testing for active SARS-CoV-2 infections using PCR and antigen products is expected to decline to a lower base level
as vaccination programs increase during the year. Viral immune-response monitoring using T-cell and antibody testing may increase
along with population monitoring to stop new infection hotspots and multiplex PCR tests to discern between COVID-19 and other
respiratory illnesses.
PCR testing volumes are expected to remain fairly robust in 2021. With COVID-19 hospitalizations expected to decrease during the
year, elective procedures and laboratory volumes for non-COVID-19 issues are likely to recover – although some industry observers
expect global demand trends to only normalize again in 2022.
The pandemic has cemented the trend of genomic insights moving rapidly from basic research laboratories into applications in
medicine and other fields, delivering ever-greater value for patients and other users. As innovation drives market expansion, QIAGEN
has a dynamic opportunity to continue its growth in 2021 and the years beyond.
COVID-19 has drawn attention to the fact that molecular testing can also evaluate and monitor patients for cancer, infectious diseases
and other conditions. Molecular medicine is migrating from research-based institutions to hospitals and reference laboratories in need
of quick, accurate results, increasing the demand for standardized tests and automated workflows. Customers embrace diverse
technologies based on different settings and needs – from low-throughput to high-throughput, and from single-target or multiplex PCR
analysis to in-depth next-generation sequencing. Customers increasingly want easy-to-use technologies that can also be used outside
of a laboratory.
Life science researchers in Academia and the Pharma industry rely on novel sample and analytical technologies to explore disease
pathways and biomarkers, and also to guide drug development and clinical trials. Genomic insights from molecular biology
laboratories are increasingly leading to new drug approvals. Applications of molecular testing also are expanding for public safety
needs such as forensics and environmental monitoring.
QIAGEN engages with customers across the continuum from discovery to routine molecular testing and aims to create value with
differentiated solutions and automation systems that make improvements in life possible.
78
M a n a g e m e n t R e p o r t › Future Perspectives
79
Corporate
Governance
Report
082 Corporate Structure
082 Managing Board
084 Supervisory Board
089 Diversity within the Management Board and Supervisory Board
089 Compensation of Managing Board Members and Supervisory Directors
093 Additional Information
Corporate Governance Report
We recognize the importance of clear and straightforward rules on corporate governance and, where
appropriate, have adapted our internal organization and processes to these rules. This section provides an
overview of QIAGEN’s corporate governance structure and includes details of the information required
under the Dutch Corporate Governance Code (the Dutch Code). The Dutch Code is applicable to QIAGEN
N.V. (in the following also referred to as the “Company”), as it is a publicly listed company incorporated
under the laws of The Netherlands with a registered seat in Venlo, The Netherlands. The Dutch Code
contains the principles and concrete provisions which the persons involved in a listed company (including
Managing Board members and Supervisory Board members) and stakeholders should observe in relation to
one another.
Our corporate governance practices generally derive from the provisions of the Dutch Civil Code and the Dutch Corporate
Governance Code. Further, due to our listing on the New York Stock Exchange in the U.S., the Managing Board and the Supervisory
Board of QIAGEN N.V. declared their intention to disclose in QIAGEN’s Annual Reports the Company’s compliance with the
corporate governance practices followed by U.S. companies under the New York Stock Exchange listing standards or state the
deviations recorded in the period.
A brief summary of the principal differences follows.
Corporate Structure
QIAGEN is a ‘Naamloze Vennootschap,’ or N.V., a Dutch limited liability company similar to a corporation in the United States.
QIAGEN has a two-tier board structure. QIAGEN is managed by a Managing Board consisting of executive management acting
under the supervision of a Supervisory Board (non-executives), similar to a Board of Directors in a U.S. corporation. It is in the
interest of QIAGEN and all its stakeholders that each Board performs its functions appropriately and that there is a clear division of
responsibilities between the Managing Board, the Supervisory Board, the general meeting of shareholders (General Meeting) and the
external auditor in a well-functioning system of checks and balances.
Managing Board
General
The Managing Board manages QIAGEN and is responsible for defining and achieving QIAGEN’s aims, strategy, policies and results
and is expected to act in a sustainable manner by focusing on long-term value creation in the performance of their work. The
Managing Board is also responsible for complying with all relevant legislation and regulations as well as for managing the risks
associated with the business activities and the financing of QIAGEN. It reports related developments to and discusses the internal risk
management and control systems with the Supervisory Board and the Audit Committee. Under Dutch Law, QIAGEN's Managing
Board, which has two members, has chosen to work with an Executive Committee and is accountable for the actions and decisions of
the Executive Committee, which is comprised of the CEO, the CFO and certain experienced leaders who have responsibilities for the
operational management of the Company and the achievement of its objectives and results. The Managing Board has ultimate
responsibility for the Company’s external reporting and is answerable to shareholders of the Company at the Annual General
Meeting of Shareholders. Pursuant to the two-tier corporate structure, the Managing Board is required to render account for the
performance of its duties to the Supervisory Board and the General Meeting of Shareholders (General Meeting). The Managing Board
provides the Supervisory Board with timely information necessary for the exercise of the duties of the Supervisory Board. In
discharging its duties, the Managing Board takes into account the interests of QIAGEN, its enterprises and all parties involved in
QIAGEN, including shareholders and other stakeholders.
82
C o r p o r a t e G o v e r n a n c e R e p o r t › Corporate Structure Managing Board
›
Composition and Appointment
The Managing Board consists of one or more members as determined by the Supervisory Board. The members of the Managing Board
are appointed by the General Meeting upon the joint meeting of the Supervisory Board and the Managing Board (the Joint Meeting)
having made a binding nomination for each vacancy. However, the General Meeting may at all times overrule the binding nature of
such a nomination by a resolution adopted by at least a two-thirds majority of the votes cast, if such majority represents more than
half the issued share capital. Managing Directors are appointed annually for the period beginning on the date following the Annual
General Meeting up to and including the date of the Annual General Meeting held in the following year.
Members of the Managing Board may be suspended and dismissed by the General Meeting by a resolution adopted by a two-thirds
majority of the votes cast, if such majority represents more than half of the issued share capital, unless the proposal was made by the
Joint Meeting, in which case a simple majority of votes cast is sufficient. Furthermore, the Supervisory Board may at any time suspend
(but not dismiss) a member of the Managing Board.
Managing Directors
Our Managing Directors for the year ended December 31, 2020 and their ages as of January 31, 2021, are as follows:
NNaammee
AAggee
PPoossiittiioonn
Thierry Bernard
Roland Sackers
56
52
Managing Director, Chief Executive Officer
Managing Director, Chief Financial Officer
The following is a brief summary of the background of each of the Managing Directors. References to “QIAGEN” and the “Company”
in relation to periods prior to April 29, 1996 mean QIAGEN GmbH and its consolidated subsidiaries:
Chief Executive Officer and Managing Director
Mr. Bernard joined QIAGEN in February 2015 to lead our growing presence in Molecular Diagnostics, the application of Sample to
Insight solutions for molecular testing in human healthcare. He was named Chief Executive Officer in March 2020, after having
previously served in this role on an interim basis since late 2019. Mr. Bernard previously worked at bioMérieux, where he served in
roles of increasing responsibility for 15 years, most recently as Corporate Vice President, Global Commercial Operations, Investor
Relations and the Greater China Region. Prior to joining bioMérieux, he served in management roles in multiple international groups.
Mr. Bernard was appointed a member of the Board of Directors of T2 BioSystems in 2020. He has earned from Sciences Po (Paris),
Harvard Business School, London School of Economics and the College of Europe and is a member of French Foreign Trade Advisors.
Chief Financial Officer and Managing Director
Mr. Sackers joined QIAGEN in 1999 as Vice President Finance and has been Chief Financial Officer since 2004. He became a
member of the Managing Board in 2006. Between 1995 and 1999, he served as an auditor with Arthur Andersen
Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft. Mr. Sackers earned his Masters Degree in Business Administration
(Diplom-Kaufmann) from the University of Münster, Germany. In 2019, he joined the Supervisory Board of Evotec SE and is chair of
the audit committee. Mr Sackers is a board member of the industry association, BIO Deutschland. From 2011 to 2018, he was a non-
executive director and chair of the audit committee of Immunodiagnostic Systems Holding PLC (IDS) in the United Kingdom.
83
Conflicts of Interest, Loans or Similar Benefits
Resolutions to enter into transactions under which members of the Managing Board could have a conflict of interest with QIAGEN,
and which are of material significance to QIAGEN and/or the relevant member of the Managing Board, require the approval of the
Supervisory Board. QIAGEN has not entered into any such transactions in 2020. No credit, loans or similar benefits were granted to
members of the Managing Board. Additionally, the Managing Board Members did not receive any benefits from third parties that
were either promised or granted in view of their position as members of the Managing Board.
Supervisory Board
General
The Supervisory Board supervises the policies of the Managing Board, the general course of QIAGEN’s affairs and strategy and the
business enterprises which we operate. The Supervisory Board assists the Managing Board by providing advice relating to the
business activities of QIAGEN. In 2020, the Supervisory Board had five regular meetings that were held with the attendance of the
Managing Board, while certain agenda items were discussed exclusively between the Supervisory Board members. In discharging its
duties, the Supervisory Board takes into account the interests of QIAGEN, its enterprise and all parties involved in QIAGEN,
including shareholders and other stakeholders. The Supervisory Board is responsible for the quality of its own performance. In this
respect, the Supervisory Board conducts a self-evaluation on an annual basis. Our Supervisory Board has specified matters requiring
its approval, including decisions and actions which would fundamentally change the company’s assets, financial position or results of
operations. The Supervisory Board has appointed an Audit Committee, a Compensation Committee, a Selection and Appointment
(Nomination) Committee and a Science and Technology Committee from among its members and can appoint other committees as
deemed beneficial. The Supervisory Board has approved charters pursuant to which each of the committees operates.
Composition and Appointment
The Supervisory Board consists of at least three members, or a larger number as determined by the Joint Meeting. Members of the
Supervisory Board are appointed by the General Meeting upon the Joint Meeting having made a binding nomination for each
vacancy. However, the General Meeting may at all times overrule the binding nature of such a nomination by a resolution adopted
by at least a two-thirds majority of the votes cast, if such majority represents more than half the issued share capital.
The Supervisory Board shall be composed in a way that enables it to carry out its duties properly and enables its members to act
critically and independently of one another and of the Managing Board and any particular interests. To that effect, the Supervisory
Board has adopted a profile of its size and composition that takes into account the nature of our business, our activities and the
desired diversity, expertise and background of the members of the Supervisory Board. The current profile of the Supervisory Board
can be found on our website. The Supervisory Board has appointed a chairman from its members who has the duties assigned to him
by the Articles of Association and the Dutch Code.
Members of the Supervisory Board are appointed annually for the period beginning on the date following the General Meeting up to
and including the date of the General Meeting held in the following year. Members of the Supervisory Board may be suspended and
dismissed by the General Meeting by a resolution adopted by a two-thirds majority of the votes cast, if such majority represents more
than half of the issued share capital, unless the proposal was made by the Joint Meeting in which case a simple majority of votes cast
is sufficient.
Our Supervisory Directors for the year ended December 31, 2020 and their ages as of January 31, 2021, are as follows:
84
C o r p o r a t e G o v e r n a n c e R e p o r t › Managing Board Supervisory Board
›
Supervisory Directors
NNaammee ((11))
AAggee NNaattiioonnaaliittyy GGeennddeerr PPoossiittiioonn
Stéphane Bancel
48
French
Male
Supervisory Director, Member of the Audit Committee
Dr. Metin Colpan
66 German
Male
Supervisory Director, Chair of the Science and Technology Committee and
Member of the Selection and Appointment Committee
Dr. Ross L. Levine
49
U.S.
Male
Supervisory Director and Member of the Science and Technology Committee
Dr. Elaine Mardis
58
U.S.
Female Supervisory Director and Member of the Science and Technology Committee
Lawrence A. Rosen
63
U.S.
Male
and Member of the Compensation Committee
Chair of the Supervisory Board, Chair of the Audit Committee, Chair of the
Selection and Appointment Committee and Member of the Compensation
Committee
Elizabeth E. Tallett
71
U.S.
Female Supervisory Director, Chair of the Compensation Committee, Member of the
Audit Committee and Member of the Selection and Appointment Committee
(1) Dr. Håkan Björklund stepped down from his roles as Chair of the Supervisory Board, Member of the Compensation Committee
and Selection and Appointment Committee effective August 21, 2020.
The following is a brief summary of the background of each of the Supervisory Directors. References to “QIAGEN” and the
“Company” in relation to periods prior to April 29, 1996 mean QIAGEN GmbH and its consolidated subsidiaries:
, 48, joined the Supervisory Board in 2013 and has been a member of the Audit Committee since 2014. He was a
member of the Compensation Committee from 2013 through July 2020 and a member of the Science and Technology Committee from
2014 through July 2020. He is Chief Executive Officer of Moderna, Inc., a clinical-stage biotechnology company based in
Cambridge, Massachusetts, which is advancing 24 drug development programs involving messenger RNA therapeutics. Before
joining Moderna, Mr. Bancel served for five years as Chief Executive Officer of the French diagnostics company bioMérieux SA. Prior
to bioMérieux, he was Managing Director of Eli Lilly in Belgium and Executive Director of Global Manufacturing Strategy and Supply
Chain at Eli Lilly in Indianapolis, Indiana, after having started at Lilly in Great Britain. Before joining Eli Lilly, Mr. Bancel served as
Asia-Pacific Sales and Marketing Director for bioMérieux while based in Tokyo, Japan. He holds a Master of Engineering degree
from École Centrale Paris (ECP), a Master of Science in Chemical Engineering from the University of Minnesota and an M.B.A. from
Harvard Business School.
2018 until he stepped down in August 2020.
, 64, joined the Supervisory Board Member in March 2017 and was Chair of the Supervisory Board from June
, 66, is a co-founder of QIAGEN and was the Chief Executive Officer and a Managing Director from 1985–2003.
Dr. Colpan has been a member of the Supervisory Board since 2004 and has served as Chair of the Science and Technology
Committee since 2014. He has been a member of the Selection and Appointment Committee since 2015. Dr. Colpan obtained his
Ph.D. and M.S. in Organic Chemistry and Chemical Engineering from the Darmstadt Institute of Technology in 1983. Prior to
founding QIAGEN, Dr. Colpan was an Assistant Investigator at the Institute for Biophysics at the University of Düsseldorf. Dr. Colpan
has extensive experience in separation technologies for the purification of nucleic acids, and has filed many patents in the field. Dr.
Colpan also serves as a Supervisory Board member of CGR GmbH in Mettmann, Germany and Heilpflanzenwohl AG in Baar,
Germany. Dr. Colpan previously served as a Supervisory Board member of Ingenium Pharmaceuticals AG, GenPat77
Pharmacogenetics AG, GPC Biotech AG and Morphosys AG, each in Munich, Germany and Qalovis Farmer Automatic Energy
GmbH, in Laer, Germany.
85
(cid:0)(cid:2)(cid:3)(cid:4)(cid:5)(cid:6)(cid:7)(cid:7)(cid:4)(cid:8)(cid:3)(cid:4)(cid:8)(cid:9)(cid:10)(cid:11)(cid:12)(cid:9)
, 49, joined the Supervisory Board and its Science and Technology Committee in 2016. He is a physician-scientist
focused on researching and treating blood and bone marrow cancers as the Laurence Joseph Dineen Chair in Leukemia Research, the
Chief of Molecular Cancer Medicine, and an Attending Physician at Memorial Sloan Kettering Cancer Center, as well as Professor of
Medicine at Weill Cornell Medical College. He leads a research lab investigating genetics and targeted therapies in myeloid
malignancies and is interested in application of next-generation sequencing technology in the practice of medicine in hematologic
cancers. He trained in internal medicine at Massachusetts General Hospital and in hematology-oncology at the Dana-Farber Cancer
Institute, earning board certification in these specialties. He received his M.D. from the Johns Hopkins University School of Medicine
and his A.B. degree from Harvard College.
(cid:0)(cid:2)(cid:3)(cid:4)(cid:13)(cid:14)(cid:15)(cid:11)(cid:12)(cid:9)(cid:4)(cid:16)(cid:15)(cid:2)(cid:17)(cid:11)(cid:7)
, 58, joined the Supervisory Board in 2014. She is also a member of the Science and Technology Committee and the
Compensation Committee. Dr. Mardis is the Co-Executive Director of the Institute for Genomic Medicine at Nationwide Children’s
Hospital in Columbus, Ohio. She also is Professor of Pediatrics at the Ohio State University College of Medicine. Dr. Mardis has
research interests in the application of genomic technologies to improve our understanding of human disease, and toward improving
the precision of medical diagnosis, prognosis and treatment. Dr. Mardis is the former Robert E. and Louise F. Dunn Distinguished
Professor of Medicine at Washington University School of Medicine in St. Louis, Missouri, where she was on the faculty for 22 years.
As Co-Director of the McDonnell Genome Institute, she devised methods and automation that contributed to the Human Genome
Project and has since played key roles in the 1000 Genomes Project, The Cancer Genome Atlas, and the Pediatric Cancer Genome
Project. Prior to joining the Washington University faculty, she was a senior research scientist at BioRad Laboratories. Dr. Mardis is
the immediate past President of the American Association for Cancer Research, and has scientific advisory roles at Kiadis
Pharmaceuticals N.V., PACT Pharma LLC, and Scorpion Therapeutics LLC. Dr. Mardis received her Bachelor of Science degree in
Zoology in 1984 and her Ph.D. in Chemistry and Biochemistry in 1989, both from the University of Oklahoma. She is an elected
member of the U.S. National Academy of Medicine.
(cid:8)(cid:15)(cid:18)(cid:2)(cid:9)(cid:12)(cid:19)(cid:9)(cid:4)(cid:20)(cid:3)(cid:4)(cid:5)(cid:6)(cid:7)(cid:9)(cid:12)
, 63, joined the Supervisory Board in 2013 and was appointed Chair in 2020. He is also Chair of the Audit
Committee and Chair of the Selection and Appointment Committee, in addition to being a member of the Compensation Committee.
Mr. Rosen was a member of the Board of Management and Chief Financial Officer of Deutsche Post DHL from 2009–2016. Mr.
Rosen was in charge of controlling, corporate accounting and reporting, investor relations, corporate finance, corporate internal
audit and security, taxes, as well as the group’s global business services. Prior to joining Deutsche Post DHL, Mr. Rosen served as
Chief Financial Officer of Fresenius Medical Care AG & Co. KGaA in Germany from 2003–2009. Prior to that, he was Senior Vice
President and Treasurer for Aventis SA in Strasbourg, France. Between 1984 and 2000, Mr. Rosen held different positions at the
Aventis predecessor companies Hoechst AG and American Hoechst/Hoechst Celanese Inc. Since 2015, Mr. Rosen has served as a
member of the Supervisory Board of Lanxess AG and previously served on the Supervisory Board of Postbank AG from 2009–2015.
Mr. Rosen, who is a U.S. citizen, holds a Bachelor's degree in Economics from the State University of New York and an M.B.A. from
the University of Michigan.
(cid:13)(cid:14)(cid:11)(cid:21)(cid:15)(cid:22)(cid:9)(cid:23)(cid:24)(cid:4)(cid:13)(cid:3)(cid:4)(cid:25)(cid:15)(cid:14)(cid:14)(cid:9)(cid:23)(cid:23)
, joined the Supervisory Board, as well as the Audit Committee and Compensation Committee, in 2011. She is a
member of the Selection and Appointment Committee, and since 2016 has served as Chair of the Compensation Committee. Ms.
Tallett was a Principal of Hunter Partners, LLC, a management company for early to mid-stage pharmaceutical, biotechnology and
medical device companies, from 2002 until February 2015. Ms. Tallett continues to consult with early stage health care companies.
Her senior management experience includes President and CEO of Transcell Technologies Inc., President of Centocor
Pharmaceuticals, member of the Parke-Davis Executive Committee, and Director of Worldwide Strategic Planning for Warner-Lambert
Company. Ms. Tallett graduated from Nottingham University, England, with dual Bachelor's degrees with honors in mathematics and
economics. She is a member of the Board of Directors of Anthem, Inc. (where she is currently Chair), Principal Financial Group, Inc.
(from which she is retiring in May 2021), Meredith Corp. and Moderna, Inc. She is a former director of Coventry Health Care, Inc.
Ms. Tallett was a founding board member of the Biotechnology Council of New Jersey and is Chair of the Trustees of Solebury School
in Pennsylvania.
86
C o r p o r a t e G o v e r n a n c e R e p o r t › Supervisory Board
Conflicts of Interest, Loans or Similar Benefits
Resolutions to enter into transactions under which members of the Supervisory Board could have a conflict of interest with QIAGEN,
and which are of material significance to QIAGEN and/or the relevant member of the Supervisory Board, must be reported and
require the approval of the Supervisory Board plenum. In 2020, neither QIAGEN nor its Supervisory Board members have entered
into any such transactions. No credit, loans or similar benefits were granted to members of the Supervisory Board. Additionally, the
Supervisory Board Members did not receive any benefits from third parties that were either promised or granted in view of their
position as members of the Supervisory Board.
Committees of the Supervisory Board
The Supervisory Board has established an Audit Committee, a Compensation Committee, a Selection and Appointment Committee
and a Science and Technology Committee from among its members and can establish other committees as deemed beneficial. The
Supervisory Board has approved charters under which each of the committees operates. These charters are published on our website
www.QIAGEN.com. The committees were comprised of the following members in 2020:
NNaammee ooff
SSuuppeerrvviissoorryy
DDiirreeccttoorr
MMeemmbbeerr ooff AAuuddiitt
CCoommmmiitttteeee
MMeemmbbeerr ooff
CCoommppeennssaattiioonn
CCoommmmiitttteeee
Stéphane Bancel
•
MMeemmbbeerr ooff SSeeleeccttiioonn aanndd
AAppppooiinnttmmeenntt CCoommmmiitttteeee
MMeemmbbeerr ooff SScciieennccee aanndd
TTeecchhnnoolooggyy CCoommmmiitttteeee
Dr. Metin Colpan
Dr. Ross L. Levine
Dr. Elaine Mardis
Lawrence A. Rosen
•
(Chair)
Elizabeth E. Tallett
•
•
•
•
(Chair)
•
•
(Chair)
•
•
(Chair)
•
•
We believe that all of our Supervisory Directors meet the independence requirements set forth in the Dutch Corporate Governance
Code (the Dutch Code). We further believe that all Supervisory Board Directors qualify as independent under the independence
standards set forth in the New York Stock Exchange (NYSE) Listed Company Manual. Pursuant to the NYSE rules, a majority of the
Supervisory Directors must qualify as independent, as defined in the Rules.
Audit Committee
The Audit Committee consists of three members and meets at least quarterly. The Audit Committee members are appointed by the
Supervisory Board and serve for a term of one year. We believe that all members of our Audit Committee meet the independence
requirements as set forth in Rule 10A-3 of the Securities Exchange Act of 1934, as amended, and the New York Stock Exchange
Listed Company Manual. The Board has designated Mr. Rosen as an “audit committee financial expert” as that term is defined in the
United States Securities and Exchange Commission rules adopted pursuant to the Sarbanes-Oxley Act of 2002 and as referred to in
the Dutch Decree on Audit Committees (Besluit instelling audit committee). The Audit Committee performs a self-evaluation of its
activities on an annual basis.
87
The Audit Committee's primary duties and responsibilities include, among other things, to serve as an independent and objective
party to monitor QIAGEN's accounting and financial reporting process and internal risk management, control and compliance
systems. The Audit Committee also is directly responsible for proposing the external auditor to the Supervisory Board, which then
proposes the appointment of the external auditor to the General Meeting. Further, the Audit Committee is responsible for the
compensation and oversight of QIAGEN’s external auditor and for providing an open avenue of communication among the external
auditor as well as the Management Board and the Supervisory Board. Our Internal Audit department operates under the direct
responsibility of the Audit Committee. Further, the Audit Committee is responsible to establish procedures to allow for the confidential
and or anonymous submission by employees of concerns. Additionally, this includes the receipt, retention and treatment of
submissions received regarding accounting, internal accounting controls, or auditing matters. The Audit Committee discusses our
financial accounting and reporting principles and policies and the adequacy of our internal accounting, financial and operating
controls and procedures with the external auditor and management; considers and approves any recommendations regarding
changes to our accounting policies and processes; reviews with management and the external auditor our quarterly earnings reports
prior to their release to the press; and reviews the quarterly and annual reports (reported on Forms 6-K and 20-F) to be furnished to
or filed with the Securities and Exchange Commission and the Deutsche Boerse as well as the half-year and annual reports filed with
The Netherlands Authority for the Financial Markets. The Audit Committee met seven times in 2020 and met with the external auditor
excluding members of the Managing Board in July and October 2020. The Audit Committee reviews major financial risk exposures,
pre-approves related-party transactions between the Company and Supervisory Board or Managing Board, and reviews any legal
matter including compliance topics that could have a significant impact on the financial statements.
Compensation Committee
The Compensation Committee’s primary duties and responsibilities include, among other things, the preparation of a proposal for the
Supervisory Board concerning the Remuneration Policy for the Managing Board to be adopted by the General Meeting, the
preparation of a proposal concerning the individual compensation of Managing Board members to be adopted by the Supervisory
Board and the preparation of the Remuneration Report on compensation policies for the Managing Board to be adopted by the
Supervisory Board. The Compensation Committee reviews and approves all equity-based compensation, reviews and approves the
annual salaries, bonuses and other benefits of executive officers, and reviews general policies relating to employee compensation
and benefits. The Remuneration Report reviews the implementation of the Remuneration Policy in the most recent year and provides an
outline of the Remuneration Policy for the future. The Compensation Committee engages external consultants to ensure that the overall
remuneration levels are benchmarked regularly, against a selected group of companies and key markets in which QIAGEN operates.
The Compensation Committee consists of three members and members are appointed by the Supervisory Board and serve for a term
of one year. The Compensation Committee met five times in 2020.
Selection and Appointment Committee
The Selection and Appointment (Nomination) Committee is primarily responsible for the preparation of selection criteria and
appointment procedures for members of the Supervisory Board and Managing Board as well as the periodic evaluation of the scope
and composition of the Managing Board and the Supervisory Board, including the profile of the Supervisory Board. Additionally, the
Selection and Appointment Committee periodically evaluates the functioning of individual members of the Managing Board and
Supervisory Board, reporting these results to our Supervisory Board. It also proposes the (re-) appointments of members of our
Managing Board and Supervisory Board and supervises the policy of our Managing Board in relation to selection and appointment
criteria for senior management. Members of the Selection and Appointment Committee are appointed by the Supervisory Board and
serve for a one-year term. Following the departure of Dr. Björklund, the Supervisory Board discussed the composition of the
Supervisory Board during Supervisory Board meetings and teleconferences. The Selection and Appointment committee met five times
in 2020.
Science and Technology Committee
The Science and Technology Committee is primarily responsible for reviewing and monitoring research and development projects,
programs, budgets, infrastructure management and overseeing the management risks related to the Company's portfolio and
information technology platforms. The Science and Technology Committee provides understanding, clarification and validation of the
fundamental technical basis of the Company's businesses in order to enable the Supervisory Board to make informed, strategic
business decisions and vote on related matters, and to guide the Managing Board to ensure that powerful, global, world-class science
is developed, practiced and leveraged throughout the Company to create shareholder value. The members of the Science and
Technology Committee are appointed by the Supervisory Board and serve for a term of one year. The Science and Technology
Committee met four times in 2020.
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C o r p o r a t e G o v e r n a n c e R e p o r t › Supervisory Board › Diversity within the Management Board and Supervisory Board
› Compensation of Managing Board Members and Supervisory Directors
Diversity within the Management Board and Supervisory Board
QIAGEN is not subject to statutory requirements regarding gender diversity within the Managing Board and Supervisory Board.
However, in nominating candidates for these boards, QIAGEN supports the trend toward higher participation of women. QIAGEN
also in terms of other factors such as age, nationality, public reputation, industry or academic background. QIAGEN is committed to
expanding diversity while pursuing individuals for these boards with a unique blend of scientific and commercial expertise and
experience that will contribute to the future success of its business. Management development programs support the career
advancement of leaders regardless of gender and other factors. As a result a number of women are in key leadership roles,
particularly in leading commercial and operational positions around the world. In line with this commitment, QIAGEN's Selection and
Appointment committee will continue selecting future members of the Managing Board and Supervisory Board with due observance of
its aim to have a diverse leadership team on the basis of gender, but also on the basis of age, wide ranging experience,
backgrounds, skills, knowledge and insight. This all without compromising QIAGEN's commitment to hiring the best individuals for
those positions. More information about diversity within the Board other than gender, can be found in below under the section Dutch
Corporate Governance Code - Comply or explain.
Compensation of Managing Board Members and Supervisory Directors
Managing Board Remuneration Policy
The objective of the Remuneration Policy for the Managing Board is to ensure a fair compensation in line with market conditions for
the most talented, qualified leaders. This enables us to achieve our strategic initiatives and operational excellence. The Remuneration
Policy aligns remuneration to reward individual performance as well as the overall performance of QIAGEN, and to foster sustainable
growth and value creation.
The Remuneration Policy and overall remuneration levels are benchmarked regularly against a selected group of companies in key
markets in which QIAGEN operates to ensure overall competitiveness. We participate in various compensation benchmarking surveys
in which companies provide information on the level, as well as the structure, of compensation awarded for a broad range of
positions around the world.
Remuneration of Managing Board members consists of a combination of base salary, short-term variable cash award and elements of
long-term incentives. In addition, the members of the Managing Board can receive pension arrangements and other benefits in line
with market practices. The total target remuneration package of the Managing Board members is appropriately set with consideration
of a variety of factors that include external benchmarks and the individual’s experience as well as the complexity of the position,
scope and areas of responsibilities. This applies for all compensation components, both individually and in total.
The structure of the remuneration package for the Managing Board members is designed to balance incentives for short-term
operational performance with incentives for long-term sustainable value creation while considering the interests of shareholders and
other stakeholders. This means that a significant portion of total remuneration consists of variable awards, which can differ
substantially from year to year and depend on the achievement of corporate goals as well as individual performance.
The Remuneration Policy for the Managing Board is generally aligned and consistent with the framework for remuneration of other
senior managers of QIAGEN.
The current Remuneration Policy for the Managing Board was adopted by the General Meeting of Shareholder in 2014. A revised
Remuneration Policy which considers changes to market trends, best practices and benchmarks, and an increased level of disclosure
in line with best practices will be on the agenda for the General Meeting of Shareholders in 2021.
Managing Board Compensation
The compensation granted to the members of the Managing Board in 2020 consisted of a fixed salary and variable components, with
the significant majority of compensation awarded in the form of QIAGEN stock units that are restricted for a long multi-year period to
89
align management with the interests of shareholders and other stakeholders. Variable compensation included long-term equity
incentives that were awarded based on individual performance as well as equity awards in lieu of the value of the annual cash
bonus.
The Remuneration Policy provides that annual regular equity-based compensation grants to members of the Managing Board will
primarily consist of performance stock units. Grants of stock options and restricted stock units which are based on time vesting only
shall no longer be granted on a regular basis and shall be reserved for use as special equity incentive rewards in certain situations.
Stock options, if granted, to the Managing Board members must have an exercise price that is higher than the market price at the
time of grant. Restricted Stock Units granted to the Managing Board members, vest over a 10-year period. Performance Stock Units
are subject to long-term vesting periods and contingent upon the achievement of several financial goals over a multi-year period.
In 2018, a grant of Performance Stock Units with mandatory minimum holding levels of QIAGEN shares was made under the
Commitment Program linked to achievement of a three-year plan covering 2019 and 2021 including quantitative goals for net sales,
earnings before interest and taxes (EBIT), QIAGEN Value Added (QVA), a steering metric that measures the ability of QIAGEN to
generate returns and exceed its cost of capital and share price development as compared to peer companies. Under the Commitment
Program, the financial targets for vesting are based on three-year goals as defined within QIAGEN’s five-year business plan covering
the period from 2019 until the end of 2023. The targets for vesting were set and approved by the Supervisory Board.
For the year ended December 31, 2020, the Managing Board members received the following compensation:
MMaannaaggiinngg BBooaarrdd MMeemmbbeerr
Thierry Bernard
Roland Sackers
Annnnuuaal CCoommppeennssaattiioonn
LLoonngg-TTeerrmm
CCoommppeennssaattiioonn
FFiixxeedd
SSaalaarryy
VVaarriiaabblee
CCaasshh
BBoonnuuss OOtthheerr ((11))
BBeenneeffiitt
PPlaannss
TToottaal
SSttoocckk
UUnniittss
GGrraanntteedd
$ 900,000 1,492,000
18,000 $ 2,410,000 $ 90,000 140,000
$ 570,500
366,000
41,000
$ 977,500 $ 77,500 120,000
(1) Amounts include, among others, car lease and reimbursed personal expenses such as tax consulting. We also occasionally
reimburse our Managing Directors' personal expenses related to attending out-of-town meetings but not directly related to their
attendance. Amounts do not include the reimbursement of certain expenses relating to travel incurred at the request of QIAGEN, other
reimbursements or payments that in total did not exceed $10,000 or tax amounts paid by the Company to tax authorities in order to
avoid double-taxation under multi-tax jurisdiction employment agreements.
Supervisory Board Remuneration Policy
At the Annual General Meeting of Shareholders in 2020, a Remuneration Policy for the Supervisory Board was adopted. The
objective of the Remuneration Policy is to attract, retain, and motivate high-qualified Supervisory Board members, taking into account
the Company’s identity, mission, values, strategic initiatives and value creation. It focuses on achieving a total remuneration level,
both short-term and long term, which is comparable with levels provided by other European and United States-based companies.
Supervisory Board Compensation
The Supervisory Board remuneration is aligned to the applicable market standards, considering peer companies of similar size and
complexity in similar industries, including biotechnology, life science supplies, diagnostics and pharmaceuticals, to reflect our nexus
to the European Markets as a Dutch company as well as our U.S. focus as a NYSE listed company subject to U.S. regulations and the
fact that several of the Supervisory Board members are residing in the United States.
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C o r p o r a t e G o v e r n a n c e R e p o r t › Compensation of Managing Board Members and Supervisory Directors
The Supervisory Board compensation for 2020 consists of fixed retainer compensation and additional retainer amounts for Chair and
Vice Chair. Annual remuneration of the Supervisory Board members is as follows:
Fee payable to the Chair of the Supervisory Board
Fee payable to each member of the Supervisory Board
Additional compensation payable to members holding the following positions:
Chair of the Audit Committee
Chair of the Compensation Committee
Chair of the Selection and Appointment Committee and other board committees
Fee payable to each member of the Audit Committee
Fee payable to each member of the Compensation Committee
Fee payable to each member of the Selection and Appointment Committee and other board committees
$150,000
$57,500
$25,000
$18,000
$12,000
$15,000
$11,000
$6,000
Further, the Supervisory Board members will be reimbursed for tax consulting costs incurred in connection with the preparation of
their tax returns up to an amount of (cid:189)5,000 per person per fiscal year.
Supervisory board members also receive a variable component, in the form of share-based compensation. We did not pay any
agency or advisory service fees to members of the Supervisory Board.
For the year ended December 31, 2020, the Supervisory Board members received the following compensation:
SSuuppeerrvviissoorryy BBooaarrdd MMeemmbbeerr
FFiixxeedd RReemmuunneerraattiioonn CCoommmmiitttteeee CChhaaiirr CCoommmmiitttteeee MMeemmbbeerrsshhiipp
TToottaal ((11))
RReessttrriicctteedd SSttoocckk UUnniittss
Stéphane Bancel
$ 57,500
—
23,500
$ 81,000
Dr. Håkan Björklund (2)
$ 100,000
8,000
7,300 $ 115,300
Dr. Metin Colpan
$ 57,500
12,000
6,000
$ 75,500
Dr. Ross L. Levine
Dr. Elaine Mardis
$ 57,500
$ 57,500
—
—
6,000
$ 63,500
9,700
$ 67,200
Lawrence A. Rosen
$ 88,300
29,000
5,500 $ 122,800
Elizabeth E. Tallett
$ 57,500
18,000
21,000
$ 96,500
9,426
9,426
9,426
9,426
9,426
9,426
9,426
(1) Supervisory Directors are reimbursed for travel costs and for any value-added tax to be paid on their remuneration. These
reimbursements are excluded from the amounts presented herein.
(2) Dr. Håkan Björklund stepped down from his roles as Chair of the Supervisory Board, Member of the Compensation Committee
and Selection and Appointment Committee effective August 21, 2020.
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Share Ownership
The following table sets forth certain information as of January 31, 2021 concerning the ownership of Common Shares by our
directors and officers. In preparing the following table, we have relied on information furnished by such persons.
NNaammee aanndd CCoouunnttrryy ooff RReessiiddeennccee
Thierry Bernard, United States
Roland Sackers, Germany
Stéphane Bancel, United States
Dr. Metin Colpan, Germany
Dr. Toralf Haag, Germany
Dr. Ross L. Levine, United States
Dr. Elaine Mardis, United States
Lawrence A. Rosen, United States
Elizabeth Tallett, United States
SShhaarreess BBeenneeffiicciiaallyy OOwwnneedd ((11))
NNuummbbeerr ((22))
50,343
170,000
15,926
1,172,698
700
2.151
—
—
(3)
(4)
(5)
(6)
(7)
(8)
(9)
28,668
(10)
PPeerrcceenntt
OOwwnneerrsshhiipp
*
*
*
0.51 %
*
*
—
—
*
* Indicates that the person beneficially owns less than 0.5% of the Common Shares issued and outstanding as of January 31, 2021.
(1) The number of Common Shares outstanding as of January 31, 2021 was 227,871,296. The persons and entities named in the
table have sole voting and investment power with respect to all shares shown as beneficially owned by them and have the same
voting rights as shareholders with respect to Common Shares.
(2) Does not include Common Shares subject to options or awards held by such persons at January 31, 2021. See footnotes below
for information regarding options now exercisable or that could become exercisable within 60 days of the date of this table.
(3) Does not include 61,590 shares issuable upon the release of unvested stock awards that could become releasable within 60 days
from the date of this table.
(4) Does not include 88,299 shares issuable upon the release of unvested stock awards that could become releasable within 60 days
from the date of this table.
(5) Does not include 10,392 shares issuable upon the release of unvested stock awards that could become releasable within 60 days
from the date of this table.
(6) Includes 357,893 shares held by CC Verwaltungs GmbH, of which Dr. Colpan is the sole stockholder and 770,370 shares held
by Colpan GbR. Does not include 10,860 shares issuable upon the release of unvested stock awards that could become releasable
within 60 days from the date of this table.
(7) Does not include 3,946 shares issuable upon the release of unvested stock awards that could become released within 60 days
from the date of this table.
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C o r p o r a t e G o v e r n a n c e R e p o r t › Compensation of Managing Board Members and Supervisory Directors Additional Information
›
(8) Does not include 10,392 shares issuable upon the release of unvested stock awards that could become releasable within 60 days
from the date of this table.
(9) Does not include 10,392 shares issuable upon the release of unvested stock awards that could become releasable within 60 days
from the date of this table.
(10) Does not include 1,563 shares issuable upon the exercise of options now exercisable having exercise prices of $15.59 per
share. Options expire on February 2022. Does not include 10,392 shares issuable upon the release of unvested stock awards that
could become releasable within 60 days from the date of this table.
The following table sets forth the options of our officers and directors as of January 31, 2021:
NNaammee
Elizabeth E. Tallett
NNuummbbeerr ooff OOppttiioonnss
EExxppiirraattiioonn DDaatteess
EExxeerrcciissee PPrriicceess
1,563
2/28/2022
$15.59
Additional Information
Shareholders
Our shareholders exercise their voting rights through Annual and Extraordinary General Meetings. Resolutions of the General
Meeting are adopted by an absolute majority of votes cast, unless a different majority of votes or quorum is required by Dutch law or
the Articles of Association. Each common share confers the right to cast one vote.
Furthermore, the Managing Board, or where appropriate, the Supervisory Board, shall provide all shareholders and other parties in
the financial markets with equal and simultaneous information about matters that may influence QIAGEN's share price.
QIAGEN is required to convene an Annual General Meeting in The Netherlands no later than six months following the end of each
year. The agenda for the Annual General Meeting must contain certain matters as specified in QIAGEN's Articles of Association and
under Dutch law, including, among other things, the adoption of QIAGEN's annual financial statements.
Additional Extraordinary General Meetings may be convened at any time by the Managing Board, the Supervisory Board or by one
or more shareholders jointly representing at least 40% of QIAGEN's issued share capital. Furthermore, one or more shareholders,
who jointly represent at least 10% of QIAGEN's issued share capital may, on their application, be authorized by the district court
judge having applications for interim relief, to convene a General Meeting. Shareholders are entitled to propose items for the agenda
of the General Meeting provided that they hold at least 3% of the issued share capital. Proposals for agenda items for the General
Meeting must be submitted at least 60 days prior to the meeting date. The notice convening a General Meeting, accompanied by the
agenda, shall be sent no later than 42 days prior to the meeting. QIAGEN informs the General Meeting by means of explanatory
notes to the agenda, providing all facts and circumstances relevant to the proposed resolutions.
Pursuant to the Dutch Code, all transactions between the company and legal or natural persons who hold at least ten percent of the
shares in the company shall be agreed on terms that are customary in the sector concerned. Decisions to enter into transactions in
which there are conflicts of interest with such persons that are of material significance to the company and/or to such persons require
the approval of the Supervisory Board. QIAGEN has not entered into any such transactions in 2020.
Furthermore, pursuant to the Dutch implementation of the Shareholders Rights Directive II (SRD II), certain material transactions with
related parties (in the meaning of the standards adopted by the International Accounting Standards Board and approved by the
European Commission) require the approval of the Supervisory Board, or, if all Supervisory Directors are involved in such transaction,
the General Meeting of Shareholders
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Stock Plans
We adopted the QIAGEN N.V. Amended and Restated 2005 Stock Plan (the 2005 Plan) which was approved by our shareholders
on June 14, 2005. The 2005 Plan expired by its terms in April 2015 and no further awards will be granted under the 2005 Plan. On
June 25, 2014, our shareholders approved the QIAGEN N.V. 2014 Stock Plan (the 2014 Plan), which replaced the 2005 Plan in
April 2015. An aggregate of 16.7 million Common Shares were reserved for issuance pursuant to the 2014 Plan, subject to certain
antidilution adjustments. We issue Treasury Shares to satisfy option exercises and award releases and had approximately 14.4
million Common Shares reserved and available for issuance under the 2005 and 2014 Plans at December 31, 2020.
Pursuant to the 2014 Plan, stock rights, which include options to purchase our Common Shares, stock grants and stock-based awards,
may be granted to employees and consultants of QIAGEN and its subsidiaries and to Supervisory Directors. Options granted
pursuant to the 2014 Plan may either be incentive stock options within the meaning of Section 422 of the United States Internal
Revenue Code of 1986, as amended (the Code), or non-qualified stock options. Options granted to members of the Supervisory
Board and the Managing Board must have an exercise price that is higher than the market price at the time of grant. Generally, the
stock rights and incentive stock options, as well as non-qualified options, stock grants and stock-based awards have terms of up to
five or ten years, subject to earlier termination in the event of death, disability or other termination of employment. The vesting and
exercisability of certain stock rights will be accelerated in the event of a Change of Control, as defined in the agreements under the
2014 Plan.
The Plan is administered by the Compensation Committee of the Supervisory Board, which selects participants from among eligible
employees, consultants and directors and determines the number of shares subject to the stock-based award, the length of time the
award will remain outstanding, the manner and time of the award's vesting, the price per share subject to the award and other terms
and conditions of the award consistent with the Plan. The Compensation Committee's decisions are subject to the approval of the
Supervisory Board.
The Compensation Committee has the power, subject to Supervisory Board approval, to interpret the plans and to adopt such rules
and regulations (including the adoption of “sub plans” applicable to participants in specified jurisdictions) as it may deem necessary
or appropriate. The Compensation Committee or the Supervisory Board may at any time amend the plans in any respect, subject to
Supervisory Board approval, and except that (i) no amendment that would adversely affect the rights of any participant under any
option previously granted may be made without such participant's consent and (ii) no amendment shall be effective prior to
shareholder approval to the extent such approval is required to ensure favorable tax treatment for incentive stock options or to ensure
compliance with Rule 16b-3 under the United States Securities Exchange Act of 1934, as amended (the Exchange Act) at such times
as any participants are subject to Section 16 of the Exchange Act.
As of January 31, 2021, there were 0.3 million options outstanding with exercise prices ranging between $14.91 and $21.87 and
expiring between May 31, 2021 and May 31, 2023. The exercise price of the options is the fair market value of the Common
Shares as of the date of grant or a premium above fair market value. Additionally, there were 5.1 million stock unit awards
outstanding as of January 31, 2021. These awards will be released between February 15, 2021 and May 31, 2028. As of January
31, 2021, 1.4 million stock unit awards were held by the officers and directors of QIAGEN, as a group.
Further detailed information regarding stock options and awards granted under the plan can be found in Note 22 included in the
Consolidated Financial Statements.
Independence
Unlike the New York Stock Exchange listing standards which require a majority of the Supervisory Board members to be independent,
the Dutch Corporate Governance Code distinguishes between certain independence criteria which may be fulfilled by not more than
one Supervisory Board Members (as e.g. prior employment with the Company, receiving personal financial an important business
relationship with the Company) and other criteria which may not be fulfilled by more than the majority of the Supervisory Board
members. In some cases the Dutch independence requirement is more stringent, such as by requiring a longer “look back” period
(five years) for former executive directors. In other cases, the New York Stock Exchange rules are more stringent, such as a broader
definition of disqualifying affiliations. Currently, all members of our Supervisory Board are “independent” under both the New York
Stock Exchange and Dutch definitions.
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C o r p o r a t e G o v e r n a n c e R e p o r t › Additional Information
Risk Management
Reference is made to the discussion in the “Risk Management” and “Risks” section above.
Disclosure Controls and Procedures
Our Managing Director, with the assistance of other members of management, performed an evaluation of the effectiveness of the
design and operation of our disclosure controls and procedures, as that term is defined in Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934, as amended, within 90 days of the date of this report. Based on that evaluation, they concluded
that as of December 31, 2020, our disclosure controls and procedures were effective to ensure that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within
the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our
Managing Directors, as appropriate to allow timely decisions regarding required disclosure.
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, no matter how well designed,
such as the possibility of human error and the circumvention or overriding of the controls and procedures. Therefore, even those
systems determined to be effective may not prevent or detect misstatements and can provide only reasonable assurance of achieving
their control objectives. In addition, any determination of effectiveness of controls is not a projection of any effectiveness of those
controls to future periods, as those controls may become inadequate because of changes in conditions or the degree of compliance
with the policies or procedures may deteriorate.
Report of Management on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. The Company’s system of internal controls
over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of the consolidated financial statements in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when
determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In
making this assessment, management used the updated criteria set forth in 2013 by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO) in Internal Control-Integrated Framework.
Based on our assessment under the COSO Internal Control-Integrated Framework, management believes that, as of December 31,
2020, our internal control over financial reporting is effective. Management’s assessment of and conclusion on the effectiveness of
internal control over financial reporting did not include the internal controls of NeuMoDx Molecular, Inc, which is included in the
2020 consolidated financial statements of QIAGEN N.V. and Subsidiaries and constituted 6.31% of total assets as of December 31,
2020 and 0.53% of revenues for the year then ended. Securities and Exchange Commission guidelines permit companies to exclude
acquisitions from their assessment of internal control over financial reporting during the first year following an acquisition.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during 2020 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
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Independent Auditors
In accordance with the requirements of Dutch law, our independent registered public accounting firm for our statutory consolidated
financial statements prepared in accordance with International Financial Reporting Standards and filed with the Netherlands
Authority for the Financial Markets (AFM), is appointed, and may be removed by, the General Meeting. The Supervisory Board
nominates a candidate for the appointment as external auditor, for which the Audit Committee advises the Supervisory Board. At the
Annual General Meeting in 2020, KPMG Accountants N.V. was appointed as external auditor for the Company for 2020 year. The
external auditor is invited to attend the meeting of the Supervisory Board at which the statutory financial statements prepared in
accordance with International Financial Reporting Standards and filed with the AFM shall be approved and is furthermore invited to
attend the General Meeting at which the statutory financial statements are adopted and may be questioned by the General Meeting
on its statement on the fairness of our annual accounts prepared in accordance with International Financial Reporting Standards.
Following the appointment of KPMG Accountants N.V. for the audit of our statutory consolidated financial statements, the external
auditor for our consolidated financial statements prepared under U.S. generally accepted accounting principles is KPMG AG
Wirtschaftsprüfungsgesellschaft who audited the consolidated financial statements as of and for the year ended December 31, 2020
contained in this annual report.
The remuneration of the external auditor, and instructions to the external auditor to provide non-audit services, shall be approved by
the Supervisory Board on the recommendation of the Audit Committee and after consultation with the Managing Board. At least once
every four years, the Supervisory Board and the Audit Committee shall conduct a thorough assessment of the functioning of the
external auditor. The main conclusions of this assessment shall be communicated to the General Meeting for the purposes of assessing
the nomination for the appointment of the external auditor.
Whistleblower Policy and Code of Conduct
We have a formal Whistleblower Policy concerning the reporting of alleged irregularities within QIAGEN of a general, operational
or financial nature. Furthermore, we have a published Code of Conduct that outlines business principles for our employees and rules
of conduct. The Code of Conduct can be found on our website at www.QIAGEN.com.
Anti-Takeover Measures
In 2004, the Supervisory Board granted an option to the Dutch Foundation Stichting Preferente Aandelen QIAGEN that allows the
Foundation to acquire preference shares from QIAGEN if (i) a person has (directly or indirectly) acquired or has expressed a desire
to acquire more than 20% of our issued share capital, or (ii) a person holding at least a 10% interest in the share capital has been
designated as a hostile person by our Supervisory Board. The option enables the Foundation to acquire preference shares equal to
the number of our outstanding common shares at the time of the relevant exercise of the right, less one share. When exercising the
option and exercising its voting rights on these shares, the Foundation must act in the interest of QIAGEN and the interests of our
stakeholders. No preference shares are currently outstanding.
Dutch Corporate Governance Code — Comply or Explain
The corporate governance structure and compliance with the Dutch Code is the joint responsibility of the Managing Board and the
Supervisory Board. They are accountable for this responsibility to the General Meeting. We continue to seek ways to improve our
corporate governance by measuring itself against international best practice. The Dutch Code was last amended on December 8,
2016, and can be found at www.mccg.nl.
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C o r p o r a t e G o v e r n a n c e R e p o r t › Additional Information
Non-application of a specific best practice provision is not in itself considered objectionable by the Dutch Code and may well be
justified because of particular circumstances relevant to a company. In accordance with Dutch law, we disclose in our Annual Report
the application of the Dutch Code's principles and best practice provisions.
To the extent that we do not apply certain principles and best practice provisions, or do not intend to apply these in the current or the
subsequent year, we state the reasons.
We take a positive view of the Dutch Code and apply nearly all of the best practice provisions. However, we prefer not to apply
some provisions due to the international character of our business as well as the fact - acknowledged by the Commission that drafted
the Dutch Code - that existing contractual agreements between QIAGEN and individual members of the Managing Board cannot be
set aside at will.
The following provides an overview of exceptions that we have identified:
1. Best practice provision 2.2.2 recommends that a supervisory board member is appointed for a period of four years. A member
may be reappointed for a term of additional two years, which appointment may be extended by at most two years.
Members of the Supervisory Board are appointed annually for a one-year period beginning on the day following the General Meeting
up to and including the day of the General Meeting held in the following year. Dr. Metin Colpan has joined the Supervisory Board in
2004 and Ms. Elizabeth Tallett has been a Supervisory Board member since 2011. We highly value the scientific and commercial
experience of Dr. Colpan and his in-depth knowledge of QIAGEN and the broad industry knowledge, management and board
experience of Ms. Tallett. QIAGEN therefore supports the reappointment of Dr. Colpan and Ms. Tallett beyond the eight-year term as
recommended by the Dutch Code.
2. Best practice provision 2.1.5 recommends that the Supervisory Board should draw up a diversity policy for the composition of the
Management Board, the Supervisory Board and, if applicable, the Executive Committee. The policy should address concrete targets
relating to diversity and the diversity aspects to the Company, such as nationality, age, gender and education and work background.
While QIAGEN strives for a diverse composition of the Supervisory Board, Managing Board, Executive Committee and in all other
management levels of the Company, we do not consider the definition of concrete targets relating to diversity useful. We are
committed to creating an environment where all individuals have the opportunity to grow and contribute to our progress, regardless
of their age, educational background, gender, nationality, physical abilities, race and ethical background, religion, or sexual
orientation. We consider it to be a key success factor on the path to achieving our mission and goals. Individuals and teams alike
understand the diverse needs of our customers, identify and realize cross-functional opportunities for our business areas, and can
quickly adapt to a fast changing environment. In 2020, our multicultural workforce was composed of at least 80 nationalities with an
average age of 40.1. With 48.4% women, we are well balanced in terms of gender on an aggregate level. Information on the
composition of our Managing and Supervisory Boards can be found above.
3. Best practice provision 3.1.2 vi. recommends that when formulating the remuneration policy, it should be considered that shares
awarded to management board should be held for a period of at least five years
Pursuant to the Company’s Remuneration Policy, long-term equity-based grants to members of the Managing Board under the 2014
Plan primarily consist of an award of performance stock units, i.e. long-term incentive awards which are dependent upon the
achievement of pre-defined performance goals. Grants of restricted stock units, which are based on time vesting only, are no longer
to be granted on a regular basis and shall be reserved for use as special equity incentive rewards in certain situations. Performance
stock units and restricted stock units granted until February 2018 are basically structured so that 40% of a grant vests after three
years, 50% after five years and the remaining 10% after ten years. Grants of performance stock units and restricted stock units
granted after February 2018 vest 40% after three years, 60% after five years. In 2019, the members of the Managing Board elected
to receive in lieu of their 2018 cash bonus the value earned in the year in performance stock units which vest over five years from the
grant date.
97
4. Best practice provision 3.2.3 recommends that the maximum remuneration in the event of dismissal of a management board
member may not exceed one year's salary (the "fixed" remuneration component).
Our Managing Board members have entered into employment agreements with QIAGEN N.V. and some QIAGEN affiliates for which
they hold managing positions. In case of termination of an agreement without serious cause as defined by the applicable law, the
respective affiliate would remain obliged to compensate the Managing Board member for the remaining term of the employment
agreement.
5. Best practice provision 2.2.4 recommends that the supervisory board should draw up a retirement schedule in order to avoid, as
far as possible, a situation in which many supervisory board members retire simultaneously. The retirement schedule should be made
generally available and should be posted on the company’s website.
The Supervisory Board follows the practice to discuss retirement plans of individual members early to proactively manage continuity
within the Supervisory Board. QIAGEN believes that this practice provides a more flexible and better succession planning than a
fixed retirement schedule.
6. Best practice provision 3.3.2 recommends that a supervisory board member may not be granted any shares and/or rights to
shares by way of remuneration.
QIAGEN has granted stock options to the members of the Supervisory Board as a remuneration component since its establishment
until 2013 when we stopped granting stock options. Since 2007, Supervisory Board members have been granted restricted stock
units. We believe that the reasonable level of equity-based compensation which we practice allows a positive alignment of
shareholder interests with the other duties of the Supervisory Board and that this practice is necessary to attract and retain
Supervisory Board members as the granting of share-based compensation to Supervisory Board members is a common practice in our
industry.
NYSE Exemptions
Exemptions from the NYSE corporate governance standards are available to foreign private issuers, such as QIAGEN when those
standards are contrary to a law, rule or regulation of any public authority exercising jurisdiction over such issuer or contrary to
generally accepted business practices in the issuer’s country of domicile. In connection with QIAGEN’s listing on the NYSE, the NYSE
accepted QIAGEN's exemptions from certain corporate governance standards that are contrary to the laws, rules, regulations or
generally accepted business practices of The Netherlands. These exemptions and the practices followed by QIAGEN are described
below:
QIAGEN is exempt from NYSE’s quorum requirements applicable to meetings of ordinary shareholders. In keeping with the law of
The Netherlands and generally accepted business practices in The Netherlands, QIAGEN’s Articles of Association provide that
there are no quorum requirements generally applicable to meetings of the General Meeting.
QIAGEN is exempt from NYSE’s requirements that shareholder approval be obtained prior to the establishment of, or material
amendments to, stock option or purchase plans and other equity compensation arrangements pursuant to which options or stock
may be acquired by directors, officers, employees or consultants. QIAGEN is also exempt from NYSE’s requirements that
shareholder approval be obtained prior to certain issuances of stock resulting in a change of control, occurring in connection with
acquisitions of stock or assets of another company or issued at a price less than the greater of book or market value other than in a
public offering. QIAGEN’s Articles of Association do not require approval of the General Meeting prior to the establishment of a
stock plan. The Articles of Association also permit the General Meeting to grant the Supervisory Board general authority to issue
shares without further approval of the General Meeting. QIAGEN’s General Meeting has granted the Supervisory Board general
authority to issue up to a maximum of our authorized capital without further approval of the General Meeting. QIAGEN plans to
seek approval of the General Meetings for stock plans and stock issuances only where required under the law of The Netherlands
or under QIAGEN’s Articles of Association.
(cid:0)
(cid:0)
98
C o r p o r a t e G o v e r n a n c e R e p o r t › Additional Information
99
Non-Financial
Statement
102 Our Approach to Sustainability
103 Environment
107 Employees
110 Human Rights
110 Sustainable Supply Chain Management
112 Data and Cyber Security
112 Business Ethics
117 Social Matters
Non-Financial Statement
Our Approach to Sustainability
QIAGEN believes in sustainability as long-term economic success combined with respect for the natural environment and for the
people who are our stakeholders – employees, customers, suppliers, neighbors. By reducing emissions, providing healthy, high-
quality workplaces, and ensuring suppliers and partners uphold our environmental and social standards, QIAGEN sees itself as a
good corporate citizen sincerely striving to make improvements in life possible.
The COVID-19 crisis has demonstrated these two facets of our responsibility to best effect. Our business success came hand in hand
with our working closely with public officials and customers around the world to ensure the availability of critical testing components
to fight the pandemic. At the same time, QIAGEN honored its commitment to its highly dedicated employees by ensuring workplace
flexibility, support for those looking after families, and safe working conditions in essential production facilities and offices.
Like no other year in living memory, 2020 showed that social and environmental developments can quickly and sweepingly affect
business. QIAGEN is affirmed in its commitment to sustainability, which goes beyond formal regulations. As a market and innovation
leader in life sciences and molecular diagnostics, we believe innovation can drive sustainable development in our industry – and in
our world. We are committed to continuing on this path.
Our dedicated Global Environment, Health and Safety (EHS) team continuously addresses, monitors, and manages sustainability
topics. It oversees the company-wide implementation of EHS management systems and sets goals to limit the use of energy, water,
and plastics. The team reports to the Head of Global Operations, who is a member of our Executive Committee.
We are committed to protecting the environment by driving more energy savings and further reducing the negative impacts of our
operations. We pledge to look after the welfare and safety of our employees, providing a safe, inclusive working environment for
their development and growth. We also pledge to collaborate and work with our suppliers to build a framework tailored around our
social and environmental goals in 2021.
We will also continue to engage with all stakeholders to gain a better understanding of our operating environment, including market
developments and cultural dynamics. We will continue to approach employees, customers, patients, suppliers, shareholders, non-
governmental organizations (NGOs) and communities using means as diverse as standard questionnaires and one-on-one
conversations. Employee-led volunteer sustainability committees contribute to environmental debates and improvements throughout the
company.
In 2020, we demonstrated our sustainability commitment by executing a (cid:189)400 million sustainability-linked credit facility with an
interest rate linked to our environmental, social and governance (ESG) rating. We will donate margin gains of improved ESG rating
to sustainability-linked causes. We are the first provider of molecular diagnostics solutions with a sustainability component built into
its corporate borrowings. It reinforces our commitment to further integrate sustainability into every part of our business.
Our Management Report contains more information about our business model, structure, products, customers, and strategy – as well
as a description of the main trends and most important issues of 2020. We will provide a separate content index report on our
102
N o n - F i n a n c i a l S t a t e m e n t › Our Approach to Sustainability Environment
›
website. This report will link our most material topics in scope for non-financial reporting with the standards provided by Global
Reporting Initiative (GRI) and Sustainability Accounting Standards (SASB). This content index will make the reported information
traceable and increases creditability and transparency. You also can find a summary report on QIAGEN’s commitment to
sustainability on our website: https://www.qiagen.com/us/sustainability
Material Non-financial Information
For guidance on materiality and non-financial disclosure, we base our non-financial reporting on the Reporting Standards as provided
by GRI as well as on relevant guidance as issued by the SASB.
For management purposes, we also work on the basis of defined materiality topics relating to sustainability. In the reporting period,
we reviewed the materiality analysis first conducted in 2019. Our senior management validated the following list of material topics:
(cid:0)
(cid:0)
(cid:0)
(cid:0)
(cid:0)
(cid:0)(cid:2)(cid:3)(cid:4)(cid:5)(cid:6)(cid:2)(cid:7)(cid:8)(cid:2)(cid:9)(cid:10)(cid:11)(cid:12)(cid:7)(cid:10)(cid:9)(cid:9)(cid:8)(cid:5)(cid:13)(cid:14)
(cid:0)(cid:7)(cid:15)(cid:11)(cid:6)(cid:16)(cid:8)(cid:8)(cid:12)(cid:7)(cid:10)(cid:9)(cid:9)(cid:8)(cid:5)(cid:13)(cid:14)
energy and emissions, water consumption, resource efficiency, sustainable procurement;
employee satisfaction, occupational safety and health protection, employee development, responsible employer,
equal opportunities;
(cid:17)(cid:6)(cid:18)(cid:4)(cid:10)(cid:11)(cid:12)(cid:7)(cid:10)(cid:9)(cid:9)(cid:8)(cid:5)(cid:13)(cid:14)
access to healthcare, quality and product safety, customer satisfaction, data and cyber security;
(cid:19)(cid:8)(cid:13)(cid:15)(cid:8)(cid:18)(cid:9)(cid:12)(cid:20)(cid:6)(cid:5)(cid:12)(cid:21)(cid:22)(cid:7)(cid:10)(cid:2)(cid:12)(cid:5)(cid:4)(cid:23)(cid:21)(cid:9)(cid:13)(cid:14)
conflict minerals; and
(cid:24)(cid:2)(cid:9)(cid:4)(cid:25)(cid:18)(cid:6)(cid:5)(cid:5)(cid:22)(cid:15)(cid:9)(cid:4)(cid:6)(cid:2)(cid:12)(cid:10)(cid:2)(cid:26)(cid:12)(cid:27)(cid:5)(cid:4)(cid:27)(cid:8)(cid:5)(cid:16)(cid:12)(cid:7)(cid:10)(cid:9)(cid:9)(cid:8)(cid:5)(cid:13)(cid:14)
antitrust, anti-corruption.
Please refer to our non-financial statement 2019 for a detailed description of the procedure.
Environment
At QIAGEN, we are committed to minimizing the impact of our business operations on the planet – from the energy we consume and
the resources we use in our manufacturing processes, to the materials we use in our laboratories and offices. Reducing our
environmental impact is a key corporate goal for 2021, and we encourage our employees to be actively engaged in pursuing this
goal by continually looking for ways to eliminate harmful substances and reduce waste from our products.
We recognize that climate change is one of the most pressing global challenges and acknowledge climate change risks such as
extreme weather events and changes in regulation or customer behavior. Operations could, for example, be negatively impacted by
volatility in the cost of raw materials, components, freight, and energy. New laws or regulations adopted in response to climate
change could increase energy costs, the costs of certain raw materials, components, packaging, and transportation. Our customers
are generally very conscious of the environment and therefore of issues including plastic consumption and the recyclability and
durability of products. These aspects influence their choice of supplier.
To proactively address climate change, we have committed to reducing emissions in line with a 1.5-degree Celsius climate target as
demanded by the 2015 Paris Agreement. Our 2019 carbon footprint, which was calculated with market-based emissions factors,
serves as the base year. By the end of 2020, we achieved a reduction of 9.1% in scope 1 and 2 emissions and a reduction in
business travel emissions of 81.8% below base year. The 2020 reduction was mainly achieved through the implementation of energy
efficiency measures as well as the overall effects of the COVID-19 crisis. QIAGEN is currently reviewing climate targets and will
make an announcement in June 2021 on its revised climate goal against science-based targets by 2050.
103
Environmental Performance
To increase transparency regarding our own global energy consumption and greenhouse gas (GHG) emissions, QIAGEN extended
the coverage of its energy consumption data in 2018 by integrating a centralized data collection process for all production sites,
research centers and offices. This expansion has enabled us to more accurately calculate our corporate carbon footprint (CCF) for
scope 1, 2 and 3 emissions for each reporting year (see QIAGEN Corporate Carbon Footprint 2020).
QIAGEN Corporate Carbon Footprint 2020
EEmmiissssiioonn ccaatteeggoorryy ((iinn ttCCOO22 ))
Scope 1: Direct emissions
Scope 2: Indirect emissions
Scope 3.4: Transportation and distribution
Scope 3.6: Business travel
TToottaal ((mmaarrkkeett bbaasseedd))
22002200
10,068
9,631
28,900
3,529
52,128
22001199
10,808
10,870
17,082
19,431
CChhaannggee iinn %%
22001199 ttoo 22002200
-6.9%
-11.4%
+69.2%
-81.8%
Scope 1 covers direct GHG emissions from the combustion of fossil fuels on our own premises and with company vehicles.
Scope 2 emissions are reported using both a location-based and market-based approach, which cover our indirect emissions
originating from external generation of electricity for our operational and business activities. A location-based calculation method for
scope 2 emissions reflects the average emissions intensity of grids on which energy consumption occurs; a market-based method
reflects emissions calculated with the energy source mix used by each QIAGEN site. Location based scope 2 emissions decreased by
14.5% to 15,854 tCO2 in 2020 compared to 18,540 tCO2 in 2019.
Continuing its progress, QIAGEN included additional scope 3 emissions data related to transportation and distribution for the years
2019 and 2020 in our GHG emissions calculations. In general, scope 3 emissions include emissions that occur along our value
chain, for example through transport services, suppliers, and business travel.
QIAGEN’s energy data used to calculate our scope 1 and 2 emissions can be viewed by source in Figure 1 QIAGEN GHG Emissions
by Site.
104
N o n - F i n a n c i a l S t a t e m e n t › Environment
QIAGEN Energy Consumption Scope 1 and 2
EEnneerrggyy ccoonnssuummppttiioonn bbyy ssoouurrccee ((iinn kkWWhh))
22002200
22001199
22001188
Natural gas
Petrol
Diesel
33,747,177
34,679,620
38,627,496
6,766,864
8,677,185
7,910,565
3,981,440
5,255,293
8,160,611
Liquefied Petroleum Gas (LPG)
66,363
50,179
72,702
Electricity procurement from conventional tariffs
30,903,763
36,130,248
30,346,347
Electricity procurement from green tariffs
1,148,642
1,142,240
1,238,345
Consumption from district heating, district cooling
and steam
146,340
223,000
193,000
TToottaal eenneerrggyy ccoonnssuummppttiioonn
76,760,589
In addition to our energy data, we collect data regarding freshwater consumption, waste and recycling. We can confirm that none of
our manufacturing sites are in water-stressed regions.
The table below lists the environmental performance data for 2018 through 2020. The data is shown as a ratio of our consolidated
environmental data in relation to our net sales (NS in $ thousands), to establish a system for a long-term monitoring.
QIAGEN Environmental Indicators
22002200
Innddiiccaattoorrss 22002200
22001199
Innddiiccaattoorrss 22001199
22001188
Innddiiccaattoorrss 22001188
Energy (in MWh)
76,761
0.041 MWh/NS
86,158
0.0564 MWh/NS
86,549
0.0576 MWh/NS
GHG emissions Scope 1 + 2
25,922
0.0139 t/NS
29,347
0.0192 t/NS
28,898
0.0192 t/NS
(in tCO2 ; location-based)
Freshwater use (in m 3 )
113,736
60.81 l/NS 174,635 1
114.41 l/NS 119,621
79.65 l/NS
Total waste (in t)
1,183
0.633 kg/NS
1,155
0.757 kg/NS
Hazardous waste (in t)
509
0.272 kg/NS
330
0.216 kg/NS
633
250
0.421 kg/NS
0.166 kg/NS
(1) - Figures for 2019 were adjusted due to improved data availability
Beginning in 2018, all relevant scope 1 and 2 emissions were calculated following a location-based approach. The additional
calculation using a market-based approach for scope 2 emissions was introduced for 2019 as part of our climate strategy. We will
continue to report the location-based emissions to ensure consistent methodology (see QIAGEN Environmental Indicators).
105
Product Life Cycle Assessment
Last year, QIAGEN conducted a life cycle assessment (LCA) for one of its best-selling – and therefore representative – products, the
QIAamp DNA Mini Kit. The aim was to assess the complete carbon footprint of the QIAmp DNA Mini Kit in order to gradually
improve its environmental performance over the following years.
The scope of the study was the full life cycle of the product (so called “cradle to grave”), including extraction and processing of raw
materials, transport to the customer, energy and material input required when using the product, as well as transport to the disposal
facility and incineration of remaining materials. The LCA identified the largest relative environmental impacts within the life cycle of a
QIAmp DNA Mini Kit, laying the foundation for a subsequent carbon-reduction process. A detailed report on the LCA can be found
on QIAGEN's website in the Sustainability section.
Plastic Footprint Reduction
The environmental impact of plastic materials is becoming a major concern for customers. QIAGEN uses plastics in many of its
products and production support materials, as well as for transport and packaging. We and our industry face a number of challenges
in reducing plastic materials due to safety, hygiene, and regulatory concerns; however, we recognize that we must work to eliminate
plastics where possible. In 2020, QIAGEN far exceeded its corporate goal to reduce plastic transportation packaging material by
3% below 2019 levels. The goal was achieved in 2020 with a 42-ton reduction in plastic transport packaging. This was primarily
achieved by the reduction in gel packs used in cold room shipments in the European Union (EU) and a change in demand for cold
room products during the pandemic. Our goal for 2021 is to reduce plastic transport packaging by 9% below 2020.
Our global, cross-functional, plastic footprint reduction team identifies opportunities to reduce plastic, investigates more environment-
friendly alternative materials, and optimizes recyclability where possible. In 2020, we successfully switched some of our expanded
polystyrene (EPS) boxes used in dry-ice shipments for the U.S. to ClimaCell liners, which use paper and starch for insulation. In 2021,
this initiative is expanding to include more cold room shipments both in the U.S, Europe, and APAC regions.
Many of our existing plastic reduction initiatives are focused on packaging. As our responsibility extends throughout our supply
chain, we are also working with our logistics suppliers on initiatives to reduce shipping waste. These include, for example, re-usable
passive temperature control shipping systems for certain cold-chain products.
Environment-Friendly Facilities
We also aim to make our buildings environmentally friendly by seeking LEED certification for new construction. Hilden’s research and
development and the production facility were awarded LEED Gold certification, and an extension to the QIAGEN Germantown facility
received Silver certification. Our initiatives to improve energy efficiency include energy modeling during the design phase of
buildings, energy extraction from co-generators, improved insulation, heat recovery, lighting replacements, and installation of
intelligent building systems.
To reduce the environmental impact of employee commuting, several QIAGEN sites have installed charging stations for electric cars
and introduced bike-to-work schemes. These include Hilden, Germantown, and Manchester. Many facilities provide discounted train
and bus tickets to encourage employees to use public transportation.
Our volunteer sustainability committees have initiated projects to reduce waste at their sites by introducing recycling and composting
programs, replacing single-use items with reusable versions, and donating surplus office furniture and lab equipment to local
community organizations.
106
N o n - F i n a n c i a l S t a t e m e n t › Environment Employees
›
Employees
QIAGEN’s long-term success and growth are shaped decisively by the knowledge, skill and passion of our employees. Focusing on
human capital therefore drives our economic performance and considerably influences the sustainability of our operations. We are
convinced that the professional and personal development of our employees is an integral factor in creating value for our customers,
patients, colleagues, partners and shareholders. Being the industry’s employer of choice by attracting and developing top talent is
one of our global goals. To achieve that, QIAGEN creates a work environment that empowers and involves employees at all levels.
As a company headquartered in the EU, freedom of association and collective bargaining are cornerstones of the good relationship
between management and representatives of employees. Around 76% of our workforce is employed in member states of the
Organization for Security and Cooperation in Europe (OSCE), and in all regions where we operate, we comply with all applicable
laws regarding freedom of association and collective bargaining and respect local laws and regulations concerning labor relations.
Our commitment on this issue can also be found in our Human Rights Policy on our Sustainability webpage. This policy is
communicated to all employees globally on an ongoing basis via the company intranet and also given to newly hired employees.
QIAGEN strives to foster an open-door workplace culture where employees are able to approach management and/or Human
Resources about their concerns without fear of retaliation. Our policy states that employeyy es may communicate openly with
management regarding their working conditions without threat of reprisal, intimidation, or harassment.
Among all QIAGEN guidelines, the following policies aim to incorporate QIAGEN’s culture and values into all of our internal and
external relationships. These are available internally for all employees:
Our Corporate Code of Conduct and Ethics is intended to provide our employees with a clear understanding of the business
conduct and ethics that are expected of them.
Our Ethical Standards Policy: QIAGEN's cultural norms and values are defined in our mission, vision, and identity. Our values form
the basis of our business success. Every employee is expected to treat everyone in an open, honest, and respectful manner.
Depending on local law and custom, there are different types of employment ranging from long-term fixed contracts to temporary
positions, also including flexible time and programs for parents returning from childcare. In 2020, we employed 3.0% part-time
employees (2019: 3.03%) and 2.1% temporary employees with a QIAGEN contract / fixed-term work contract (2019: 1.24%).
Employee Training
As a fast-growing technology and knowledge-based company, we consider high-quality training and career development to be an
integral part of our success. We offer various training platforms as QIAlearn, QIAGEN Academy, and MasterControl that provide the
possibility to either use our global e-learning portfolio or to participate in personal trainings usually offered in a blended format. The
focus is on job-specific skills, compliance, competencies, and leadership development.
In 2020, we ran a mix of virtual instructor-led and e-learning courses attended by 2,470 employees (2019: 3,951). In addition, 74
(2019: 46) top talented employees participated in our advanced leadership development programs, which took place in two groups
in 2020. All trainings were conducted virtually in 2020 due to the COVID-19 pandemic.
As part of our talent and succession management, we have established transparent career paths with the QIAGEN Profile Navigator
(QPN). It defines jobs, core competencies and approaches to advancement across the global organization.
In addition, QIAGEN’s global Performance Enhancement System (PES) creates a clear framework of regular one-on-one review
sessions for each employee and their manager to discuss career development. These include discussions of goals and achievement
levels, assessment of relevant competencies, as well as training needs and career planning steps.
The supervisor feedback process provides the opportunity for employees to give anonymized feedback to their supervisors. For 2020,
employees provided overall very positive feedback.
107
Diversity
At QIAGEN, we are committed to creating an environment that is rich in diversity and empowers all employees. Diverse teams
strengthen our organization through the variety of ideas, perspectives and approaches they bring to our business. Our teams
outperform and succeed when they are composed of individuals with the widest possible range of personalities, backgrounds and
traits. That’s why we value each person’s uniqueness and maintain an environment where all individuals can contribute to our success
based on their strengths and characteristics.
We want to provide an environment where all individuals have the equal opportunity to grow and contribute to our progress,
regardless of their age, educational background, sex (including gender identity, gender expression and sexual orientation),
nationality, ethnicity, veteran status, physical abilities or religion. Diversity makes QIAGEN a great place to work.
Our strategic initiative on gender diversity started in 2018 has yielded remarkable results, particularly regarding leadership
positions. The participation of women in leadership roles rose from approximately 28% in 2018 to approximately 32% in 2020
because of a series of initiatives to drive awareness, engagement and development of this area among our leadership team. More
information about the policy on diversifying the Management Board and the Supervisory Board can be found in the Corporate
Governance Report.
The QIAGEN Executive Council of Equal Opportunity (ECEO), made up of senior representatives from each of the business areas
across the organization, has a lead function in driving change within QIAGEN around diversity and inclusion. Globally agreed cross-
functional objectives are tied directly to our corporate goals on diversity and inclusion and drive initiatives within each
organizational area. In addition, the ECEO works closely with the Diversity and Inclusion Ambassador Program. The ambassador
program includes more than 25 employees from around the world who volunteer to champion diversity and inclusion across our
global sites. The ambassadors host site-specific roundtables, organize trainings, workshops and events to educate the community – at
QIAGEN and beyond – on diversity and inclusion topics throughout 2020. In 2019, our parental leave guidance in the U.S. was
updated, which was a direct result of the diversity forums led by our ambassadors in conjunction with the executive committee
members. The ambassadors have worked on updating our unconscious bias training package that will be rolled out in early 2021.
Employee Satisfaction and Retention
Recognizing that QIAGEN’s employees are the key to our success, we seek to be a great place to work. QIAGEN offers opportunities
to work on exciting tasks and projects in an engaging work environment. Employees join QIAGEN and stay with QIAGEN because
they can see how their work makes a difference to people’s lives everywhere in the world. Internal and external ratings have
improved significantly and show QIAGEN’s reputation and preferred position in the global working environment. Specific targets for
2020 in terms of retention were reached – both the overall (under 10%) and the management level (under 5%) voluntary turnover
were significantly lower.
A prudent work-life balance is an important measure to create and maintain employee satisfaction. We provide services to help
employees balance their personal lives with the company’s dynamic work environment, including in-house childcare, sabbatical
programs, and flexible working hours. In the U.S., we recently updated our parental leave policies to allow 12 to 14 weeks of fully
paid leave. We also allow short-term bereavement leave. With regard to the COVID-19 pandemic, we were and continue to be
flexible and allow our employees to work from home as guided by local regulations as well as personal situations.
QIAGEN has implemented frameworks for performance-based compensation and equity-based compensation, and incentive programs
for new ideas and innovation. These programs aim to ensure fair and attractive compensation and to encourage each employee to
work for the company’s long-term benefit. The QIAGEN remuneration report provides detailed information on the compensation
practices regarding the QIAGEN Managing Board and can be found in our Renumeration Report online in our Corporate Governance
pages.
An essential component of QIAGEN’s efforts to maintain a high level of satisfaction at work is our corporate health and safety
management. We offer a wide range of measures and tools, from annual “health days” with free counseling, screening and medical
check-ups to sports opportunities in the form of in-house gyms, on-site soccer fields and beach volleyball courts.
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N o n - F i n a n c i a l S t a t e m e n t › Employees
QIAGEN’s commitment to being an employer of choice is also reflected in the high number of applications for open positions, which
exceeded 40,000 applications in 2020 (2019: 27,000). At the same time, the average voluntary annual turnover rate has decreased
from approximately 12% to less than 10% year over year. In 2020, QIAGEN was once again recognized as a “Top Employer” in
Germany. The Top Employer Institute is a global authority on recognizing excellence in people practices. The title is awarded after a
very rigorous process where companies must provide detailed information on their HR practices, have an onsite review and several
employee interviews. In July 2020, our Brazil subsidiary was certified for the first time as a “Great Place to Work,” and in November
2020, it was awarded one of the “Best Workplaces” in healthcare as well as Top 5 in diagnostic medicine. To receive the
certification, at least 7 out of 10 employees must classify the company in a survey as a “Great Place to Work.” For the ranking, an
assessment of the cultural practices and a complementary questionnaire are taken into account. Finally, QIAGEN’s US headquarters
in Germantown, Maryland, received five different awards by the Alliance for Workplace Excellence (AWE), including the Workplace
Excellence Seal of Approval, Diversity Champion Award, and Best Practices Supporting Workers 50+. All award recipients undergo
a rigorous assessment process led by an independent review panel.
Occupational Safety and Health Protection
QIAGEN recognizes its responsibilities with respect to occupational health and safety in all our operations and meets all applicable
regulatory requirements. A dedicated EHS manager provides direction and oversees the implementation of global EHS policies and
procedures in alignment with the international standard ISO 45001 and our own quality management system.
All QIAGEN facilities coordinate, manage and monitor site-specific occupational health and safety risks and activities, which include
the management of permits and licenses, risk analysis and assessments, planning for unplanned events, accident reporting, and
health and safety inspections. In 2020, a senior manager for EHS was appointed at the Hilden manufacturing site as part of the
company’s commitment to improve the safety of its employees at this large manufacturing site. All employees of the company are
required to adhere to local health and safety procedures and practices. Safety, orderliness, and cleanliness are a key success factor
at QIAGEN.
QIAGEN committed to an all-company goal in 2020 to reduce the rate of lost days due to injuries per 100 employees based on
calculated working hours, to drive and encourage initiatives to improve the safety culture in QIAGEN. The Days Away Restricted and
Transferred (DART) are collected monthly from 13 QIAGEN sites located across Americas, EMEA and APAC. The DART goal was set
in 2020 as <4.5 per 100 employees and we achieved 4.0.
Headcount average per month 1
Total number of calculated work hours
Total OSHA recordable accidents
Total number of lost workdays
DDAARRTT ppeerr 110000 eemmpplooyyeeeess
22002200
3,220
5,658,706
29
113
4.0
(1) - Headcount average per month of employee at key manufacturing sites across APAC, US and EU
The table below shows the total number of recordable incidents (recordable accidents include lost workdays, restricted work, and
medical treatment beyond first aid) and lost workdays for 2020, 2019 and 2018. The data is obtained from QIAGEN’s key
manufacturing sites in Germany, the U.S., China, Sweden and Spain. It also includes the research and development site in United
Kingdom, and the large business service center located in Poland. Thus, the data equates to 56% of the total average number of
employees. There were again zero reported fatalities during 2020 as in previous years.
109
Headcount average per month 1
Europe / Middle East / Africa
Americas
Assiiaa-PPaacciiffiicc // JJaappaann
TToottaal RReeccoorrddaabblee Inncciiddeennttss
DDaayyss LLoosstt dduuee ttoo Innjjuurriieess
22002200
22001199
22001188
22002200
22001199
22001188
3,220
3,132
3,120
3,220
3,132
3,120
23
6
0
17
3
0
28
26
0
64
49
0
121
261
5
0
16
0
(1) - Headcount average per month of employee at key manufacturing sites across APAC, US and EU
In 2021, near misses reporting will be implemented at the sites that provide data to support the DART metrics. To promote further
safety awareness and implement continuous improvement initiatives, health and safety training programs are planned for 2021. Sites
that have implemented lean management processes will utilize the blue safety cross to capture this information. The blue safety cross
is a visual data collection tool for recording metrics on the number of safety incidents. The tool is used to improve safety and promote
good practice by raising awareness within the teams regarding safety incidents tracked. It provides real time incidence data and
includes near misses, accidents that are recordable and incidents that are not recordable.
As the health of our employees is a significant priority, we established free coronavirus testing at our location in Hilden following the
outbreak of the pandemic. Starting in March 2020, we implemented systems and processes so that all Hilden-based QIAGEN
employees and external service providers could be tested voluntarily at least once a week. Our internal laboratory was able to
analyze up to 380 samples per working day. On average, approximately 200 tests per working day were conducted. The provision
of regular and free testing facilities was an important factor in ensuring the uninterrupted flow of production.
Human Rights
QIAGEN believes that the respect for human rights is an essential component of promoting sustainability in our global business. As a
publicly listed company with international operations, we regard ourselves as a responsible corporate citizen in all the countries and
regions where we do business. This role includes rights and obligations governed by international and national law, with human
rights as one of the foundations of international law.
In this sense, we acknowledge and endorse the UN Universal Declaration of Human Rights, the European Convention on Human
Rights, and the business-related Organization for Economic Cooperation and Development (OECD) Guidelines for Multinational
Enterprises, the ILO Declaration on Fundamental Principles and Rights at Work, and the UN Guiding Principles on Business and
Human Rights and its application in National Actions Plans of our relevant jurisdictions.
Our Human Rights Policy is designed to provide guidance on all human rights issues in our sphere of influence such as in our
relationship with customers, on the employee level, and in our supply chain. For more information on our due diligence processes
with regard to human rights in our supply chain, please refer to the "Sustainable supply chain management" section. Our Human
Rights Policy can be found online on our Sustainability webpage.
Sustainable Supply Chain Management
We strive to ensure that our quality standards, compliance with laws and regulations as well as environmental and social standards
are maintained along the entire value chain of suppliers and partners. We demand the same from our business partners. Our
procurement policy includes specific requirements for corporate governance, environmental and social standards, which we expect
from our suppliers as minimum standards. Among other issues, it includes the obligations to reduce the use of substances of concern,
to ensure collective bargaining and freedom of association among employees, fair wages, and regulations concerning maximum
working time. The procurement policy is available online in the Resources area of our website under Service and Support.
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COVID-19 demanded that our supply chain increase its previous capacity by three to five times its former volume. This was achieved
in close cooperation with our partners, mainly through investment in machinery and alternative shift models to reach the capacity
required.
In alignment with QIAGEN’s Compliance Program (especially QIAGEN’s Corporate Code of Conduct and Ethics), every QIAGEN
employee must conduct themselves honestly, fairly, and objectively in all business relationships with suppliers and all others with
whom QIAGEN maintains business relationships. Our compliance training program ensures that employees in the procurement
organization understand our guidelines and comply with them.
Structure of our Supply Chain
QIAGEN operates in over 35 locations worldwide. Our sites are supported by a global supplier network that includes approximately
9,000 (2019: 9,000) suppliers in over 60 (2019: 60) countries, supplying resources such as chemicals and bioreagents, plastics,
packaging materials, as well as other materials and services essential to our business. In 2020, 76% (2019: 83%) of our overall
purchasing volume came from OECD countries.
Region of Origin of Suppliers
RReeggiioonn ooff oorriiggiinn
Europe
North America
Asia
Australia
South America
Africa
TToottaal
Due Diligence Process
22002200
22001199
48%
22%
25%
2%
3%
0%
53%
24%
19%
3%
1%
0%
100%
100%
To minimize compliance, environmental and social risks in our supply chain, we apply a multi-stage vendor selection process.
Suppliers are subjected to a risk analysis regarding environmental and social criteria based on their geographic location. These
criteria were supported by information from the MVO Nederlands platform financed by the Dutch Foreign Ministry as well as the
Bertelsmann Stiftung’s Sustainable Development Goals Index in 2020. As a result, 70 suppliers were identified for whom potential
risks exist due to geographic location and sales to QIAGEN.
In 2020, all new suppliers signed QIAGEN’s procurement policy. As a rule, all new suppliers need to sign the policy as part of the
contracting process. The policy contains requirements regarding legal compliance, bribery and corruption, labor rights, non-
discrimination and fair treatment, health and safety as well as environmental protection and conservation. QIAGEN provides a
whistleblower hotline, which can be used by all employees. The contact details can be found on QIAGEN’s website within the section
Corporate Code of Conduct and Ethics. In addition, first-tier suppliers must confirm REACH, RoHS and conflict mineral compliance as
appropriate.
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As part of our supplier selection process, we additionally assess the suppliers’ policy with a perspective on QIAGEN's requirements.
Some suppliers are analyzed with a supplier risk tool. This includes all QSR suppliers, suppliers with a risk class of A, B or C and
suppliers with a high critical impact on QIAGEN’s security of supply. They are all analyzed once a year on several criteria including
quality management, financial stability, embargos, risks of natural disaster. The relevant data for the assessment is either submitted
via a questionnaire, or the suppliers are assessed on site during a visit. If all criteria are not fulfilled, the further procedure is decided
on an individual basis.
Supplier audits are conducted if non-compliance is suspected. Audits are conducted on site at least every three years for all “A”-
categorized direct suppliers. Audits are documented and results are being shared with audited suppliers. To our knowledge, there
were no violations regarding corporate governance, environmental and social standards in the reporting period.
Conflict Minerals
The sourcing of certain minerals (known as “conflict minerals”) has been linked with human rights abuses in the Democratic Republic
of Congo (DRC) and other conflict zones. QIAGEN has performed an extensive inquiry into the company’s supply chain to confirm
that the products supplied to us are either DRC conflict-free or that the suppliers are not aware of any non-compliance in their supply
base. QIAGEN has no indication that any conflict minerals from the Democratic Republic of Congo or adjoining countries are used in
the company’s laboratory instruments. To prove this, we receive compliance certificates from our vendors.
Our products consist of sample and assay kits, known as consumables, and automated instrumentation systems. We do not believe
that any conflict minerals are necessary to the production or functionality of any of our consumable products. We conduct due
diligence measures annually to determine the presence of conflict minerals in our instrumentation products and the source of any such
conflict minerals. Because we do not purchase conflict minerals directly from smelters or refineries, we rely on our suppliers to specify
their sources to us and declare their conflict minerals status. We disclosed our findings to the U.S. Securities and Exchange
Commission (SEC) for the calendar year ending December 31, 2020, on Form SD on March 26, 2021, and will provide updated
disclosure to the SEC annually.
Data and Cyber Security
As the external threat landscape continues to evolve, managing cyber security risk is a priority for QIAGEN. The company is
committed to making investments in its capabilities to enhance the cyber resilience of our organization, products and services and to
preserve the trust of our customers, partners, and employees.
QIAGEN's cyber security program continues to ensure that data and cyber security efforts and initiatives reflect evolving business
requirements, regulatory guidance, and emerging threats. Our membership in private and public cyber security organizations (such
as Health Information Sharing and Analysis Center, Information Security Forum, BSI Alliance for Cyber Security) facilitates close
collaboration with peer organizations and government authorities to share industry-relevant best practices and threat information.
Business Ethics
For QIAGEN, conducting business in a responsible way includes looking beyond our day-to-day business operations into the ethical
foundations of our company. This means, in particular, the respect for human rights and legally compliant business behavior.
QIAGEN's Approach to Tax
QIAGEN is committed to conducting business lawfully, ethically, and with the highest integrity. These fundamental values and
principles, as defined in our three I’s (Integrity, Inspiration, and Insight), are the undisputed key to the long-term success of our
company and also the basis for our tax strategy.
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Our tax strategy is embedded in the following guiding principles which reflects our status as a listed company and the regulated
nature of our business.
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Tax accountability and governance
Tax is part of QIAGEN’s corporate governance and is supervised by the QIAGEN Managing Board. The tax function of QIAGEN is
centrally managed and controlled by its Global Tax Department, which is part of the Global Finance organization. It is led by the
global Head of Tax, who is ultimately reporting to the Chief Financial Officer of the QIAGEN Group. Under the ultimate
responsibility of our Audit Committee and Managing Board, the Chief Financial Officer regularly reviews, evaluates, approves and
where necessary adjusts QIAGEN’s approach to tax.
Tax follows business
One of the basic principles for sustainable tax management is that taxes should be paid where economic value is generated. The
volume of product and service flows among entities within the company is significant, and the price of transactions among QIAGEN
entities is an important factor in QIAGEN’s overall tax organization. Our transfer pricing team determines the policy for the pricing
of such transactions based on a full analysis of the value drivers of our business, ensuring that international and local rules are
respected. Our objective is for all entities to be remunerated at “arm’s length” in accordance with OECD guidelines and country-
specific rules.
The intellectual property related to our products and also to marketing specific intangibles are key profit drivers within QIAGEN,
and profits generated with the employment of such assets are appropriately remunerated with the respective owner. The owner is
the company controlling and taking the entrepreneurial risk of investing in the intellectual property. Our main entrepreneurs and
intellectual property owners are companies in Germany, the U.S. and Spain.
We will only use business structures that are driven by commercial considerations, are aligned with business activity and which
have genuine substance. QIAGEN does not operate in countries that are in the EU list of non-cooperative jurisdictions for tax
purposes.
Seeking and accepting tax incentives
Like many companies, QIAGEN seeks to optimize its global tax position by accepting tax incentives. In doing so, we always try to
achieve an appropriate balance between corporate, employee and shareholder interests on the one hand and public interest on the
other. QIAGEN is committed to conducting business lawfully, ethically, and with the highest integrity. We seek to comply with the
letter and the spirit of the tax laws wherever we operate, and we anticipate paying tax on profits where our business activities take
place. If possible and appropriate, we apply for tax incentives and exemptions.
Compliance
We are committed to complying with the tax legislation of the countries in which we operate and pay the right amount of tax at the
right time, in the countries where we create value. We strive for full and timely tax compliance. To minimize any tax compliance
risk, a frequent review process is in place to secure timely and correct tax filings and tax payments. In the execution of tax
compliance, third-party tax service providers are often involved under the supervision of the Global Tax Department.
Stakeholder engagement
We seek an open dialogue with our stakeholders, including relevant tax authorities, our shareholders, customers, business partners,
employees, governments, regulators, NGOs and the communities in which we operate.
In some cases, QIAGEN and the respective tax authority may disagree on the correct application of local tax law. In the event of
disputes, QIAGEN collaborates with the respective authorities in a fair and positive spirit to find balanced solutions in accordance
with the applicable laws.
During 2020, QIAGEN’s tax policy received public interest. More specific, details on two former structures the company used to
collect certain tax incentives have been disclosed. The structures that have been disclosed derive from a period in which there was
no or limited discussion about base erosion and profit shifting and should been seen within the spirit of time. In line with QIAGEN’s
business requirements and considering the rapidly changing global tax developments and environment, the mentioned structures
were abandoned.
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Transparency
Country-by-Country Reporting (CbCR) requires multinationals to provide information on their global allocation of profit, taxes paid,
and certain indicators of economic activity among the countries in which they operate. This requires QIAGEN N.V., the ultimate
parent of the QIAGEN Group, to file an annual Country-by-Country Report to the Dutch tax authorities.
QIAGEN submitted its 2019 CbCR to the Dutch tax authorities in 2020. The Dutch tax authorities will share the report with tax
authorities in other jurisdictions where QIAGEN operates, subject to an international agreement that permits automatic exchange of
data. QIAGEN has established appropriate processes to comply with CbCR requirements that ensures the integrity of the data.
Payments to Governments for Income Taxes
Income tax is paid on profits and not on revenues. If an affiliate makes marginal profit, for example following capital investment,
significant R&D expenditure or restructuring expenses, it will accordingly pay less income tax.
We pay income tax related to the value added by QIAGEN's operational activities to the governments in the global regions of
operations as follows:
EMEA
($$ iinn tthhoouussaannddss))
The Netherlands
Germany
United Kingdom
Switzerland
France
Sweden
Other
TToottaal EEMMEEAA
Americas
(($$ iinn tthhoouussaannddss))
United States
Brazil
Canada
Mexico
TToottaal AAmmeerriiccaass
114
22002200
$ 2,174
4,915
124
2,869
17,880
1,705
(1,022)
22001199
$ 4,236
9,719
729
(47)
1,872
893
784
$ 28,645
$ 18,186
22002200
$ 4,544
1,451
463
202
22001199
$ 9,427
238
526
155
$ 6,660
$ 10,346
N o n - F i n a n c i a l S t a t e m e n t › Business Ethics
APAC
(($$ iinn tthhoouussaannddss))
China
Japan
Australia
Singapore
South Korea
Other
TToottaal AAPPAACC
22002200
$ 2,553
328
2,753
594
567
472
22001199
$ 2,154
239
9,158
1,004
351
36
$ 7,267
$ 12,942
(($$ iinn tthhoouussaannddss))
Total income taxes paid, net
22002200
$ 42,572
22001199
$ 41,474
In addition to income taxes, QIAGEN also contributes significantly to local communities, directly and indirectly as collector on behalf
of governments, through local taxes, custom duties, payroll taxes and social security payments.
Financial Assistance from Governments
We recognize government grants when there is reasonable assurance that all conditions will be complied with and the grant will be
received. Our government grants generally represent subsidies for specified activities and are therefore recognized when earned as a
reduction of the expenses recorded for the activity that the grants are intended to compensate. Thus, when the grant relates to
research and development expenses, the grant is recognized over the same period that the related costs are incurred. Otherwise,
amounts received under government grants are recorded as liabilities in the statement of financial position. When the grant relates to
an asset, the value of the grant is deducted from the carrying amount of the asset and recognized over the same period that the
related asset is depreciated or amortized.
The company has received cost grants and investment grants. In 2020, the company received income from government grants in the
amount of $3.0 million (2019: $1.4 million).
COVID-19 Related Grants
Since early 2020, we have been working closely with governments, public health authorities and customers to ensure availability of
critical COVID-19 testing diagnostics across the globe, while also developing new dedicated COVID-19 tests to cover all stages of
the infection cycle. In this regard, QIAGEN launched its largest investment program ever to increase production capacity in Hilden
(Germany), Maryland (U.S.) and Barcelona (Spain). The program involves an investment of more than EUR 110 million.
This investment program is being supported by a grant of EUR 18 million from the government of North Rhine-Westphalia (Germany),
a grant of $0.6 million from the U.S. government and a grant of EUR 0.5 million from the Spanish government.
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COVID-19 Related Financial Measures
Governments around the world are acting decisively to protect their businesses and people from economic disruption resulting from
the COVID-19 virus pandemic. QIAGEN has not proactively applied for any COVID-19-related financial stimulus. Some countries,
however, have introduced generic measures that apply automatically to all or certain business areas. In this respect, QIAGEN was
exempted from certain employer taxes the following local COVID-19 support in 2020 to retain local employees: $0.7 million under
the Singapore “Jobs Support Scheme” and $1.8 million under the Chinese “Relief on Social Security Fees and Other Issues.”
Compliance
As a publicly listed company with international operations, QIAGEN is subject to regulation in various jurisdictions. Unethical
behavior and non-compliance with laws and regulations have the potential to seriously harm our business, our reputation and our
shareholders and to expose our employees to personal liability. QIAGEN has established a comprehensive Compliance Program,
which translates legal and regulatory requirements as well as our fundamental values into clear, precise and understandable
guidelines in our Corporate Code of Conduct and Ethics and supplementing specific policies for our employees. Our Corporate Code
of Conduct and Ethics can be found here on our Compliance webpage under Investor Relations.
The policies include, but are not limited to, aspects such as conflicts of interest, insider trading, revenue recognition, confidentiality
and social media. Interactions with healthcare professionals are fully compliant with the AdvaMed Code of Ethics and are described
in detail in our Global Sales and Marketing Policy. Moreover, QIAGEN does not make or receive any payments to or from political
parties or political action committees. Such actions are prohibited by QIAGEN’s Code of Conduct.
Special attention is paid to antitrust and anti-corruption laws (see: https://corporate.qiagen.com/investor-relations/compliance-and-
ethics). Our specific antitrust and anti-corruption policies set forth our commitment to ensure that QIAGEN and its subsidiaries abide
by the antitrust and anti-corruption laws of the countries in which we operate. Our policies on anti-trust and anti-corruption can be
found on our Compliance webpage under Investor Relations.
We extend our Compliance Program not only to our management and employees, but also to third-party intermediaries as distributors
or agents. Third-party due diligence lies in the remit of the Sales Compliance Manager. This contains the following five elements:
Anti-corruption questionnaire and certification for new distributors, resellers and agents
Annual risk assessment based on a calculated risk score, which factors location of business (Transparency International Index
Score, TIIS) and annual sales revenue for distributing QIAGEN products.
Training.
Contractual obligations.
Due diligence (including selected background checks); also including payment monitoring.
All our policies are available to employees through the company’s Compliance@QIAGEN intranet pages. Compliance awareness of
our employees in all areas of the world is increased by regular trainings, which are held by external as well as inhouse legal and
regulatory experts. In addition, QIAGEN has entered a long-term online training program focusing on topics such as antitrust and
competition, bribery and corruption, conflicts of interest, data protection, gifts and entertainment, harassment, insider trading,
reporting as well as respectful communication.
Online training reaches all employees in local language, supported by multiple communication resources. New employees are
required to take online training on our Corporate Code of Conduct and Ethics at a minimum. Additional trainings customized to the
specific area of responsibility are mandatory. Employees in sales and marketing as well as upper management are required to take
training on anti-corruption and antitrust laws. These basic trainings are followed by refresher courses on a regular basis. In 2020,
our employees completed more than 7,000 (2019: 10,000) online training modules. In addition, employees are informed through the
company’s Compliance@QIAGEN intranet page and regular updates on compliance topics via the company’s internal communication
platform Yammer and its Compliance Newsletter issued quarterly.
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We provide a hotline for reporting accounting-related concerns on an anonymous basis in good faith. In accordance with the U.S.
Sarbanes-Oxley Act and the listing standards of NYSE, QIAGEN follows as strict non-retaliation policy. QIAGEN will diligently
investigate all such complaints and will protect the anonymity of the complainant. We also offer a direct e-mail and telephone hotline
for employees to address questions or make suggestions for our Compliance Program.
Our Compliance Program is overseen by the Compliance Committee under the leadership of the Head of Global Legal Affairs and
Compliance, who reports in this function directly to the Audit Committee of the Supervisory Board. The Compliance Committee
consists of managers from Legal, Internal Audit, Human Resources, Commercial Operations, Trade Compliance and Regulatory
functions.
In the reporting period, QIAGEN had 0 (none) legal actions pending or completed regarding antitrust or corruption.
Social Matters
QIAGEN’s mission is to make improvements in life possible by enabling our customers to achieve outstanding success and
breakthroughs in life sciences, applied testing, pharma, and molecular diagnostics. We are committed to customers and their patients
in delivering innovative solutions that unlock new insights for scientific research, forensics, food safety or better treatment decisions.
We understand and live up to our responsibility to customers and patients who depend on us for reliable, efficient, and safe
workflows.
Customer Satisfaction
Customer satisfaction is an integral part of the QIAGEN mission of making improvements in life possible, which is therefore the direct
responsibility of the Chief Executive Officer. Our customers have high expectations on reliability, safety and the environment-friendly
manufacturing of our products. We develop our products and services in close contact with our customers and incorporate their
feedback into our processes.
QIAGEN commits to continually improve the customer experience, taking into account their evolving needs and expectations. We
established a global systematic approach to measure customer experience in the form of an aggregated Customer Experience
Indicator (CEI). The CEI is measured monthly through a set of internal KPIs (product and delivery performance, phone support, etc.)
and external customer feedback directly linked to customer experience in our transactions. Thus, we can identify quickly and
systematically areas for improvement while staying closely connected with our customers.
Departmental and employee contributions to the CEI performance is embedded into our annual goal-setting process. For 2020, a full
year score of 93 (2019: 96) points (out of a maximum 100 points) was achieved. The drop in CEI points compared to the previous
year is caused by the steep demand increase for COVID-19-related test products that could not be fulfilled immediately. Since early
2020 we have been working closely with governments, public health authorities and customers to ensure availability of critical
COVID-19 testing components across the globe. With several products listed in the U.S. CDC and WHO COVID-19 testing protocols,
we have seen a rapid increase in orders of our RNA extraction kits and automation instrumentation, as well as for our newly
developed COVID-19 single and multiplex syndromic tests, and antibody and antigen tests. We have been working around the clock
to meet this testing demand.
We are currently supporting COVID-19 testing in more than 100 countries. Despite the vigorously increased production output,
QIAGEN has not been able to immediately honor all of the COVID-19-related demand increase. Hence, the performance of the KPI
“Product availability” scored lower and led to a decreased 2020 CEI value.
Quality and Product Safety
QIAGEN stands for quality. Since QIAGEN’s founding 30 years ago, we have always been committed to the highest quality, and we
always strive to exceed our customers’ expectations. QIAGEN’s reputation as a quality supplier is best-in-class in our industry and is
the foundation of our loyal global customer base. Therefore, we offer a 100% satisfaction guarantee to all our customers. This means
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that if our customers are not entirely satisfied with the performance of a QIAGEN product, we will exchange or refund it free of
charge.
To achieve and maintain our quality standards, we established quality management systems (QMS) in all of our manufacturing
facilities around the globe. These assure constant high quality as well as safe and effective medical devices. QIAGEN’s QMS are
certified according ISO 9001, ISO 13485, ISO 18385, and comply to 21 CFR 820 and all other applicable medical device
standards around the globe (see section “Government Regulations” in the Management Report).
QIAGEN products and their components are safe to use by customers as well by our employees. In the early stages of product
development, the Chemical Compliance Department provides a statement and guidance about the use of specific substances. During
this evaluation, a special emphasis is laid on substances of very high concern (according to REACH in the EU), and care is taken to
ensure that these substances are not added to new products. One tool to reach this goal is the component tree – a list of all materials
that can be used in development, providing an overview of qualified substances, suppliers and components and also highlighting
substances that must not be used (e.g. substances of concern). Further we have developed a strategy to reduce substances of concern
in our production processes.
When assessing the manufacturability of a new product, the evaluation considers technical aspects, regulatory requirements, financial
aspects, and timeline constraints. QIAGEN aims to fully eliminate the use of OPnEO and NpnEO (substance groups for substances of
very high concern). Therefore, we set up a project to guarantee that within the next five years OPnEO and NpnEO are exchanged in
non-regulated/non-in-vitro diagnostic (IVD) products, and within the next ten years in IVD and otherwise regulated products. For this,
a detailed technical evaluation is being conducted to assess the scope and feasibility of substitution of substances of concern. A
holistic analysis of multiple parameters will determine the prioritization and sequence of substitution. Such parameters consider:
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volume and concentration of substances of concern in an affected product;
total annual volume turnaround of the affected product and substance;
economic aspects (revenues and revenue projection) of the affected product;
complexity of substitution; and
product sustainability.
This systematic approach allows QIAGEN to determine the most effective substitution of substances of concern from affected products.
All instruments are compliant according to RoHS.
Our transparent and responsible product and development policy also includes communication and marketing. As with all companies
in the medical device/IVD industry, product claims and product properties are verified and validated during development and
approved by regulatory bodies around the world as part of the product submission process. As part of their development process, all
IVD products are specially tested for safety and usability. We market products only in accordance with their approved intended
purpose and declare potential residual (or remaining) risks in the information for use of each product.
QIAGEN, like other companies, is exposed to the financial implications of potential recalls and other adverse events due to
equipment failures, manufacturing defects, design flaws, or inadequate disclosure of product-related risks. In the event of a recall,
QIAGEN has established global procedures applicable to all QIAGEN sites that aim to avoid the further use of the product and to
guarantee cost-neutral procedures for our customers. Processes, responsibilities, and improvement programs are defined as required
by regulating authorities to avoid the recurrence of recalls. There is full traceability of each product to the final customer; therefore,
any recalls are executed by direct customer notifications. Required actions for recalls are for each case highly individual. They can
range from providing additional information to physically recalling a product. Due to QIAGEN’s stringent quality management,
recalls rarely occur: 2020 (6), 2019 (3), 2018 (4), 2017 (0), 2016 (3), 2015 (1). The percentage of affected product is low as well:
2020 (0.14%), 2019 (0.15%), 2018 (0.09%), 2017 (0%), 2016 (0.21%), 2015 (0.022%). In past recalls, 90% to 100% of
customers have been reached and confirmed recall notification.
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Access to Healthcare
QIAGEN cares is the company’s Corporate Social Responsibility program, an umbrella for supporting initiatives that improve lives by
fighting diseases in which our products can play an important role. In developing countries with scarce resources, new ways are
needed to ensure access to affordable diagnostics that play a critical role in helping to prevent and treat diseases. In particular,
infectious diseases and various malignancies can be treated much more cost-effectively through early and precise detection – and
with improved patient outcomes. However, many emerging countries lack properly trained lab personnel and technical infrastructure
to utilize the latest molecular testing technologies.
Therefore, we collaborate with non-governmental health organizations, local nonprofits, and ministries of health to help ensure
efficient distribution of donations. Our social responsibility efforts aim to provide access to cutting-edge molecular technologies to
people worldwide, regardless of their economic or social status, including diagnostic solutions designed especially for settings where
limited medical resources are available.
Tuberculosis Testing
One example is our global effort to advance diagnostics for tuberculosis (TB) in low-resource, high-disease burden countries.
Tuberculosis is the world’s leading infectious disease killer, claiming 1.25 million lives in 2019. In October 2019, we announced the
addition of QuantiFERON TB Gold Plus (QFT-Plus) to the diagnostic catalogue of the Stop TB Partnership’s Global Drug Facility (GDF).
The GDF facilitates access and helps match demand for TB diagnostics and drugs with funding from donors, governments and NGOs
on a global scale. The acceptance of QFT-Plus to the GDF catalogue advances our strategy to help expand screening with modern
blood-based assays for latent TB infection in regions with high disease burden but limited resources.
To reach the highest risk populations needing TB testing, QIAGEN is building upon our high-volume, state-of-the-art QuantiFERON-TB
Gold Plus assay with the development QuantiFERON-TB Access, a field-friendly test with ultrasensitive digital detection on a portable
device. Launching in 2021, this public health solution has already gained recognition by the Joint United Nations Program on
HIV/AIDS.
COVID-19 Testing
Since early 2020, we have been working closely with governments, public health authorities and customers to ensure availability of
critical COVID-19 testing diagnostics across the globe, while also developing new dedicated COVID-19 tests to cover all stages of
the infection cycle. In order to meet the rapid increase in orders of our RNA extra extraction kits and automation instrumentation, as
well our new COVID-19 testing solutions, we have dramatically scaled up production, moving to 24-hour, seven-day-a week
operations at our manufacturing sites, and are investing in additional equipment capacity.
Dedicated COVID-19 tests brought to market in 2020 to address the pandemic include:
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QIAstat-Dx Respiratory SARS-CoV-2 Panel - a multiplex PCR test with EUA-authorization for the detection of SARS-CoV-2 plus more
than 20 other respiratory pathogens;
NeuMoDx - single-plex (also approved for saliva sample type) and multiplex;
QIAprep& rapid PCR test - a solution that streamlines RNA extraction and PCR analysis into one process, delivering a result in
under one hour and requiring less disposable laboratory plastic-ware than standard PCR tests, helping to avoid resource
bottlenecks;
QIAreach Antibody test - allows clinicians to detect immune status of individuals and has applications in determining vaccine
efficacy;
QuantiFERON SARS-CoV-2 T cell assay - enables researchers to explore longer-term immune responses to the virus and vaccines;
and
a suite of next generation sequencing (NGS) and bioinformatics tools - used for epidemiological studies.
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Support for Local Initiatives
QIAGEN supports a broad range of activities in communities where our businesses are based. These include sponsorship of science
education, disease awareness campaigns, installation of school laboratories and promotion of biology in school curricula. Our local
engagement goes beyond financial. In Hilden, for instance, QIAGEN is collaborating with the local Rotary Club to help integrate
refugees from Syria and other war-torn countries through a program that includes language training and cultural orientation,
assessment centers, and internships at QIAGEN. Since April 2019, QIAGEN has supported 18 candidates through the program,
many of which are still employed with the company.
Hilden also works with Hephata, a local institution for citizens with disabilities, who undertake a broad array of operational tasks for
the company, including certain packaging and production responsibilities.
In North America, our employees are granted 8 hours of paid community service time and in 2020 committed around 720 hours of
volunteer time to meeting community needs. Our Community Service Committee mobilizes volunteers and provides company funds for
projects that improve the lives of people locally and nationally.
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121
Financial
Results
124 Consolidated Financial Statements
134 Notes to Consolidated Financial Statements
194 List of Subsidiaries
195 Auditor’s Report
Consolidated Financial Statement
)
QIAGEN N.V. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands)
(
Current assets:
Cash and cash equivalents
Restricted cash
Short-term investments
Accounts receivable, net of allowance for credit losses of $27,052 in 2020 and
allowance for doubtful accounts of $12,115 in 2019
Income taxes receivable
Inventories, net
Prepaid expenses and other current assets (of which $25,429 and $13,697 in
2020 and 2019 due from related parties, respectively)
AAssssss ooooooff DDeeeeeecccccceeeeeemmbbbbbbeeeeeerr 33333311,,,,,,
NNoottee
22002200
22001199
(3)
(3)
(7)
$ 597,984
$ 623,647
—
5,743
117,249
129,586
(3, 24)
380,519
385,117
59,335
42,119
(3)
291,181
170,704
(8, 24)
206,921
105,464
Fair value of derivative instruments - current
(14)
14,127
107,868
TToottaal ccuurrrreenntt aasssseettss
Long-term assets:
1,667,316
1,570,248
Property, plant and equipment, net of accumulated depreciation of $630,443 and
$699,130 in 2020 and 2019, respectively
(9)
559,372
455,243
Goodwill
Intangible assets, net of accumulated amortization of $809,724 and $776,520 in
2020 and 2019, respectively
Deferred income tax assets
Fair value of derivative instruments — long-term
(11)
(11)
(17)
(14)
2,364,031
2,140,503
726,194
632,434
54,879
56,542
379,080
192,266
Other long-term assets (of which $9,594 and $16,830 in 2020 and 2019 due from
related parties, respectively)
(10, 12, 24)
161,658
188,380
TToottaal loonngg-tteerrmm aasssseettss
TToottaal aasssseettss
4,245,214
3,665,368
$ 5,912,530 $ 5,235,616
The accompanying notes are an integral part of these consolidated financial statements.
124
F i n a n c i a l R e s u l t s › Consolidated Financial Statement
)
QIAGEN N.V. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except par value)
p p
(
,
Current liabilities:
Current portion of long-term debt
Accounts payable
Fair value of derivative instruments — current
AAss ooff DDeecceemmbbeerr 3311,,
NNoottee
22002200
22001199
(16)
(24)
(14)
$ 42,539
$ 285,244
118,153
84,767
51,464
103,175
Accrued and other current liabilities (of which $1,380 and $15,404 due to related
parties in 2020 and 2019, respectively)
(10, 13, 24)
345,665
444,303
Income taxes payable
TToottaal ccuurrrreenntt liiaabbiiliittiieess
Long-term liabilities:
Long-term debt, net of current portion
Deferred income tax liabilities
Fair value of derivative instruments — long-term
Other long-term liabilities
TToottaal loonngg-tteerrmm liiaabbiiliittiieess
57,265
33,856
615,086
951,345
(16)
(17)
(14)
1,880,210
1,421,108
39,216
23,442
393,455
196,929
(12, 15)
186,724
106,201
2,499,605
1,747,680
Commitments and contingencies
(20)
Equity:
Preference shares, 0.01 EUR par value, authorized—450,000 shares, no shares
issued and outstanding
Financing preference shares, 0.01 EUR par value, authorized—40,000 shares, no
shares issued and outstanding
Common Shares, 0.01 EUR par value, authorized—410,000 shares, issued—
230,829 shares in 2020 and 2019, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Less treasury shares, at cost—2,844 and 3,077 shares in 2020 and 2019,
respectively
TToottaal eeqquuiittyy
TToottaal liiaabbiiliittiieess aanndd eeqquuiittyy
The accompanying notes are an integral part of these consolidated financial statements.
—
—
—
—
2,702
2,702
1,834,169
1,777,017
1,323,091
1,178,457
(18)
(18)
(243,822)
(309,619)
(118,301)
(111,966)
2,797,839
2,536,591
$ 5,912,530 $ 5,235,616
125
QIAGEN N.V. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands, except per share data)
p p
Net sales
Cost of sales:
Cost of sales
YYeeaarrss eennddeedd DDeecceemmbbeerr 3311,,
NNoottee
22002200
22001199
22001188
(3, 4, 24)
$ 1,870,346
$ 1,526,424 $ 1,501,848
574,467
449,651
444,165
Acquisition-related intangible amortization
63,164
71,511
56,723
TToottaal ccoosstt ooff ssaaleess
GGrroossss pprrooffiitt
Operating expenses:
Research and development
Sales and marketing
General and administrative
637,631
521,162
500,888
1,232,715
1,005,262
1,000,960
(3)
(3)
149,072
157,448
161,852
413,684
391,906
392,281
111,678
112,262
104,568
Acquisition-related intangible amortization
20,811
29,973
39,032
Restructuring, acquisition, integration and other, net
(1, 6)
150,005
199,778
28,659
Long-lived asset impairments
(6)
1,034
140,031
7,987
TToottaal ooppeerraattiinngg eexxppeennsseess
Innccoommee ((loossss)) ffrroomm ooppeerraattiioonnss
Other income (expense):
Interest income
Interest expense
Other income, net
846,284
1,031,398
734,379
386,431
(26,136)
266,581
10,032
22,113
20,851
(71,317)
(74,185)
(67,293)
(6)
114,326
432
5,598
TToottaal ootthheerr iinnccoommee ((eexxppeennssee)),, nneett
53,041
(51,640)
(40,844)
Income (loss) before income tax (benefit) expense
439,472
(77,776)
225,737
Income tax expense (benefit)
(3, 17)
80,284
(36,321)
35,357
NNeett iinnccoommee ((loossss))
$ 359,188
$ (41,455)
$ 190,380
BBaassiicc eeaarrnniinnggss ((loossss)) ppeerr ccoommmmoonn sshhaarree
DDiiluutteedd eeaarrnniinnggss ((loossss)) ppeerr ccoommmmoonn sshhaarree
(19)
(19)
$ 1.57
$ (0.18)
$ 0.84
$ 1.53
$ (0.18)
$ 0.82
126
F i n a n c i a l R e s u l t s › Consolidated Financial Statement
Weighted-average common shares outstanding
Basic
Diluted
YYeeaarrss eennddeedd DDeecceemmbbeerr 3311,,
NNoottee
22002200
22001199
22001188
(19)
(19)
228,427
226,777
226,640
234,214
226,777
233,456
The accompanying notes are an integral part of these consolidated financial statements.
QIAGEN N.V. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
)
(in thousands)
(
YYeeaarrss eennddeedd DDeecceemmbbeerr 3311,,
NNoottee
22002200
22001199
22001188
NNeett iinnccoommee ((loossss))
$ 359,188
$ (41,455)
$ 190,380
Other comprehensive income (loss) to be reclassified to profit or loss in
subsequent periods:
(Losses) gains on cash flow hedges, net of tax benefit of $2.8 million in
2020, tax expense of $0 in 2019 and tax expense of $2.8 million in
2018
Reclassification adjustments on cash flow hedges, net of tax expense of
$4.7 million in 2020, tax expense of $0 in 2019 and tax benefit of
$2.4 million in 2018
Cash flow hedges, net of tax
Net investment hedge
Gain on pension, net of tax expense of $0 in 2020, tax expense of
$0.4 million in 2019 and tax benefit of $0.6 million in 2018
Foreign currency translation adjustments, net of tax expense of $0.9
million in 2020, tax benefit of $0.5 million in 2019 and tax benefit of
$1.4 million in 2018
(14)
(8,536)
11,547
8,526
(14)
13,999
(3,888)
(7,331)
5,463
7,659
1,195
(26,442)
5,505
13,839
(38)
(437)
754
86,814
(11,702)
(106,615)
TToottaal ootthheerr ccoommpprreehheennssiivvee iinnccoommee ((loossss))
65,797
1,025
(90,827)
CCoommpprreehheennssiivvee iinnccoommee ((loossss))
$ 424,985
$ (40,430)
$ 99,553
The accompanying notes are an integral part of these consolidated financial statements.
127
QIAGEN N.V. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
((iinn tthhoouussaannddss)) NNoottee CCoommmmoonn SShhaarreess
AAddddiittiioonnaal
PPaaiidd-Inn
CCaappiittaal
RReettaaiinneedd
EEaarrnniinnggss
AAccccuummuulaatteedd
OOtthheerr
CCoommpprreehheennssiivvee
Innccoommee ((LLoossss))
TTrreeaassuurryy SShhaarreess
TToottaal EEqquuiittyy
SShhaarreess
AAmmoouunntt
SShhaarreess
AAmmoouunntt
230,829 $ 2,702 $ 1,630,095 $ 1,247,945
$ (220,759)
(4,272) $ (118,987) $ 2,540,996
—
—
—
(942)
942
—
—
—
BBaalaannccee aatt
DDeecceemmbbeerr 3311,,
22001177
ASU 2016-01
impact of
change in
accounting
policy
ASU 2016-16
—
—
—
(16,096)
—
—
—
(16,096)
impact of
change in
accounting
policy
ASC 606
impact of
change in
accounting
policy
—
—
—
(1,306)
—
—
—
(1,306)
Issuance of
(18)
warrants
Net income
Unrealized
gain, net on
pension
—
—
—
—
—
—
Unrealized
(14)
—
—
gain, net on
hedging
contracts
—
—
—
71,983
—
—
—
—
—
—
—
—
—
71,983
190,380
754
190,380
—
754
—
22,365
—
—
22,365
Realized gain,
(14)
—
—
—
—
(7,331)
—
—
(7,331)
—
—
—
—
(106,615)
—
—
(106,615)
net on
hedging
contracts
Translation
adjustment,
net
128
F i n a n c i a l R e s u l t s › Consolidated Financial Statement
((iinn tthhoouussaannddss)) NNoottee CCoommmmoonn SShhaarreess
AAddddiittiioonnaal
PPaaiidd-Inn
CCaappiittaal
RReettaaiinneedd
EEaarrnniinnggss
AAccccuummuulaatteedd
OOtthheerr
CCoommpprreehheennssiivvee
Innccoommee ((LLoossss))
TTrreeaassuurryy SShhaarreess
TToottaal EEqquuiittyy
SShhaarreess
AAmmoouunntt
SShhaarreess
AAmmoouunntt
Purchase of
(18)
—
—
—
—
— (2,871)
(104,685)
(104,685)
treasury
shares
Issuance of
(22)
—
—
—
(40,357)
—
1,823
44,769
4,412
common
shares in
connection
with stock
plan
Share-based
(22)
—
—
40,113
—
—
—
—
40,113
230,829 $ 2,702 $ 1,742,191 $ 1,379,624
$ (310,644) $ (5,320) $ (178,903) $ 2,634,970
—
—
—
(316)
—
—
—
(316)
compensation
BBaalaannccee aatt
DDeecceemmbbeerr 3311,,
22001188
ASC 842
impact of
change in
accounting
policy
Net loss
Conversion of
(18)
warrants
Unrealized
loss, net on
pension
Unrealized
(14)
—
—
gain, net on
hedging
contracts
—
—
—
—
—
—
—
(41,455)
(31,067)
(37,698)
—
—
—
—
(41,455)
2,056
68,761
(4)
—
—
—
(437)
—
—
(437)
—
17,052
—
—
17,052
Realized gain,
(14)
—
—
—
—
(3,888)
—
—
(3,888)
net on
hedging
contracts
Translation
adjustment,
net
—
—
—
—
(11,702)
—
—
(11,702)
129
((iinn tthhoouussaannddss)) NNoottee CCoommmmoonn SShhaarreess
AAddddiittiioonnaal
PPaaiidd-Inn
CCaappiittaal
RReettaaiinneedd
EEaarrnniinnggss
AAccccuummuulaatteedd
OOtthheerr
CCoommpprreehheennssiivvee
Innccoommee ((LLoossss))
TTrreeaassuurryy SShhaarreess
TToottaal EEqquuiittyy
SShhaarreess
AAmmoouunntt
SShhaarreess
AAmmoouunntt
(18)
—
—
—
—
— (1,987)
(74,450)
(74,450)
(22)
—
—
—
(121,698)
—
3,622
123,773
2,075
(22)
—
—
—
—
— (1,448)
(51,147)
(51,147)
Purchase of
treasury
shares
Issuance of
common
shares in
connection
with stock
plan
Tax
withholding
related to
vesting of
stock awards
Share-based
(22)
—
—
65,893
—
—
—
—
65,893
230,829 $ 2,702 $ 1,777,017 $ 1,178,457
$ (309,619)
(3,077) $ (111,966) $ 2,536,591
—
—
—
(15,074)
—
—
—
(15,074)
—
—
—
—
—
—
—
359,188
(7,547)
(22,725)
—
(30,289)
(144,337)
—
54,052
—
—
—
—
—
—
—
359,188
807
30,272
—
—
—
—
(174,626)
—
54,052
—
—
—
—
(38)
—
—
(38)
compensation
BBaalaannccee aatt
DDeecceemmbbeerr 3311,,
22001199
ASC 326
impact of
change in
accounting
policy
Net income
Conversion of
(18)
warrants
Termination of
(18)
warrants
Equity
(16)
component of
convertible
debt, net
Unrealized
loss, net on
pension
130
F i n a n c i a l R e s u l t s › Consolidated Financial Statement
((iinn tthhoouussaannddss)) NNoottee CCoommmmoonn SShhaarreess
AAddddiittiioonnaal
PPaaiidd-Inn
CCaappiittaal
RReettaaiinneedd
EEaarrnniinnggss
AAccccuummuulaatteedd
OOtthheerr
CCoommpprreehheennssiivvee
Innccoommee ((LLoossss))
TTrreeaassuurryy SShhaarreess
TToottaal EEqquuiittyy
SShhaarreess
AAmmoouunntt
SShhaarreess
AAmmoouunntt
(14)
—
—
—
—
(34,978)
—
—
(34,978)
(14)
—
—
—
—
13,999
—
—
13,999
—
—
(18)
—
—
—
—
—
86,814
—
—
86,814
—
— (1,346)
(63,995)
(63,995)
Unrealized
loss, net on
hedging
contracts
Realized loss,
net on
hedging
contracts
Translation
adjustment,
net
Purchase of
treasury
shares
Issuance of
(22)
—
—
—
(32,418)
—
1,085
40,079
7,661
common
shares in
connection
with stock
plan
Tax
withholding
related to
vesting of
stock awards
Share-based
compensation
BBaalaannccee aatt
DDeecceemmbbeerr 3311,,
22002200
(22)
—
—
—
—
—
(313)
(12,691)
(12,691)
(22)
—
—
40,936
—
—
—
—
40,936
230,829 $ 2,702 $ 1,834,169 $ 1,323,091
$ (243,822)
(2,844) $ (118,301) $ 2,797,839
The accompanying notes are an integral part of these consolidated financial statements.
131
QIAGEN N.V. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
((iinn tthhoouussaannddss))
Cash flows from operating activities:
YYeeaarrss eennddeedd DDeecceemmbbeerr 3311,,
NNoottee
22002200
22001199
22001188
Net income (loss)
$ 359,188 $ (41,455)
$ 190,380
Adjustments to reconcile net income to net cash provided by operating activities,
net of effects of businesses acquired:
Depreciation and amortization
Non-cash impairments
205,014
231,458
206,436
(6)
1,432
144,830
17,020
Amortization of debt discount and issuance costs
42,318
40,763
35,537
Share-based compensation expense
(22)
40,936
65,893
40,113
Deferred income tax benefit
(17)
(6,706)
(55,362)
(23,272)
(Gain) loss on marketable securities
(1,992)
2,867
(2,725)
Gain on sale of investment
(10)
(121,813)
—
Reversals of contingent consideration
(15)
— (10,433)
—
—
Other items, net including fair value changes in derivatives
11,696
(3,394)
(8,834)
Net changes in operating assets and liabilities:
Accounts receivable
Inventories
(3)
(14,711)
(39,578)
(41,813)
(3)
(107,573)
(30,028)
(36,918)
Prepaid expenses and other current assets
(8)
1,061
18,626
(9,942)
Other long-term assets
Accounts payable
316
(1,406)
(30,312)
8,442
9,252
6,993
Accrued and other current liabilities
(13)
(22,141)
19,913
(13,317)
Income taxes
Other long-term liabilities
(17)
4,682
(6,782)
14,239
57,657
(14,321)
15,911
Net cash provided by operating activities
457,806
330,843
359,496
Cash flows from investing activitiesee :
Purchases of property, plant and equipment
(132,787)
(117,950)
(109,773)
Purchases of intangible assets
(11)
(171,450)
(156,934)
(40,990)
Proceeds from (purchases of) investments, net
(10)
25,638
(5,170)
(9,398)
Cash paid for acquisitions, net of cash acquired
(5)
(239,572)
(68,058)
(172,832)
Purchases of short-term investments
(7)
(49,770)
(293,959)
(568,002)
Proceeds from redemptions of short-term investments
(7)
181,223
396,098
691,765
132
F i n a n c i a l R e s u l t s › Consolidated Financial Statement
((iinn tthhoouussaannddss))
Proceeds from divestiture
YYeeaarrss eennddeedd DDeecceemmbbeerr 3311,,
NNoottee
22002200
22001199
22001188
(5)
1,845
1,000
16,394
Cash (paid) received for collateral asset
(14)
(53,417)
22,685
(3,461)
Other investing activities
(4,991)
10
(15,059)
Net cash used in investing activities
(443,281)
(222,278)
(211,356)
Cash flows from financing activities:
Proceeds from short-term debt
Repayment of short-term debt
Proceeds from long-term debt, net of issuance costs
Repayment of long-term debt
Payment for termination of warrants
(16)
59,345
(16)
(58,705)
(16)
497,646
—
—
—
(16)
(296,400)
(506,400)
(18)
(174,627)
—
Payment of intrinsic value of cash convertible notes
(16)
(237,438)
(133,763)
Proceeds from exercise of call option related to cash convertible notes
(16)
239,836
134,737
—
—
—
—
—
—
—
Purchase of treasury shares
(18)
(63,995)
(74,450)
(104,685)
Proceeds from issuance of common shares
7,662
2,075
4,412
Tax withholding related to vesting of stock awards
(13,841)
(49,998)
—
Other financing activities
(9,610)
(11,281)
(8,019)
Proceeds from issuance of cash convertible notes, net of issuance costs
Purchase of call option related to cash convertible notes
Proceeds from issuance of warrants, net of issuance costs
Principal payments on capital leases
(16)
(16)
(18)
—
—
—
—
—
—
—
—
494,879
(97,277)
72,406
(1,308)
Net cash (used in) provided by financing activities
(50,127)
(639,080)
360,408
Effect of exchange rate changes on cash, cash equivalents and restricted cash
4,196
826
(7,183)
Net (decrease) increase in cash, cash equivalents and restricted cash
(31,406)
(529,689)
501,365
Cash, cash equivalents and restricted cash, beginning of period
629,390 1,159,079
657,714
Cash, cash equivalents and restricted cash, end of period
$ 597,984 $ 629,390 $ 1,159,079
Supplemental cash flow disclosures:
Cash paid for interest
Cash paid for income taxes
The accompanying notes are an integral part of these consolidated financial statements.
$ 25,351
$ 29,721
$ 25,902
$ 42,572
$ 41,474
$ 29,317
133
Notes to Consolidated Financial Statements
For the Year Ended December 31, 2020
1. Corporate Information and Basis of Presentation
Corporate Information
QIAGEN N.V. is a public limited liability company ('naamloze vennootschap') under Dutch law with registered office at Hulsterweg
82, 5912 PL Venlo, The Netherlands. QIAGEN N.V., a Netherlands holding company, and subsidiaries (we, our or the Company) is
a leading global provider of Sample to Insight solutions that enable customers to gain valuable molecular insights from samples
containing the building blocks of life. Our sample technologies isolate and process DNA, RNA and proteins from blood, tissue and
other materials. Assay technologies make these biomolecules visible and ready for analysis. Bioinformatics software and knowledge
bases interpret data to report relevant, actionable insights. Automation solutions tie these together in seamless and cost-effective
workflows. We provide solutions to more than 500,000 customers around the world in Molecular Diagnostics (human healthcare) and
Life Sciences (academia, pharma R&D and industrial applications, primarily forensics). As of December 31, 2020, we employed
more than 5,600 people in over 35 locations worldwide.
Announced Merger with Thermo Fisher Scientific Inc.
On March 3, 2020, QIAGEN and Thermo Fisher Scientific Inc. (NYSE: TMO) announced that their boards of directors, as well as the
Managing Board of QIAGEN N.V., unanimously approved Thermo Fisher’s proposal to acquire QIAGEN for (cid:189)39.00 per share in
cash. On July 16, 2020, Thermo Fisher and QIAGEN entered into an amendment to the Business Combination Agreement dated as of
March 3, 2020 whereby Quebec B.V., the wholly-owned subsidiary of Thermo Fisher making the public tender offer, increased the
cash consideration offered per QIAGEN share from (cid:189)39.00 to (cid:189)43.00. The amendment also provided for a reduction of the
minimum acceptance threshold from 75% to 66.67% of QIAGEN’s issued and outstanding ordinary share capital at the end of the
acceptance period on August 10, 2020, as well as a $95.0 million expense reimbursement payable by QIAGEN to Thermo Fisher if
the minimum acceptance threshold is not met. On August 13, 2020, QIAGEN announced that Thermo Fisher did not achieve the
minimum 66.67% acceptance threshold from QIAGEN shareholders. For the year ended December 31, 2020, we incurred related
expenses of $125.5 million, which includes the $95.0 million expense reimbursement which was paid when the minimum acceptance
threshold was not met. These costs are recorded within restructuring, acquisition, integration and other expenses, net in the
accompanying consolidated statement of income.
Basis of Presentation
The accompanying consolidated financial statements were prepared in accordance with U.S. generally accepted accounting
principles (GAAP) and all amounts are presented in U.S. dollars rounded to the nearest thousand, unless otherwise indicated. The
consolidated financial statements have been prepared on a historical cost basis, except for derivative financial instruments,
contingent consideration and available-for-sale financial instruments that have been measured at fair value.
We undertake acquisitions to complement our own internal product development activities. In September 2020, we completed the
acquisition of the remaining shares in NeuMoDx Molecular, Inc ("NeuMoDx"), a privately-held U.S. company that designs and
develops molecular diagnostics solutions for hospital and clinical reference laboratories. In 2019, we completed three immaterial
acquisitions, including the January 2019 acquisition of N-of-One, Inc., a privately-held U.S. molecular decision support company and
pioneer in clinical interpretation services for complex genomic data located in Concord, Massachusetts. In April 2018, we acquired
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F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
all shares in STAT-Dx Life, S.L. ("STAT-Dx"), a privately-held company located in Barcelona, Spain and also completed the acquisition
of the remaining shares of a privately held entity in which we held a minority interest. Accordingly, at their respective acquisition
dates, all the assets acquired and liabilities assumed were recorded at their respective fair values and our consolidated results of
operations include the operating results from the acquired companies from the acquisition date.
Certain prior year amounts have been reclassified to conform to the current year presentation.
2. Effects of New Accounting Pronouncements
The following new Financial Accounting Standards Board (FASB) Accounting Standards Updates (ASU) were adopted in 2020, 2019
and 2018:
Adoption of New Accounting Standards in 2020
ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, provides
financial statement users with more decision-useful information about the expected credit losses on financial instruments and other
commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in ASU
2016-13 replace the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires
consideration of a broader range of reasonable and supportable information to form credit loss estimates. The measurement of
expected credit losses under Topic 326 is applicable to financial assets measured at amortized cost, including loan receivables and
held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan
commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized
by a lessor in accordance with Topic 842 on leases. In addition, Topic 326 made changes to the accounting for available-for-sale
debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on
available-for-sale debt securities management does not intend to sell or believes is more likely than not they will be required to sell.
We adopted Topic 326 on January 1, 2020 using the modified retrospective approach by recognizing the effect of initially applying
Topic 326 as an after-tax $15.1 million ($19.6 million pre-tax) adjustment to the opening balance of retained earnings at January 1,
2020 for credit losses on loans, notes and accounts receivable. The adoption did not have an impact on our consolidated statements
of income or cash flows.
ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606, precludes an
entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the
counterparty is not a customer of that transaction. The guidance amends ASC 808 to refer to unit-of-account guidance in ASC 606
and requires it to be used only when assessing whether a transaction is in the scope of ASC 606. ASU 2018-18 is effective for us for
annual periods beginning on January 1, 2020. Entities are required to apply the amendments retrospectively to the date they initially
applied ASC 606. We adopted ASU 2018-18 on January 1, 2020 without any cumulative effect.
ASU 2020-03, Codification Improvements to Financial Instruments, was issued to improve and clarify various financial instrument
topics, including Topic 326 issued in 2016. The ASU includes seven issues that describe areas of improvement and the related
amendments to GAAP. They are intended to make the standards easier to understand and apply and to eliminate inconsistencies.
They are narrow in scope and are not expected to significantly change practice for most entities. The amendments have different
effective dates with early adoption permitted. We adopted ASU 2020-03 on January 1, 2020 without any effect.
ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives
and Hedging (Topic 815)-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815, addresses accounting for the
transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments.
The ASU is effective on January 1, 2021. Early adoption is permitted, including early adoption in an interim period. We adopted
ASU 2020-01 on June 30, 2020 without any impact.
135
Adoption of New Accounting Standards in 2019
The FASB issued guidance codified in Accounting Standards Codification (ASC) Topic 842, Leases (Topic 842), which supersedes the
lease requirements in ASC Topic 840 and aims to increase transparency and comparability among organizations and requires
disclosure of key information about leasing arrangements. The main principle of ASC 842 requires lessees to recognize the assets
and liabilities that arise from nearly all leases on the consolidated balance sheet. Lessor accounting remains mainly consistent with
the former guidance, with the majority of changes allowing for better alignment with the new lessee model and ASC Topic 606. We
adopted these standards as per the effective date of January 1, 2019, using the modified retrospective approach and did not restate
comparative periods. Under this approach, the cumulative effect of initially applying the standard was recognized as an adjustment
to the opening balance of retained earnings on the date of initial application. As a lessee, the classification of our leases did not
change, but we recognized a lease liability and corresponding right-of-use asset on our consolidated balance sheets for all our
operating leases. We have elected the package of practical expedients which allows us to not reassess (1) whether existing contracts
contain leases, (2) the lease classification for existing leases, and (3) whether existing initial direct costs meet the new definition. We
also elected the hindsight practical expedient which permits entities to use hindsight in determining the lease term when transitioning
to ASC 842. Our initial lease liabilities and right-of-use assets totaled $57.7 million and $57.4 million, respectively, as recorded in
our consolidated balance sheet as of January 1, 2019, primarily relating to leased office space. The difference between the
additional lease assets and lease liabilities was recorded as a $0.3 million adjustment to retained earnings. Further disclosure is
found in Note 12 "Leases".
ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, makes more
financial and nonfinancial hedging strategies eligible for hedge accounting. It also amends the presentation and disclosure
requirements and changes how companies assess effectiveness. It is intended to more closely align hedge accounting with companies’
risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of
hedging programs. The new guidance became effective for public entities beginning on January 1, 2019 by applying a modified
retrospective approach to existing hedging relationships as of the adoption date. Under the modified retrospective approach, entities
with cash flow or net investment hedges will make (1) a cumulative-effect adjustment to accumulated other comprehensive income so
that the adjusted amount represents the cumulative change in the hedging instruments’ fair value since hedge inception (less any
amounts that should have been recognized in earnings under the new accounting model) and (2) a corresponding adjustment to
opening retained earnings as of the most recent period presented on the date of adoption. We adopted ASU 2017-12 on January 1,
2019 without any cumulative effect.
ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, removes Step 2 of the
goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair
value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for public entities for annual periods beginning
January 1, 2020 and early adoption is permitted. The new guidance is required to be applied on a prospective basis. We adopted
ASU 2017-04 on January 1, 2019 and applied the new guidance prospectively as required.
ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework, provides guidance that eliminates, adds and modifies
certain disclosure requirements for fair value measurements. ASU 2018-13 is effective for public entities for annual periods beginning
January 1, 2020. Entities are permitted to early adopt either the entire standard or only the provisions that eliminate or modify the
requirements. We adopted ASU 2018-13 on January 1, 2019 and applied the entire standard to disclosures as required beginning
in 2019.
ASU 2018-15, Intangibles--Goodwill and Other--Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation
Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, provides guidance on a customer's accounting for
implementation, set-up, and other upfront costs incurred in a cloud computing arrangement that is hosted by the vendor, i.e. a service
contract. Under the new guidance, customers will apply the same criteria for capitalizing implementation costs as they would for an
arrangement that has a software license. ASU 2018-15 is effective for public entities for annual periods beginning January 1, 2020,
and early adoption is permitted and should be applied either retrospectively or prospectively to all implementation costs incurred
after the date of adoption. We adopted ASU 2018-15 on January 1, 2019 and applied the guidance to all implementation costs
prospectively.
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F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities, amends
how a decision maker or service provider determines whether its fee is a variable interest entity (VIE) when a related party under
common control also has an interest in the VIE. We adopted ASU 2018-17 on January 1, 2019, on a prospective basis.
Adoption of New Accounting Standards in 2018
ASU 2014-09, Revenue from Contracts with Customers (Topic 606) and additional related accounting standard updates to clarify and
provide implementation guidance were adopted with a date of initial application of January 1, 2018. The comparative information
for 2017 has not been adjusted and continues to be reported under ASC Topic 605 Revenue Recognition. As a result, we changed
our accounting policy for revenue recognition. We applied the Topic 606 using the "modified retrospective method" by recognizing
the effect of initially applying Topic 606 as an $1.3 million decrease to the opening balance of retained earnings at January 1,
2018, for all contracts not completed at January 1, 2018.
ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial
Liabilities as well as an additional clarifying accounting standard update became effective for our financial statements beginning in
the first quarter of 2018. This ASU makes targeted improvements to existing U.S. GAAP for both the recognition and measurement of
financial assets and financial liabilities. Changes in accounting to our equity investments as a result of this standard are further
discussed in Notes below. As required, we adopted using a cumulative-effect adjustment to the balance sheet as of the beginning of
2018 and recorded an adjustment to decrease opening retained earnings at January 1, 2018 by $0.9 million (pre-tax $1.1 million)
as required for our equity investments recorded at fair value.
ASU 2016-05, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments and ASU 2016-18,
Statement of Cash Flows (Topic 320): Restricted Cash, addresses classification issues and presentation related to the statement of
cash flows and was adopted on January 1, 2018 without any impact from the adoption.
ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, aims to improve the accounting for the
income tax consequences of intra-entity transfers of assets other than inventory. This standard was adopted on a modified
retrospective basis resulting in a decrease to opening retained earnings of $16.1 million at January 1, 2018.
ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, clarifies and provides a more robust
framework to use in determining when a set of assets and activities is a business. We adopted this update beginning January 1,
2018, without impact.
ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, clarifies when to account for a
change to the terms and conditions of a share-based payment award as a modification. This guidance is effective prospectively and
was adopted as of January 1, 2018.
ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from
Accumulated Other Comprehensive Income, permits reclassification of stranded tax effects of the U.S. Tax Cuts and Jobs Act (Tax
Act). We adopted this standard as of April 1, 2018 with no impact as we had no stranded tax effects. This guidance only relates to
the effects of the Tax Act. For all other tax law changes that have occurred or may occur in the future, we reclassify the tax effects to
the consolidated statement of income (loss) on an item-by-item basis when the pre-tax item in accumulated other comprehensive
income (loss) is reclassified to income.
ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,
aligns most of the accounting for share-based payment awards issued to employees and non-employees. We early adopted this
standard as of July 1, 2018, without material impact.
137
New Accounting Standards Not Yet Adopted
The following new FASB Accounting Standards Updates, which are not yet adopted as of December 31, 2020, have been grouped
by their required effective dates or early adoption date:
First Quarter of 2021
ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, removes certain exceptions for recognizing
deferred taxes for investments, performing intraperiod tax allocations and calculating income taxes in interim periods. The ASU also
adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating income
taxes to members of a consolidated group. ASU 2019-12 is effective for annual periods beginning on January 1, 2021, with earlier
adoption permitted. We adopted the ASU on the efee fective date of January 1, 2021 and the adoption of this guidance did not have
an impact on our consolidated financial statements on the date of adoption. Ultimately, the impact in future periods will be dependent
on the extent of future events or conditions that would be affected such as enacted changes in tax laws or rates.
ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in
Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, reduces the
number of accounting models for convertible instruments. The ASU also amends diluted earnings per share (EPS) calculations for
convertible instruments, which will result in more dilutive EPS results. The ASU also amends the requirements for a contract (or
embedded derivative) that is potentially settled in an entity’s own shares to be classified in equity. ASU 2020-06 is effective for
annual periods beginning on January 1, 2022, with earlier adoption on January 1, 2021 permitted. We early adopted ASU 2020-
06 on January 1, 2021 and as a result reclassified $54.1 million from equity for the conversion feature to the liability for our 2027
Convertible Notes further discussed in Note 16 "Debt".
Through December 31, 2022
ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, and
ASU 2021-01 Reference Rate Reform (Topic 848): Scope, provide companies with optional guidance to ease the potential accounting
burden associated with transitioning away from reference rates that are expected to be discontinued. Companies can apply the ASU
immediately. However, the guidance will only be available for a limited time, generally through December 31, 2022. We continue to
evaluate the guidance.
3. Summaryrr of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of QIAGEN N.V. and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated. Investments in either common stock or in-substance common stock of
companies where we exercise significant influence over the operations but do not have control, and where we are not the primary
beneficiary, are accounted for using the equity method. All other investments are accounted for as discussed under "Non-marketee able
Investments" below. When there is a portion of equity in an acquired subsidiary not attributable, directly or indirectly, to the
Company, we record the fair value of the noncontrolling interests at the acquisition date and classify the amounts attributable to
noncontrolling interests separately in equity in the consolidated financial statements. Any subsequent changes in the Company's
ownership interest while the Company retains its controlling financial interest in its subsidiary are accounted for as equity
transactions.
138
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingencies
at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Concentrations of Risk
We buy materials for products from many suppliers, and are not dependent on any one supplier or group of suppliers for the business
as a whole. However, key components of certain products, including certain instrumentation components and chemicals, are
available only from a single source. If supplies from these vendors were delayed or interrupted for any reason, we may not be able to
obtain these materials timely or in sufficient quantities in order to produce certain products and sales levels could be negatively
affected. Additionally, our customers include researchers at pharmaceutical and biotechnology companies, academic institutions, and
government and private laboratories. Fluctuations in the research and development budgets of these researchers and their
organizations for applications in which our products are used could have a significant effect on the demand for our products.
The financial instruments used in managing our foreign currency, equity and interest rate exposures have an element of risk in that the
counterparties may be unable to meet the terms of the agreements. We attempt to minimize this risk by limiting the counterparties to a
diverse group of highly-rated international financial institutions. The carrying values of our financial instruments incorporate the non-
performance risk by using market pricing for credit risk. However, we have no reason to believe that any counterparties will default
on their obligations. In order to minimize our exposure with any single counterparty, we have entered into master agreements which
allow us to manage the exposure with the respective counterparty on a net basis.
Other financial instruments that potentially subject us to concentrations of credit risk are cash and cash equivalents, short-term
investments, and accounts receivable. We attempt to minimize the risks related to cash and cash equivalents and short-term
investments by dealing with highly-rated financial institutions and investing in a broad and diverse range of financial instruments. We
have established guidelines related to credit quality and maturities of investments intended to maintain safety and liquidity.
Concentration of credit risk with respect to accounts receivable is limited due to a large and diverse customer base, which is
dispersed over different geographic areas. Allowances are maintained for potential credit losses and such losses have historically
been within expected ranges.
Foreign Currency Translation
Our reporting currency is the U.S. dollar and the functional currencies of our subsidiaries are generally the local currency of the
respective countries in which they are headquartered. All amounts in the financial statements of entities whose functional currency is
not the U.S. dollar are translated into U.S. dollar equivalents at exchange rates as follows: (1) assets and liabilities at period-end
rates, (2) income statement accounts at average exchange rates for the period, and (3) components of equity at historical rates.
Translation gains or losses are recorded in equity, and transaction gains and losses are reflected in net income (loss) as a component
of other income, net. Realized gains or losses on the value of derivative contracts entered into to hedge the exchange rate exposure
of receivables and payables are also included in net income (loss) as a component of other income, net. The net loss on foreign
currency transactions was $4.1 million, $5.7 million, and $12.3 million in 2020, 2019 and 2018, respectively, and is included in
other income, net.
139
The exchange rates of key currencies were as follows:
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AAnnnnuuaal aavveerraaggee rraattee
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22002200
22001199
22002200
22001199
22001188
Euro (EUR)
Pound Sterling (GBP)
Swiss Franc (CHF)
Australian Dollar (AUD)
Canadian Dollar (CAD)
Japanese Yen (JPY)
Chinese Yuan (CNY)
Segment Information
1.2271
1.1234
1.1411
1.1196
1.1813
1.3649
1.3204
1.2836
1.2768
1.3356
1.1360
1.0350
1.0659
1.0062
1.0228
0.7720
0.7023
0.6905
0.6954
0.7478
0.7849
0.7696
0.7463
0.7535
0.7719
0.0097
0.0092
0.0094
0.0092
0.0091
0.1530
0.1437
0.1450
0.1448
0.1514
We determined that we operate as one operating segment in accordance with the Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) Topic 280, Segment Reporting. Our chief operating decision maker (CODM) makes
decisions based on the Company as a whole. In addition, we have a common basis of organization and types of products and
services which derive revenues and consistent product margins. Accordingly, we operate and make decisions as one reporting unit.
Revenue Recognition
We recognize revenue when control of promised goods or services transfers to our customers in an amount that reflects the
consideration that is expected to be received in exchange for those goods or services. The majority of our sales revenue is
recognized when products are shipped to the customers at which point control transfers.
Warranty
We provide warranties on our products against defects in materials and workmanship for a period of one year. A provision for
estimated future warranty costs is recorded in cost of sales at the time product revenue is recognized. Product warranty obligations
are included in accrued and other current liabilities in the accompanying consolidated balance sheets.
Research and Development
Research and product development costs are expensed as incurred. Research and development expenses consist primarily of salaries
and related expenses, facility costs, and amounts paid to contract research organizations and laboratories for the provision of
services and materials as well as costs for internal use or clinical trials.
Government Grants
We recognize government grants when there is reasonable assurance that all conditions will be complied with and the grant will be
received. Our government grants generally represent subsidies for specified activities and are therefore recognized when earned as a
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F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
reduction of the expenses recorded for the activity that the grants are intended to compensate. Thus, when the grant relates to
research and development expense, the grant is recognized over the same period that the related costs are incurred. Otherwise,
amounts received under government grants are recorded as liabilities in the balance sheet. When the grant relates to an asset, the
nominal amount of the grant is deducted from the carrying amount of the asset and recognized over the same period that the related
asset is depreciated.
Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that takes a substantial period of time to
get ready for its intended use or sale are capitalized as part of the cost of the respective assets (qualifying asset) when such
borrowing costs are significant. All other borrowing costs are expensed in the period they occur.
Shipping and Handling Income and Costs
Shipping and handling costs charged to customers are recorded as revenue in the period that the related product sale revenue is
recorded. Associated costs of shipping and handling are included in sales and marketing expenses. For the years ended December
31, 2020, 2019 and 2018, shipping and handling costs totaled $32.1 million, $27.9 million and $28.4 million, respectively.
Advertising Costs
The costs of advertising are expensed as incurred and are included as a component of sales and marketing expense. Advertising
costs for the years ended December 31, 2020, 2019 and 2018 were $9.5 million, $8.1 million and $8.1 million, respectively.
General and Administrative
General and administrative expenses primarily represent the costs required to support administrative infrastructure. These costs
include licensing costs in connection with continued investments in information technology improvements, including cyber security,
across the organization as well as personnel in administrative functions.
Restructuring, Acquisition, Integration and Other
We incur indirect acquisition and business integration costs in connection with business combinations which are expensed when
incurred. These costs represent incremental costs that we believe would not have been incurred absent the business combinations.
Major components of these costs include consulting and related fees incurred to integrate or restructure the acquired operations,
payroll and related costs for employees remaining with the Company on a transitional basis and public relations, advertising and
media costs for re-branding of the combined organization.
Restructuring costs include personnel costs (principally termination benefits) as well as contract and other costs, primarily contract
termination costs. Termination benefits are accounted for in accordance with FASB ASC Topic 712, Compensation - Nonretirement
Postemployment Benefits, and are recorded when it is probable that employees will be entitled to benefits and the amounts can be
reasonably estimated. Estimates of termination benefits are based on the frequency of past termination benefits, the similarity of
benefits under the current plan and prior plans, and the existence of statutory required minimum benefits. Contract and other costs
are accounted for in accordance with FASB ASC Topic 420, Exit or Disposal Cost Obligations and are recorded when the liability is
incurred. The specific restructuring measures and associated estimated costs are based on management's best business judgment
under the existing circumstances at the time the estimates are made. If future events require changes to these estimates, such
adjustments will be reflected in the period of the revised estimate.
141
Income Taxes
We account for income taxes under the liability method. Under this method, total income tax expense is the amount of income taxes
expected to be payable for the current year plus the change from the beginning of the year for deferred income tax assets and
liabilities established for the expected future tax consequences resulting from differences in the financial statement carrying amount
and the tax basis of assets and liabilities. Deferred tax assets and/or liabilities are determined by multiplying the differences between
the financial statement carrying amount and the tax reporting bases for assets and liabilities by the enacted tax rates expected to be
in effect when such differences are recovered or settled. Deferred tax assets are reduced by a valuation allowance to the amount
more likely than not to be realized. The effect on deferred taxes of a change in tax rates is recognized in income in the period that
includes the enactment date.
Tax benefits are initially recognized in the financial statements when it is more likely than not that the position will be sustained upon
examination by the tax authorities. Such tax positions are initially and subsequently measured as the largest amount of tax benefit
that is greater than 50 percent likely of being realized upon settlement with the taxing authority using the cumulative probability
method, assuming the tax authority has full knowledge of the position and all relevant facts. Our policy is to recognize interest
accrued related to unrecognized tax benefits in interest expense and penalties within the income tax expense.
Derivative Instruments
We enter into derivative financial instrument contracts to minimize the variability of cash flows or income statement impact associated
with the anticipated transactions being hedged or to hedge fluctuating interest rates. As changes in foreign currency or interest rate
impact the value of anticipated transactions, the fair value of the forward or swap contracts also changes, offsetting foreign currency
or interest rate fluctuations. Derivative instruments are recorded on the balance sheet at fair value. Changes in fair value of
derivatives are recorded in current earnings or other comprehensive income, depending on whether a derivative is designated as part
of a hedge transaction.
Share-Based Payments
Compensation cost for all share-based payments is recorded based on the grant date fair value, less an estimate for pre-vesting
forfeitures, recognized in expense over the service period using an accelerated method.
Forfeiture Rate — This is the estimated percentage of grants that are expected to be forfeited or canceled on an annual basis before
becoming fully vested. We estimated the forfeiture rate based on historical forfeiture experience.
Restricted Stock Units and Performance Stock Units: Restricted stock units and performance stock units represent rights to receive
Common Shares at a future date. The fair market value of restricted and performance stock units is determined based on the number
of stock units granted and the fair market value of our shares on the grant date. The fair market value at the time of the grant, less an
estimate for pre-vesting forfeitures, is recognized in expense over the vesting period. At each reporting period, the estimated
performance achievement of the performance stock units is assessed and any change in the estimated achievement is recorded on a
cumulative basis in the period of adjustment.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on deposit in banks and other cash invested temporarily in various instruments that are
short-term and highly liquid, and having an original maturity of less than 90 days at the date of purchase. Cash and cash equivalents
as of December 31, 2020 and 2019 consist of the following:
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F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
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Cash at bank and on hand
Short-term bank deposits
Cash and cash equivalents
Restricted Cash
22002200
22001199
$ 245,373
$ 189,569
352,611
434,078
$ 597,984
$ 623,647
Restricted cash includes cash that is subject to legal restriction in connection with a tender offer and not available for general
operating purposes. As of December 31, 2019, we had $5.7 million of restricted cash.
Short-Term Investments
Short-term investments consisting of marketable equity securities are reported at fair value with gains and losses recorded in earnings.
Short-term investments consisting of cash investments are classified as “available for sale” and stated at fair value, which is
equivalent to the amortized cost, in the accompanying consolidated balance sheet. Interest income is accrued when earned and
changes in fair market values are reflected in other income, net. The amortization of premiums and accretion of discounts to maturity
arising from acquisition is included in interest income. A decline in fair value that is judged to be other-than-temporary is accounted
for as a realized loss and the write-down is included in the consolidated statements of income. Realized gains and losses, determined
on a specific identification basis on the sale of short-term investments, are included in income.
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, notes receivable, accounts receivable, accounts payable and accrued liabilities
approximate their fair values because of the short maturities of those instruments. The carrying value of our variable rate debt and
leases approximates their fair values because of the short maturities and/or interest rates which are comparable to those available to
us on similar terms. The fair values of the zero coupon convertible debt and the Cash Convertible Notes are based on an estimation
using available over-the-counter market information. The fair values of the Private Placement Senior Notes were estimated using the
changes in the U.S. Treasury rates and the fair value of the German Private Placement is based on an estimation using changes in the
euro swap rates.
Accounts Receivable and Allowance for Credit Losses
Our accounts receivable consist of unsecured customer obligations and we are at risk to the extent such amounts become
uncollectible. Accounts receivable are carried at face value less an allowance for doubtful accounts as of December 31, 2019, and
following the adoption of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments, less an allowance for expected credit losses. We continually monitor accounts receivable balances, and until December
31, 2019, provided for an allowance for doubtful accounts at the time collection became questionable based on payment history or
age of the receivable. Since January 1, 2020, we maintain allowances for credit losses resulting from the expected failure or inability
of our customers to make required payments. We recognize the allowance for expected credit losses at inception and reassess
regularly considering historical experience with bad debts, the aging of the receivables, credit quality of the customer base, current
economic conditions and other reasonable and supportable expectations for future conditions, if applicable. Once a receivable is
determined to be uncollectible, the balance is charged against the allowance.
143
We sell our products worldwide through sales subsidiaries and distributors. There is no concentration of credit risk with respect to
trade accounts receivable as we have a large number of internationally dispersed customers. Trade accounts receivable are non-
interest bearing and mostly have payment terms of 30-90 days. For all years presented, no single customer represented more than ten
percent of accounts receivable or consolidated net sales.
The changes in the allowance for credit losses on accounts receivable for the year ended December 31, 2020 and in the allowance
for doubtful accounts for the years ended December 31, 2019 and 2018 are as follows:
((iinn tthhoouussaannddss))
Balance at beginning of year
ASC 326 adoption impact
Additions charged to expense
Deductions from allowance
Currency translation adjustments and other
22002200
22001199
22001188
$ 12,115
$ 9,270
$ 8,008
8,089
16,439
(9,868)
277
–
–
8,701
4,448
(5,777)
(2,827)
(79)
(359)
Balance at end of year
$ 27,052
$ 12,115
$ 9,270
For the year ended December 31, 2020, additions charged to expense of $16.4 million include the forward-looking expected impact
of the global economic uncertainty caused by COVID-19.
Loans and Other Receivables and Allowance for Credit Losses
Prepaid expenses and other current assets include other short-term receivables and other long-term assets include long-term loan
receivables. Following the adoption of Topic 326, we are required to use the new forward-looking expected credit loss model that
replaced the previous incurred credit loss model. The new model generally results in earlier recognition of allowances for credit
losses and requires consideration of a broader range of information to estimate expected credit losses over the entire lifetime of the
assets. Accordingly, with the adoption of Topic 326, we recorded allowances for credit losses of $10.2 million for other receivables
and $1.3 million for loan receivables. As of December 31, 2020, allowances for credit losses of $7.9 million for other receivables
are included in prepaid expenses and other current assets and $1.2 million for loan receivables are included in other long-term
assets in the accompanying consolidated balance sheet. The allowances reflect the forward-looking expected impact of non-payment
of the contractual amounts due.
Inventories
Inventories are stated at the lower of cost or net realizable value, determined on either a weighted average cost basis or a standard
cost basis which is regularly adjusted to actual. Inventories include material, direct labor and overhead costs and are reduced for
estimated obsolescence. Inventories consisted of the following as of December 31, 2020 and 2019:
((iinn tthhoouussaannddss))
Raw materials
Work in process
Finished goods
TToottaal iinnvveennttoorriieess,, nneett
144
22002200
$ 65,449
74,398
151,334
22001199
$ 26,077
45,729
98,898
$ 291,181
$ 170,704
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated amortization. Capitalized internal-use software costs include only
those direct costs associated with the actual development or acquisition of computer software solely to meet internal needs and cloud-
based applications to deliver our service and comprise costs associated with the design, coding, installation and testing of the
system. Costs associated with preliminary development, such as the evaluation and selection of alternatives, as well as training,
maintenance and support are expensed as incurred. Costs for software to be sold, leased or otherwise marketed that are related to
the conceptual formulation and design are expensed as incurred. Costs incurred to produce software products and the software
components of products to be sold, leased or marketed after technological feasibility is established are capitalized and amortized in
accordance with the accounting standards for the costs of software to be sold, leased, or otherwise marketed. All other depreciation
is computed using the straight-line method over the estimated useful lives of the assets (3 to 40 years). Amortization of leasehold
improvements is computed on a straight-line basis over the lesser of the remaining life of the lease or the estimated useful life of the
improvement asset. We have a policy of capitalizing expenditures that materially increase assets’ useful lives and charging ordinary
maintenance and repairs to operations as incurred. When property or equipment is disposed of, the cost and related accumulated
depreciation and amortization are removed from the accounts and any gain or loss is included in earnings.
Business Combinations
We include the results of operations of the businesses that we acquire as of the acquisition date. The purchase price of an acquired
business is allocated to the individual assets acquired and liabilities assumed based on their fair values at the date of acquisition.
Those fair values are determined using income, cost and market approaches, most of which depend upon significant inputs that are
not observable in the market, or level 3 measurements. The excess of purchase price over the fair value of identifiable assets acquired
and liabilities assumed is recorded as goodwill. Acquisition-related expenses are recognized separately from the business
combinations and are expensed as incurred.
The purchase price for some business combinations includes consideration that is contingent on the achievement of net sales or
earnings targets by the acquired business. Contingent consideration is measured initially and on a recurring basis at fair value.
Payments to settle the acquisition-date fair value of contingent consideration are presented as financing activities on the statement of
cash flows; any payments in excess of the acquisition-date fair value are presented as operating activities.
Acquired Intangibles and Goodwill
Acquired intangibles with alternative future uses are carried at cost less accumulated amortization and consist of licenses to
technology held by third parties and other acquired intangible assets. Amortization is computed over the estimated useful life of the
underlying patents, which has historically ranged from 1 to 20 years. Purchased intangible assets acquired in business combinations,
other than goodwill, are amortized over their estimated useful lives unless these lives are determined to be indefinite. Intangibles are
assessed for recoverability considering the contract life and the period of time over which the intangible will contribute to future cash
flow. The unamortized cost of intangible assets, where cash flows are independent and identifiable from other assets, is evaluated
periodically and adjusted, if necessary, if events and circumstances indicate that a decline in value below the carrying amount has
occurred. Intangible asset impairments recorded during the year ended December 31, 2020, 2019 and 2018 are further discussed
in Note 6 "Restructuring and Impairments".
Amortization expense related to developed technology and patent and license rights which have been acquired in a business
combination is included in cost of sales. Amortization of trademarks, customer base and non-compete agreements which have been
acquired in a business combination is recorded in operating expense under the caption 'acquisition-related intangible amortization'.
Amortization expenses of intangible assets not acquired in a business combination are recorded within either the cost of sales,
research and development or sales and marketing line items based on the use of the asset.
We dispose the gross carrying amount and accumulated amortization of fully amortized intangible assets from historic business
combinations once they are considered fully integrated into our business.
145
The fair value of in-process research and development (IPR&D) acquired in a business combination is capitalized as an indefinite-lived
intangible asset until completion or abandonment of the related research and development activities. IPR&D is tested for impairment
annually or when any event or circumstance indicates that the fair value may be below the carrying value. If and when research and
development is complete, the associated asset is amortized over the estimated useful life.
Goodwill represents the difference between the purchase price and the estimated fair value of the net assets acquired arising from
business combinations. Goodwill is subject to impairment tests annually or earlier if indicators of potential impairment exist, using a
fair-value-based approach. We have elected to perform our annual test for indications of impairment as of October 1 st of each year.
Following the annual impairment tests for the years ended December 31, 2020, 2019 and 2018, goodwill has not been impaired.
Non-Marketable Investments
We have investments in non-marketable equity securities issued by privately held companies. These investments are included in other
long-term assets in the accompanying consolidated balance sheets. Non-marketable investments through which we exercise significant
influence but do not have control are accounted for using the equity method. We monitor for changes in circumstances that may
require a reassessment of the level of influence. Following the adoption of ASU 2016-01 on January 1, 2018, our non-marketable
equity securities not accounted for under the equity method are either carried at fair value or under the measurement alternative.
Under the measurement alternative, the carrying value is measured at cost, less any impairment, plus or minus changes resulting from
observable price changes in orderly transactions for identical or similar investments of the same issuer. Adjustments are determined
primarily based on a market approach as of the transaction date.
Investments are evaluated periodically, or when impairment indicators are noted, to determine if declines in value are other-than-
temporary. In making that determination, we consider all available evidence relating to the realizable value of a security. This
evidence includes, but is not limited to, the following:
(cid:0)
(cid:0)
(cid:0)
adverse financial conditions of a specific issuer, segment, industry, region or other variables;
the length of time and the extent to which the fair value has been less than cost; and
the financial condition and near-term prospects of the issuer.
We consider whether the fair values of any of our non-marketable investments have declined below their carrying value whenever
adverse events or changes in circumstances indicate that recorded values may not be recoverable. If any such decline is considered
to be other than temporary (based on various factors, including historical financial results, product development activities and the
overall health of the affiliate’s industry), then a write-down of the investment would be recorded in operating expense to its estimated
fair value. Investment impairments recorded during the year ended December 31, 2020 are discussed in Note 10 "Investments."
Variable Interest Entities
We evaluate at the inception of each arrangement whether we have made an investment in an entity that is considered a variable
interest entity (VIE) or if we hold other variable interests in an arrangement that is considered a variable interest entity (VIE). We
consolidate VIEs when we are the primary beneficiary. The primary beneficiary of a VIE is the party that meets both of the following
criteria: (1) has the power to make decisions that most significantly affect the economic performance of the VIE; and (2) has the
obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Periodically,
we assess whether any changes in our interest or relationship with the entity affect our determination of whether the entity is still a VIE
and, if so, whether we are the primary beneficiary. If we are not the primary beneficiary in a VIE, we account for the investment or
other variable interests in a VIE as an investment in a non-marketable investment or in accordance with other applicable GAAP.
146
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
Impairment of Long-Lived Assets
We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset or a group of assets may not be recoverable. We consider, amongst other indicators, a history of operating losses or a change
in expected sales levels to be indicators of potential impairment. Assets are grouped and evaluated for impairment at the lowest level
for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. If an asset is
detett rmined to be impaired, the loss is measured as the amount by which the carrying amount of the asset exceeds fair value which is
determined by applicable market prices, when available. When market prices are not available, we generally measure fair value by
discounting projected future cash flows of the asset. Considerable judgment is necessary to estimate discounted future cash flows.
Accordingly, actual results could differ from such estimates.
4. Revenue
Nature of Goods and Servrr ices
Our revenues are reported net of sales and value added taxes and accruals for estimated rebates and returns and are derived
primarily from the sale of consumable and instrumentation products, and to a much lesser extent, from the sale of services, intellectual
property and technology. Revenue is recognized upon transfer of control of promised products or services to customers in an amount
that reflects the consideration we expect to receive in exchange for those products or services. We enter into contracts that can
include various combinations of products and services, which are generally distinct and accounted for as separate performance
obligations. The transaction price is allocated to performance obligations based on their relative stand-alone selling prices.
We offer warranties on our products. Certain of our warranties are assurance-type in nature and do not cover anything beyond
ensuring that the product is functioning as intended. Based on the guidance in Topic 606, assurance-type warranties do not represent
separate performance obligations. The Company also sells separately-priced service contractcc s which qualify as service-type
warranties and represent separate performance obligations.
We sell our products and services both directly to customers and through distributors generally under agreements with payment terms
typically less than 90 days and in most cases not exceeding one year and therefore contracts do not contain a significant financing
component.
Consumable and Related Revenue
: In the last three years, revenue from consumable product sales has accounted for approximately 78-80% of our
net sales and revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied. The
majority of our contracts have a single performance obligation to transfer a product or multiple performance obligations to transfer
multiple products concurrently. Accordingly, we recognize revenue when control of the products has transferred to the customer,
which is generally at the time of shipment of products as this is when title and risk of loss have been transferred. In addition,
invoicing typically occurs at this time so this is when we have a present right to payment. Revenue is measured as the amount of
consideration we expect to receive in exchange for transferring products and is generally based upon a negotiated formula, list or
fixed price.
: Revenues from related products include software-as-a-service (SaaS), licenses, intellectual property and patent sales,
royalties and milestone payments and over the last three years has accounted for approximately 6-10% of our net sales.
SaaS arrangements: Revenue from SaaS arrangements, which allow customers to use hosted software over the contract period without
taking possession of the software, is recognized over the duration of the agreement unless the terms of the agreement indicate that
revenue should be recognized in a different pattern, for example based on usage.
147
Licenses: Licenses for on-site software, which allow customers to use the software as it exists when made available, are sold as
perpetual licenses or term licenses. Revenue from on-site licenses are recognized upfront at the point in time at the later of when the
software is made available to the customer and the beginning of the license term. When a portion of the transaction price is
allocated to a performance obligation to provide support and/or updates, revenue is recognized as the updates/support are
provided, generally over the life of the license. Fees from research collaborations include payments for technology transfer and
access rights. Royalties from licensees of intellectual property are based on sales of licensed products and revenues are recognized at
the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been
allocated has been satisfied (or partially satisfied).
Milestone Payments: At the inception of each companion diagnostic co-development arrangement that includes development milestone
payments, which represent variable consideration, we evaluate whether the milestones are probable of being reached and estimate
the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue
reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within
our control, such as milestones which are achieved through regulatory approvals, are considered to be constrained and excluded
from the transaction price until those approvals are received. Revenue is recognized following the input method as this is considered
to best depict the timing of the transfer of control. This involves measuring actual hours incurred to date as a proportion of the total
budgeted hours of the project. At the end of each subsequent reporting period, the proportion of completion is trued-up. We also re-
evaluate the probability of achievement of development milestones and any related constraint on a periodic basis, and if necessary,
adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would
affect revenues and earnings in the period of adjustment.
Instruments
Revenue from instrumentation includes the instrumentation equipment, installation, training and other instrumentation services, such as
extended warranty services or product maintenance contracts and over the last three years has accounted for approximately 11-14%
of net sales. Revenue from instrumentation equipment is recognized when the customer obtains control of the instrument which is
predominantly at the time of delivery or when title has transferred to the customer. Service revenue is recognized over the term of the
service period as the customers benefit from the service throughout the service period. Revenue related to services performed on a
time-and-materials basis is recognized when performed.
Contract Estimates
The majority of our revenue is derived from contracts (i) with an original expected length of one year or less and (ii) contracts for
which we recognize revenue at the amount in which we have the right to invoice as product is delivered. We have elected the
practical expedient not to disclose the value of remaining performance obligations associated with these types of contracts.
However, we have certain companion diagnostic co-development contracts to provide research and development activities in which
our performance obligations extend over multiple years. As of December 31, 2020, we had $23.7 million of remaining performance
obligations for which the transaction price is not constrained related to these contracts which we expect to recognize over the next
12 to 18 months.
Revenue expected to be recognized in any future year related to remaining performance obligations, excluding revenue pertaining to
contracts that have an original expected duration of one year or less, contracts where revenue is recognized as invoiced and
contracts with variable consideration related to undelivered performance obligations, is not material.
Contract Balances
The timing of revenue recognition, billings and cash collections can result in billed accounts receivable, unbilled receivables (contract
assets), and customer advances and deposits (contract liabilities) in the consolidated balance sheet.
148
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
Contract assets as of December 31, 2020 and 2019 totaled $8.5 million and $5.5 million, respectively, and are included in prepaid
expenses and other current assets in the accompanying consolidated balance sheets and relate to the companion diagnostic co-
development contracts discussed above.
Contract liabilities primarily relate to non-cancellable advances or deposits received from customers before revenue is recognized
and is primarily related to instrument service and SaaS arrangements. As of December 31, 2020 and 2019, contract liabilities
totaled $68.9 million and $56.2 million, respectively, of which $57.1 million and $48.5 million is included in accrued and other
current liabilities, respectively, and $11.8 million and $7.7 million in included in other long-term liabilities, respectively. During the
twelve months ended December 31, 2020 and 2019, we satisfied the associated performance obligations and recognized revenue of
$48.1 million and $48.3 million, respectively, related to advance customer payments previously received.
Disaggregation of Revenue
We disaggregate our revenue based on product type and customer class as shown in the tables below for the years ended December
31, 2020, 2019 and 2018:
((iinn tthhoouussaannddss))
22002200
22001199
22001188
Consumables and related revenues
$ 774,234
$ 665,866
$ 649,602
Instruments
Molecular Diagnostics
Consumables and related revenues
Instruments
Life Sciences
TToottaal
129,742
903,976
841,201
125,169
966,370
71,266
737,132
688,281
101,011
789,292
82,197
731,799
665,857
104,192
770,049
$ 1,870,346
$ 1,526,424
$ 1,501,848
Additionally, we disaggregate our revenue based on product category as shown in the tables below for the years ended December
31, 2020, 2019 and 2018:
((iinn tthhoouussaannddss))
Sample technologies
Diagnostic solutions
PCR / Nucleic acid amplification
Genomics / NGS
Other
TToottaal
22002200
22001199
22001188
$ 803,867
$ 548,365
$ 546,636
460,757
363,552
165,570
76,600
465,503
224,685
183,768
104,103
461,064
236,952
163,383
93,813
$ 1,870,346
$ 1,526,424
$ 1,501,848
Refer to Note 21 "Segment Information" for disclosure of revenue by geographic region.
149
5. Acquisitions and Divestitures
Business Combinations and Asset Acquisitions
For acquisitions which have been accounted for as business combinations, the acquired companies’ results have been included in the
accompanying consolidated statements of income (loss) from their respective dates of acquisition. Our acquisitions have historically
been made at prices above the fair value of the acquired net assets, resulting in goodwill, due to expectations of synergies of
combining thtt e businesses. These synergies include use of our existing infrastructure, such as sales force, shared service centers,
distribution channels and customer relations, to expand sales of an acquired business' products; use of the infrastructure of the
acquired businesses to cost-effectively expand sales of our products; and elimination of duplicative facilities, functions and staffing.
If the acquired net assets do not constitute a business under the acquisition method of accounting, the transaction is accounted for as
an asset acquisition and no goodwill is recognized. In an asset acquisition, the amount allocated to acquired in-process research and
development with no alternative future use is charged to expense at the acquisition date.
2020 Business Combinations
In September 2020, we completed the acquisition of the remaining 80.1% of NeuMoDx Molecular, Inc. ("NeuMoDx") shares, a
privately-held U.S. company in which we held a minority interest. NeuMoDx designs and develops molecular diagnostics solutions for
hospital and clinical reference laboratories. Prior to acquisition, we held a 19.9% investment in NeuMoDx with a carrying value of
$41.0 million. The cash consideration, net of cash acquired totaled $239.4 million for the remaining shares. Of this amount, $8.5
million was retained in an escrow account as of December 31, 2020 which is expected to be fully utilized to cover claims for breach
of any representations, warranties or indemnities.
The acquisition date fair value of the minority interest investment was $52.7 million and a gain of $11.7 million was recorded in
restructuring, acquisition, integration and other, net in the accompanying consolidated statement of income. The fair value of the
minority interest investment was determined using an implied purchase price reduced by a 20% control premium.
We incurred $2.5 million acquisition related costs to effect the business combination, of which $1.8 million was incurred during the
year ended December 31, 2020, and are included in restructuring, acquisition, integration and other, net. Revenue and earnings in
the reporting period since the acquisition date have not been significant.
The allocation of the purchase price is preliminary and not yet finalized. The preliminary allocation of the purchase price is based
upon preliminary estimates which used information that was available to management at the time the consolidatett d financial
statements were prepared and these estimates and assumptions are subject to change within the measurement period, up to one year
from the acquisition date. Accordingly, the allocation may change. We continue to gather information about the fair value of all
assets and liabilities, including intangible assets acquired, and the related deferred taxes.
150
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
The preliminary purchase price allocation for NeuMoDx as of December 31, 2020 and the difference to September 30, 2020 is as
follows:
AAss ooff DDeecceemmbbeerr 3311,,
AAss ooff SSeepptteemmbbeerr 3300,,
22002200
22002200
DDiiffffeerreennccee
((iinn tthhoouussaannddss))
Purchase Price:
Cash consideration
$ 251,730
$ 251,730
Fair value of minority interest
52,727
52,727
$ 304,457
$ 304,457
Preliminary Allocation:
Cash and cash equivalents
$ 12,291
$ 12,291
Accounts receivable
Inventories
Prepaid expenses and other current assets
Accounts payable
Accruals and other current liabilities
Other long-term liabilities
Fixed and other long-term assets
5,691
20,666
5,961
(12,450)
(18,929)
(4,101)
7,076
5,691
18,866
5,943
(11,168)
(18,770)
(4,101)
6,698
$ —
—
$ —
$ —
—
1,800
18
(1,282)
(159)
—
378
Developed technology
101,000
119,100
(18,100)
In-process research and development
55,000
64,800
(9,800)
Patents and license rights
Customer backlog
Goodwill
Deferred tax asset
770
400
770
900
157,627
149,877
12,457
—
Deferred tax liability on fair value of identifiable
(39,002)
(46,440)
—
(500)
7,750
12,457
7,438
intangible assets acquired
TToottaal
$ 304,457
$ 304,457
$ —
The in-process research and development recognized relates to technologies that remain in development and have not yet obtained
regulatory approvals. The technologies within in-process research and development are expected to be completed within the next
three years. The weighted average amortization period for the acquired intangibles is 10 years. The goodwill acquired is not
deductible for tax purposes.
151
Pro Forma Results
The following unaudited pro forma information assumes that the above acquisition occurred at the beginning of the periods
presented. For the year ended December 31, 2020, pro forma net sales would have been $1.90 billion, pro forma net income would
have been $347.0 million, and pro forma diluted net income per common share would have been $1.48. For the year ended
December 31, 2019, pro forma net sales would have been $1.53 billion, pro forma net loss would have been $69.1 million and pro
forma diluted net loss per common share would have been $0.30. These unaudited pro forma results are intended for informational
purposes only and are not necessarily indicative of the results of operations that would have occurred had the acquisition been in
effect at the beginning of the periods presented, or of future results of the combined operations.
2019 Business Combinations
In January 2019, we completed the acquisition of N-of-One, Inc., a privately-held U.S. molecular decision support company and
pioneer in clinical interpretation services for complex genomic data located in Concord, Massachusetts. The cash consideration, net
of cash acquired, was $24.5 million. This acquisition was not significant to the overall consolidated financial statements and as of
December 31, 2019, the allocation of the purchase price was final. The acquisition did not have a material impact to net sales, net
income or earnings per share and therefore no pro forma information has been provided herein.
In the third quarter of 2019, we acquired two additional companies for total cash consideration, net of cash acquired, of $43.5
million. The purchase price allocations for these acquisitions were final as of March 31, 2020. These acquisitions were not
significant to the overall consolidated financial statements and the acquisitions did not have a material impact to net sales, net
income or earnings per share. Thus, no pro forma information has been provided herein.
Other 2018 Business Combination
In April 2018, we acquired all remaining shares of a privately held entity in which we held a minority interest. The value of the
minority interest investment was revalued in connection with the acquisition by $4.8 million and a corresponding gain was recorded
in restructuring, acquisition, integration and other, net in the accompanying consolidated statement of income for the year ended
December 31, 2018. This acquisition was not significant to the overall consolidated financial statements. The acquisition did not
have a material impact to net sales, net income or earnings per share and therefore no pro forma information has been provided
herein.
2019 Asset Acquisition
On January 31, 2019, we acquired the digital PCR asset of Formulatrix, Inc., a developer of laboratory automation solutions. We
paid Formulatrix $125.0 million in cash upon closing. During 2020, we paid the remaining $135.9 million of milestone payments.
Divestitures
In 2019, we sold a portfolio of protein catalysation products for $1.0 million. An immaterial gain was recorded on the sale. In 2018,
we sold a portfolio of veterinary testing products for a total of (cid:189)15.1 million ($18.5 million), of which (cid:189)13.4 million ($16.4 million)
was received during 2018 and the remaining (cid:189)1.7 million ($1.8 million) was collected in 2020. An $8.0 million gain was recorded
on the sale to other income, net in the accompanying consolidated statement of income for the year-ended December 31, 2018.
152
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
6. Restructuring and Impairments
As part of our restructuring activities, we incur expenses that qualify as exit and disposal costs under U.S. GAAP including severance
and employee costs as well as contract and other costs, primarily contract termination costs, as well as inventory write-offs and other
implementation costs primarily related to consulting fees. Personnel related costs primarily relate to cash severance and other
termination benefits including accelerated share-based compensation. We also incur expenses that are an integral component of, and
are directly attributable to, our restructuring activities which do not qualify as exit and disposal costs under U.S. GAAP, which consist
of asset-related costs such as intangible asset impairments and other asset related write-offs.
Personnel costs are primarily determined based on established benefit arrangements, local statutory requirements, or historical benefit
practices. We recognize these benefits when payment is probable and estimable. Other benefits which require future service and are
associated to non-recurring benefits are recognized ratably over the future service period. Other assets, including inventory, are
impaired or written-off if the carrying value exceeds the fair value. All other costs are recognized as incurred.
2019 Restructuring
In the second half of 2019, we decided to suspend development of NGS-related instrument systems and entered into a new strategic
partnership with Illumina to commercialize IVD kits worldwide on Illumina's diagnostic sequencers. In order to align our business with
this new strategy, we began restructuring initiatives to target resource allocation to growth opportunities in our Sample to Insight
portfolio.
Impairments to property, plant and equipment primarily impacted computer software and machinery and equipment. Costs incurred to
either purchase software or produce software products and the software components of products to be sold, leased or marketed after
technological feasibility is established were previously capitalized during the development of certain NGS-related instrument systems.
These long-lived assets were fully impaired due to the decision to suspend further development. In addition to computer software,
certain machinery and equipment assets were fully impaired given that these assets had no alternative use following the changes
announced for this program and it was estimated that no value was recoverable in a market disposal.
Due to the suspended development, intangible assets were also assessed for recoverability. The abandoned assets include developed
technology related to the suspended projects as well as the termination of licenses which were used exclusively in connection with this
program. As a result, we recorded intangible asset impairment charges due to the conclusion that the identified assets have no
alternative use outside of the suspended program and thus are fully impaired.
We also conducted an impairment review of inventory and prepaid and other assets and recorded the charges noted in the table
below. As these charges, including inventory, are a direct result of the decision to suspend further development of NGS-related
instrument systems and are not related to external market factors, the impairment charges were recorded in the line item restructuring,
acquisition, integration and other, net in the consolidated statements of income (loss) due to the assets being deemed excess and no
longer utilized due to the discontinued development and related actions discussed above.
In addition, we implemented measures to:
(cid:0)
(cid:0)
(cid:0)
shift Commercial Operations activities into Business Areas;
transition manufacturing activities into a regional structure; and
expand the scope of activities at QIAGEN Business Services (QBS) centers in Wroclaw, Poland and Manila, Philippines
During 2020, certain of the planned measures were delayed during the acquisition attempt by Thermo Fisher or changed as a result
of business needs during the pandemic. The following is a summary of the charges recorded in the consolidated statements of income
(loss) during the years ended December 31, 2020 and 2019 and total program charges through December 31, 2020.
153
CClaassssiiffiiccaattiioonn aanndd TTyyppee ooff CChhaarrggee ((iinn tthhoouussaannddss))
NNoottee
22002200
22001199
Restructuring, acquisition, integration and other, net
TToottaal pprrooggrraamm
cchhaarrggeess tthhrroouugghh
22002200
Personnel related (1)
Contract termination expense (1)
Consulting fees
Accounts receivable (2)
Inventories
Prepaid expenses and other assets (2)
Long-lived asset impairments
Property, plant and equipment
Intangible assets
Other income, net
(22)
$ 904
$ 70,578
$ 71,482
682
42,099
42,781
1,153
10,150
11,303
(622)
1,014
10,825
10,203
12,336
13,350
127
17,012
17,139
3,258
163,000
166,258
(9)
(11)
1,034
98,472
99,506
–
40,301
40,301
1,034
138,773
139,807
Equity method investment impairment
(10)
–
4,799
4,799
TToottaal
$ 4,292
$ 306,572
$ 310,864
(1) During the year ended December 31, 2019, personnel related and contract termination costs include $2,956 and $15,676,
respectively, due to related parties.
(2) During the year ended December 31, 2019, accounts receivable and prepaid expenses and other assets includes $5,984 and
$2,270, respectively due from related parties.
Of the total costs incurred, $11.2 million and $60.2 million are accrued as of December 31, 2020 and 2019, respectively, in
accrued and other current liabilities in the accompanying consolidated balance sheets as summarized in the following table that
includes the cash components of the restructuring activity.
154
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
(iinn tthhoouussaannddss))
Costs incurred in 2019
Payments
PPeerrssoonnnneel
CCoonnttrraacctt
CCoonnssuulttiinngg
RReelaatteedd
TTeerrmmiinnaattiioonn
FFeeeess
TToottaal
$ 44,640
$ 42,099
$ 10,150
$ 96,889
(17,272)
(18,294)
(2,162)
(37,728)
Foreign currency translation adjustment
631
493
(53)
1,071
Liability at December 31, 2019
$ 27,999
$ 24,298
$ 7,935
$ 60,232
Additional costs incurred in 2020
4,542
1,639
1,661
7,842
Release of excess accrual
(3,638)
(957)
(508)
(5,103)
Payments
(24,355)
(18,319)
(9,028)
(51,702)
Foreign currency translation adjustment
139
(230)
(12)
(103)
Liability at December 31, 2020
$ 4,687
$ 6,431
$ 48
$ 11,166
Future pre-tax costs between $5 - $10 million are expected to be incurred, primarily related to personnel and consulting, in the first
half of 2021.
2017 Restructuring
We initiated restructuring initiatives in 2017 to mitigate the negative impacts stemming from the U.S. tax reform. Total pre-tax costs
for the initiatives, which concluded in 2018, were $24.4 million. Cumulative costs for this program were as follows:
((iinn tthhoouussaannddss))
Cost of sales
PPeerrssoonnnneel
RReelaatteedd
CCoonnttrraacctt aanndd
OOtthheerr CCoossttss
Innvveennttoorryy
WWrriittee-ooffffss &&
AAsssseett
Immppaaiirrmmeennttss
TToottaal
$ —
$ —
$ 3,039
$ 3,039
Restructuring, acquisition, integration and other, net
6,174
4,583
—
10,757
Total 2017 costs
Cost of sales
6,174
4,583
3,039
13,796
424
1,193
—
1,617
Restructuring, acquisition, integration and other, net
4,207
4,232
1,610
10,049
Total 2018 costs
4,631
5,425
1,610
11,666
Restructuring, acquisition, integration and other, net
Total 2019 releases
TToottaal ccuummuulaattiivvee ccoossttss
(1,100)
(1,100)
—
—
—
—
(1,100)
(1,100)
$ 9,705
$ 10,008
$ 4,649
$ 24,362
During 2018, fixed asset impairments of $1.6 million were recorded in connection with this initiative and are included within long-
lived asset impairments in the accompanying consolidated statement of income.
155
7. Short-Term Investments
As of December 31, 2020 and 2019, short-term investments consisted of the following:
((iinn tthhoouussaannddss))
Marketable equity securities
Money market deposits
Commercial paper
Loans receivable
TToottaal
22002200
$ 117,249
—
—
—
22001199
$ —
87,468
22,459
19,659
$ 117,249
$ 129,586
At December 31, 2020, short-term investments include the fair value of our marketable equity securities totaling $117.2 million.
These investments, further discussed in Note 10 "Investments", are reported at fair value with gains and losses recorded in earnings.
At December 31, 2019 we had $129.6 million ($65.0 million and (cid:189)57.5 million) of money market deposits, commercial paper and
loan receivables due from financial and nonfinancial institutions. These instruments are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market and are carried at fair market value, which is equal to the cost. All
instruments are classified as current assets in the accompanying balance sheet as they either have a maturity of less than one year or
are redeemable at our discretion. Interest income is determined using the effective interest rate method.
8. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets are summarized as follows as of December 31, 2020 and 2019:
((iinn tthhoouussaannddss))
Prepaid expenses
Cash collateral
Other receivables
Value added tax
Loan receivables
Contract assets
NNootteess
22002200
22001199
$ 61,159
$ 39,930
(14)
56,100
2,683
32,901
29,486
31,128
20,347
17,094
8,539
7,539
5,479
(4)
TToottaal pprreeppaaiidd eexxppeennsseess aanndd ootthheerr ccuurrrreenntt aasssseettss
$ 206,921
$ 105,464
156
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
9. Propertytt , Plant and Equipment
Property, plant and equipment of December 31, 2020 and 2019 were as follows:
((iinn tthhoouussaannddss))
Land
Buildings and improvements
Machinery and equipment
Computer software
Furniture and office equipment
Construction in progress
Less: Accumulated depreciation and amortization
Property, plant and equipment, net
EEssttiimmaatteedd uusseeffuul
liiffee ((iinn yyeeaarrss))
22002200
22001199
—
$ 18,903
$ 17,684
5-40
3-10
3-7
3-10
362,902
341,032
322,379
292,294
260,730
301,604
108,339
102,901
—
116,562
98,858
1,189,815
1,154,373
(630,443)
(699,130)
$ 559,372
$ 455,243
In 2019, we began restructuring initiatives to target resource allocation to growth opportunities in our Sample to Insight portfolio and
in connection therewith, we recorded impairments. Asset impairment charges for the years ended December 31, 2020, 2019 and
2018 were as follows:
((iinn tthhoouussaannddss))
Machinery and equipment
Computer software
Furniture and office equipment
Construction in progress
22002200
22001199
$ 77
$ 9,177
22001188
$ —
—
44,649
2,911
315
4,030
—
642
41,870
4,979
TToottaal iimmppaaiirrmmeenntt iinn pprrooppeerrttyy,, pplaanntt aanndd eeqquuiippmmeenntt
$ 1,034
$ 99,726
$ 7,890
During the year ended December 31, 2020, $1.0 million of impairments were related to the 2019 Restructuring program discussed
in Note 6 "Restructuring and Impairments". In 2019, $98.5 million of impairments were related to the 2019 Restructuring program
while the remaining $1.2 million were related to other identified impairments during the year. In 2018, we recorded asset
impairment charges of $7.9 million of internal-use software of which $1.6 million were related to the 2017 Restructuring program
discussed in Note 6 and $6.3 million were related to strategic shifts in our business.
For the years ended December 31, 2020, 2019 and 2018 depreciation and amortization expense totaled $78.6 million, $86.0
million and $87.9 million, respectively. For the years ended December 31, 2020, 2019 and 2018 amortization related to computer
software to be sold, leased or marketed totaled $7.4 million, $18.3 million and $17.2 million, respectively. Impairment charges
related to computer software to be sold, leased or marketed are included in computer software and construction in progress in the
table above and totaled $65.9 million for the year ended December 31, 2019. As of December 31, 2020 and 2019, the
unamortized balance of computer software to be sold, leased or marketed was $50.5 million and $36.6 million, respectively.
157
Repairs and maintenance expense was $13.8 million, $10.7 million and $12.1 million in 2020, 2019 and 2018, respectively. For
the year ended December 31, 2020, construction in progress primarily includes amounts related to projects to expand production
lines as well as increase capacity of manufacturing as well as ongoing software development projects. For the years ended December
31, 2020, 2019 and 2018, interest capitalized in connection with construction projects was not significant.
10. Investments
Marketable Equity Securities
We hold investments in marketable equity securities that have readily determinable fair values. Since January 1, 2018, these
investments are reported at fair value with gains and losses recorded in earnings.
As of December 31, 2020, our investments in marketable equity securities totaled $117.5 million, of which $117.2 million are
included in short-term investments and $0.3 million are included in other long-term assets in the accompanying consolidated balance
sheet, as follows:
((iinn tthhoouussaannddss,, eexxcceepptt sshhaarreess hheeldd))
Shares held
Cost basis
Fair value
Innvviittaaee
CCoorrppoorraattiioonn
((Innvviittaaee))
SShhoorrtt-TTeerrmm
OOnnccooCCyyttee
CCoorrppoorraattiioonn
((OOnnccooCCyyttee))
LLoonngg-TTeerrmm
OOnncciimmmmuunnee
HHoolddiinnggss pplcc
((OOnncciimmmmuunnee))
HHTTGG MMooleeccuulaarr
DDiiaaggnnoossttiiccss,, Inncc
((HHTTGGMM))
2,769,189
88,101
560,416
55,556
$ —
$ —
$ —
$ 2,000
$ 115,780
$ 211
$ 1,258
$ 266
Total cumulative unrealized gain (loss)
$ 115,780
$ 211
$ 1,258
$ (1,734)
In 2020, HTGM completed a 15:1 reverse stock split.
In 2020, we received 2.4 million shares of Invitae as part of the initial consideration for the sale of our ArcherDX shares, followed by
an earn-out of an additional 0.4 million Invitae shares. Additionally in 2020, we received 0.1 million shares in OncoCyte. These
transactions are discussed further below. In February 2021, we sold 2.4 million shares of Invitae for $101.5 million.
During the year ended December 31, 2020, unrealized losses recognized for the change in fair market value of all marketable equity
securities totaled $5.7 million of which $5.4 million is attributable to short-term investments and $0.3 million to long-term investments.
As of December 31, 2019, these marketable securities are included in other long-term assets in the accompanying consolidated
balance sheet as follows:
158
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
(iinn tthhoouussaannddss,, eexxcceepptt sshhaarreess hheeldd))
Shares held
Cost basis
Fair value
Total cumulative unrealized gain (loss)
LLoonngg-TTeerrmm
OOnncciimmmmuunnee
HHTTGGMM
560,416
833,333
$ —
$ 2,000
$ 285
$ 585
$ 285
$ (1,415)
During 2019, we received 0.6 million shares in Oncimmune in settlement of a zero-book value financial instrument held with a third
party. On the date of receipt, these shares held a fair value of $0.7 million which was recorded as a gain in other income, net for
the year ended December 31, 2019.
During the years ended December 31, 2019 and 2018 unrealized losses recognized for the change in fair market value of all
marketable equity securities totaled $2.1 million and $0.1 million, respectively.
Non-Marketable Investments
We have made strategic investments in certain privately-held companies without readily determinable market values.
Non-Marketable Investments Accounted for Under the Equity Method
A summary of our non-marketable investments accounted for as equity method investments is as follows:
((iinn tthhoouussaannddss))
PreAnalytiX GmbH
EEqquuiittyy iinnvveessttmmeennttss
aass ooff DDeecceemmbbeerr 3311,,
SShhaarree ooff iinnccoommee ((loossss)) ffoorr tthhee
yyeeaarrss eennddeedd DDeecceemmbbeerr 3311,,
OOwwnneerrsshhiipp
PPeerrcceennttaaggee
22002200
22001199
22002200
22001199
22001188
50.00 % $ 4,761
$ 5,452
$ 3,070
$ 3,971
$ 4,062
Suzhou Fuda Business Management and Consulting
33.67 %
3,301
3,100
—
—
Partnership
Apis Assay Technologies Ltd
19.00 %
1,940
719
1,221
(51)
TVM Life Science Ventures III
3.10 %
1,545
1,219
630
(330)
—
—
—
Hombrechtikon Systems Engineering AG
19.00 %
(530)
(761)
97
(1,124)
(668)
MAQGEN Biotechnology Co., Ltd
Biotype Innovation GmbH
Pyrobett
40.00 %
0.00 %
0.00 %
—
—
—
—
—
—
—
—
—
(383)
(579)
—
—
(123)
(100)
$ 11,017
$ 9,729
$ 5,018
$ 2,083
$ 2,592
159
TVM Life Science Ventures III is a limited partnership and we account for our 3.1% investment under the equity method as we have
the ability to exercise significant influence over the limited partnership. Of the $11.0 million of non-marketable investments accounted
for as equity method investments, $11.5 million is included in other long-term assets and $0.5 million, where we are committed to
fund losses, is included in other long-term liabilities in the accompanying consolidated balance sheet as of December 31, 2020.
During the year ended December 31, 2019, we recorded an impairment of $4.8 million in other income, net in the accompanying
consolidated statements of income, following changes in circumstances of MAQGEN Biotechnology Co., Ltd that indicated the
carrying value was no longer recoverable. Accordingly, the investment was fully impaired.
In 2018, we recorded impairments totaling $6.1 million in other income, net in the accompanying consolidated statements of income,
following changes in the investees' circumstances that indicated the carrying value was no longer recoverable.
Three of our equity method investments are variable interest entities and we are not the primary beneficiary as we do not hold the
power to direct the activities that most significantly impact the economic performance. Therefore, these investments are not
consolidated. As of December 31, 2020, these investments had a total net carrying value of $3.0 million, of which $3.5 million is
included in other long-term assets and $0.5 million is included in other long-term liabilities in the accompanying consolidated
balance sheet. As of December 31, 2019, these investments held a balance of $1.2 million, of which $1.9 million is included in
other long-term assets and $0.8 million is included in other long-term liabilities in the accompanying consolidated balance sheet.
These balances represent our maximum exposure to loss.
Non-Marketable Investments Not Accounted for Under the Equity Method
At December 31, 2020 and 2019, we had investments in non-publicly traded companies that do not have readily determinable fair
values with carrying amounts that totaled $4.1 million and $70.8 million, respectively. The changes in these investments which are
measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the
identical or a similar investment of the same issuer for the years ended December 31, 2020 and 2019 are as follows:
((iinn tthhoouussaannddss))
Balance at beginning of year
Full acquisition of equity securities
Sale of equity securities
Loss on sale of equity securities
Impairments
Cash investments in equity securities, net
Net increases due to observable price changes
Foreign currency translation adjustments
22002200
22001199
$ 70,849
$ 59,484
(41,001)
(23,812)
(2,250)
(398)
173
—
581
—
—
—
—
3,619
7,760
(14)
Balance at end of year
$ 4,142
$ 70,849
160
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
2020 Changes in Non-Marketable Investments Not Accounted for Under the Equity
Method
During 2020, we acquired the remaining shares of NeuMoDx as further discussed in Note 5 "Acquisitions and Divestitures".
In 2020, Invitae Corporation ("Invitae"), a publicly traded company (NVTA), completed the acquisition of ArcherDX, Inc.
("ArcherDX"), a company in which we held an approximate 8% investment. In exchange for our shares in ArcherDX, we initially
received cash of $21.1 million and 2.4 million shares in Invitae followed by an additional 0.4 million shares for milestone
achievement. For the year ended December 31, 2020, we recognized a total gain of $123.3 million in other income, net in the
accompanying consolidated statement of income as a result of this transaction. We are entitled to up to 1.7 million additional Invitae
shares subject to milestone achievement.
We sold an investment with a carrying value of $2.5 million in exchange for cash of $0.3 million including the shares in OncoCyte,
as discussed above. A loss of $2.3 million was recognized in other income, net in the accompanying consolidated statement of
income on the sale of this investment.
We sold another investment for its book value and received $3.7 million in cash.
In 2020, we recorded a $0.4 million impairment in other income, net in the accompanying consolidated statement of income due
following indications that the carrying value was no longer recoverable. Accordingly, the investment was fully impaired.
For non-marketable investments not accounted for under the equity method as of December 31, 2020, cumulative upward adjustments
for price changes was $0.7 million. These adjustments were due to equity offerings at a higher price from the issuer in orderly
transactions for identical or similar investments as those we hold.
11. Goodwill and Intangible Assets
The following sets forth the intangible assets by major asset class as of December 31, 2020 and 2019:
((iinn tthhoouussaannddss))
yyeeaarrss))
AAmmoouunntt
AAmmoorrttiizzaattiioonn
AAmmoouunntt
AAmmoorrttiizzaattiioonn
WWeeiigghhtteedd
AAvveerraaggee LLiiffee((iinn
22002200
22001199
GGrroossss CCaarrrryyiinngg
AAccccuummuulaatteedd
GGrroossss CCaarrrryyiinngg
AAccccuummuulaatteedd
Amortized Intangible Assets:
Patent and license rights
10.50
$ 298,395
$ (197,038)
$ 320,406
$ (216,554)
Developed technology
10.74
860,129
(378,705)
766,966
(346,085)
Customer base, trademarks, and non-
12.02
314,876
(233,981)
314,638
(213,881)
compete agreements
10.86
$ 1,473,400
$ (809,724)
$ 1,402,010
$ (776,520)
Unamortized Intangible Assets:
In-process research and development
Goodwill
$ 62,518
2,364,031
$ 6,944
2,140,503
$ 2,426,549
$ 2,147,447
161
The in-process research and development as of December 31, 2020 is associated to the acquisitions of NeuMoDx in 2020 and STAT-
Dx in 2018. The estimated fair value of acquired in-process research and development projects which have not reached technological
feasibility at the date of acquisition are capitalized and subsequently tested for impairment through completion of the development
process, at which point the capitalized amounts are amortized over their estimated useful life. If a project is abandoned rather than
completed, all capitalized amounts are written-off immediately.
Developed technology includes the acquired intangibles from NeuMoDx and the digital PCR asset from Formulatrix as discussed in
Note 5 "Acquisitions and Divestitures" which are both being amortized over 10 years.
The changes in intangible assets for the years ended December 31, 2020 and 2019 are as follows:
((iinn tthhoouussaannddss))
Balance at beginning of year
Additions
Additions from acquisitions
Amortization
Disposals
Impairments
Foreign currency translation adjustments
Balance at end of year
22002200
22001199
$ 632,434
$ 475,043
24,007
286,159
157,170
36,458
(103,230)
(122,560)
(537)
–
–
(40,301)
16,350
(2,365)
$ 726,194
$ 632,434
Cash paid for purchases of intangible assets during the twelve months ended December 31, 2020 totaled $171.5 million, of which
$146.1 million is related to current year payments for assets that were accrued as of December 31, 2019, $24.0 million of current
year additions and $1.4 million for prepayments recorded in other long-term assets in the accompanying consolidated balance sheet.
Cash paid for intangible assets during the year ended December 31, 2019 totaled $156.9 million of which $11.5 million is related
to current year payments for licenses that were accrued as of December 31, 2018 and $0.5 million is related to prepayments
recorded in other long-term assets in accompanying consolidated balance sheet. Intangible asset additions of $286.2 million includes
$144.9 million of cash paid during the year ended December 31, 2019, together with $137.8 million of additions that were accrued
as of December 31, 2019 and $3.5 million of additions which were previously recorded as prepayments.
Amortization expense on intangible assets totaled approximately $103.2 million, $122.6 million and $118.6 million, respectively,
for the years ended December 31, 2020, 2019 and 2018. During the year ended December 31, 2019, we recorded an impairment
charge of $40.3 million related to the restructuring activities discussed further in Note 6 "Restructuring and Impairments" of which
$28.1 million is related to patent and license rights and $12.1 million is related to developed technology.
162
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
Amortization of intangibles for the next five years is expected to be approximately:
((iinn tthhoouussaannddss))
Years ended December 31:
2021
2022
2023
2024
2025
The changes in goodwill for the years ended December 31, 2020 and 2019 are as follows:
((iinn tthhoouussaannddss))
Balance at beginning of year
Business combinations
Purchase adjustments
Disposals
Foreign currency translation adjustments
AAmmoorrttiizzaattiioonn
$ 103,485
$ 89,734
$ 87,355
$ 83,520
$ 71,130
22002200
22001199
$ 2,140,503
$ 2,108,536
157,627
34,807
3,382
—
(236)
(225)
62,519
(2,379)
Balance at end of year
$ 2,364,031
$ 2,140,503
The changes in the carrying amount of goodwill during the year ended December 31, 2020 resulted primarily from the acquisition of
NeuMoDx discussed in Note 5 "Acquisitions and Divestitures" and changes in foreign currency translation. The changes in goodwill
during the year ended December 31, 2019 resulted primarily from the acquisition of N-of-One, Inc. and other acquisitions and
divestitures also discussed in Note 5 "Acquisitions and Divestitures" and changes in foreign currency translation.
12. Leases
We have operating leases primarily for real estate. The leases generally have terms which range from one year to 15 years, some
include options to extend or renew, and some include options to early terminate the leases. As of December 31, 2020 and 2019, no
such options have been recognized as part of the right-of-use assets and lease liabilities.
Operating leases can contain variable lease charges based on an index like consumer prices or rates. During the year ended
December 31, 2020 and 2019, amounts recorded as variable lease payments not included in the operating lease liability were not
material.
When the interest rate implicit in each lease is not readily determinable, we apply our incremental borrowing rate in determining the
present value of lease payments. All operating lease expense is recognized on a straight-line basis over the lease term. For the years
ended December 31, 2020 and 2019, we recognized $25.0 million and $24.4 million in total lease costs, respectively.
163
Supplemental balance sheet and other information related to operating leases as of December 31, 2020 and 2019 are as follows:
((iinn tthhoouussaannddss,, eexxcceepptt leeaassee tteerrmm aanndd ddiissccoouunntt rraattee))
LLooccaattiioonn iinn bbaalaannccee sshheeeett
22002200
22001199
Operating lease right-of-use assets
Other long-term assets
$ 102,522
$ 57,305
Current operating lease liabilities
Accrued and other current liabilities
$ 23,450
$ 18,739
Long-term operating lease liabilities
Other long-term liabilities
$ 85,585
$ 39,631
Weighted average remaining lease term
Weighted average discount rate
7.04 years
3.71 years
1.89 %
2.39 %
Supplemental cash flow information related to operating leases for the years ended December 31, 2020 and 2019 are as follows:
((iinn tthhoouussaannddss))
Cash paid for operating leases included in operating cash flows
22002200
22001199
$ 24,193
$ 26,113
Operating lease right-of-use assets obtained in exchange for lease obligations
$ 58,992
$ 24,670
Future maturities of operating lease liabilities as of December 31, 2020 are as follows:
YYeeaarrss eennddiinngg DDeecceemmbbeerr 3311,, ((iinn tthhoouussaannddss))
2021
2022
2023
2024
2025
Thereafter
Total lease payments
Less: imputed interest
Total
$ 25,353
20,993
16,280
10,790
6,707
36,878
117,001
(7,966)
$ 109,035
As of December 31, 2020, we do not have any material operating leases that have not yet commenced. We did not hold any
material finance leases as of December 31, 2020 and 2019.
164
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
13. Accrued and Other Current Liabilities
Accrued and other current liabilities at December 31, 2020 and 2019 consist of the following:
((iinn tthhoouussaannddss))
Payroll and related accruals
Other liabilities
Deferred revenue
Accrued expenses
Accrued contingent consideration and milestone payments
Operating lease liabilities
Restructuring
Accrued royalties
Accrued interest on long-term debt
Cash collateral
NNoottee
22002200
22001199
$ 99,085
$ 66,866
67,244
54,241
(4)
57,066
48,525
(15)
(12)
(6)
(20)
(16)
(14)
51,026
38,963
23,593
142,604
23,450
18,739
11,599
62,227
7,427
4,575
600
5,481
5,257
1,400
Total accrued and otoo her current liabilities
$ 345,665
$ 444,303
14. Derivatives and Hedging
Objective and Strategy
In the ordinary course of business, we use derivative instruments, including swaps, forwards and/or options, to manage potential
losses from foreign currency exposures and interest bearing assets or liabilities. The principal objective of such derivative instruments
is to minimize the risks and/or costs associated with our global financial and operating activities. We do not utilize derivative or
other financial instruments for trading or other speculative purposes. We recognize all derivatives as either assets or liabilities on the
balance sheet on a gross basis, measure those instruments at fair value and recognize the change in fair value in earnings in the
period of change, unless the derivative qualifies as an effective hedge that offsets certain exposures. We have agreed with almost all
of our counterparties with whom we had entered into cross-currency swaps, interest rate swaps or foreign exchange contracts, to
enter into bilateral collateralization contracts under which we will receive or provide cash collateral, as the case may be, for the net
position with each of these counterparties. As of December 31, 2020, cash collateral posititt ons consisted of $0.6 million recorded in
accrued and other current liabilities and $56.1 million recorded in prepaid expenses and other current assets. As of December 31,
2019, we had cash collateral positions consisting of $1.4 million recorded in accrued and other current liabilities and $2.7 million
recorded in prepaid expenses and other current assets in the accompanying consolidated balance sheets.
Non-Derivative Hedging Instrument
Net Investment Hedge
In 2017, we entered into a foreign currency non-derivative hedging instrument that is designated and qualifies as net investment
hedge. The objective of the hedge is to protect part of the net investment in foreign operations against adverse changes in the
165
exchange rate between the Euro and the functional currency of the U.S. dollar. The non-derivative hedging instrument is the German
private corporate bond ("Schuldschein") which was issued in the total amount of $331.1 million as described in Note 16 "Debt". Of
the $331.1 million, which is held in both U.S. dollars and Euros, (cid:189)255.0 million is designated as the hedging instrument against a
portion of our Euro net investments in our foreign operations. The relative changes in both the hedged item and hedging instrument
are calculated by applying the change in spot rate between two assessment dates against the respective notional amount. The
effective portion of the hedge is recorded in the cumulative translation adjustment account within other accumulated comprehensive
loss. Based on the spot rate method, the unrealized loss recorded in equity as of December 31, 2020 and 2019 is $26.9 million and
$0.4 million, respectively. Since we are using the debt as the hedging instrument, which is also remeasured based on the spot rate
method, there is no hedge ineffectiveness related to the net investment hedge as of December 31, 2020 and 2019.
Derivatives Designated as Hedging Instruments
Cash Flow Hedges
As of December 31, 2020 and 2019, we held derivative instruments that are designated and qualify as cash flow hedges, where the
effective portion of the gain or loss on the derivative is reported as a component of other comprehensive loss and reclassified into
earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative
representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in
current earnings. To date, we have not recorded any hedge ineffectiveness related to any cash-flow hedges in earnings. Based on
their valuation as of December 31, 2020, we expect approximately $3.6 million of derivative losses included in accumulated other
comprehensive loss will be reclassified into income during the next 12 months. The cash flows derived from derivatives are classified
in the consolidated statements of cash flows in the same category as the consolidated balance sheets account of the underlying item.
We use interest rate derivative contracts to align our portfolio of interest bearing assets and liabilities with our risk management
objectives. During 2015, we entered into five cross currency interest rate swaps through 2025 for a total notional amount of (cid:189)180.0
million which qualify for hedge accounting as cash flow hedges. We determined that no ineffectiveness exists related to these swaps.
As of December 31, 2020 and 2019, interest receivables of $1.1 million and $1.5 million, respectively are recorded in prepaid
expenses and other current assets in the accompanying consolidated balance sheets.
Fair Value Hedges
As of December 31, 2020 and 2019, we held derivative instruments that qualify for hedge accounting as fair value hedges. For
derivative instruments that are designated and qualify as a fair value hedge, the effective portion of the gain or loss on the derivative
is reflected in earnings. This effect on earnings is offset by the change in the fair value of the hedged item attributable to the risk
being hedged that is also recorded in earnings. To date, there has been no ineffectiveness. The cash flows derived from derivatives
are classified in the consolidated statements of cash flows in the same category as the consolidated balance sheets account of the
underlying item.
We hold interest rate swaps which effectively fix the fair value of a portion of our fixed rate private placement debt and qualify for
hedge accounting as fair value hedges. We determined that no ineffectiveness exists related to these swaps. As of December 31,
2020 and 2019, interest receivables of $0.6 million and $0.1 million, respectively, are recorded in prepaid and other current assets
in the accompanying consolidated balance sheets.
Derivatives Not Designated as Hedging Instruments
Call Options
We entered into Call Options which, along with the sale of the Warrants, represent the Call Spread Overlay entered into in
connection with the Cash Convertible Notes and which are more fully described in Note 16 "Debt". In these transactions, the Call
Options are intended to address the equity price risk inherent in the cash conversion feature of each instrument by offsetting cash
payments in excess of the principal amount due upon any conversion of the Cash Convertible Notes.
166
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
Aside from the initial payment of premiums for the Call Options, we will not be required to make any cash payments under the Call
Options. We will, however, be entitled to receive under the terms of the Call Options, an amount of cash generally equal to the
amount by which the market price per share of our common stock exceeds the exercise price of the Call Options during the relevant
valuation period. The exercise price under the Call Options is equal to the conversion price of the Cash Convertible Notes.
The Call Options, for which our common stock is the underlying security, are derivative assets that requires mark-to-market accounting
treatment due to the cash settlement features until the Call Options settle or expire. The Call Options are measured and reported at
fair value on a recurring basis, within Level 2 of the fair value hierarchy. For further discussion of the inputs used to determine the fair
value of the Call Options, refer to Note 15 "Financial Instruments and Fair Value Measurements".
The Call Options do not qualify for hedge accounting treatment. Therefore, the change in fair value of these instruments is recognized
immediately in our consolidated statements of income (loss) in other income, net. Because the terms of the Call Options are
substantially similar to those of the Cash Convertible Notes' embedded cash conversion option, discussed below, we expect the effect
on earnings from the two derivative instruments to mostly offset each other.
Cash Convertible Notes Embedded Cash Conversion Option
The embedded cash conversion option within the Cash Convertible Notes discussed in Note 16 "Debt" is required to be separated
from the Cash Convertible Notes and accounted for separately as a derivative liability, with changes in fair value reported in our
consolidated statements of income (loss) in other income, net until the cash conversion option settles or expires. The embedded cash
conversion option is measured and reported at fair value on a recurring basis, within Level 2 of the fair value hierarchy. For further
discussion of the inputs used to determine the fair value of the embedded cash conversion option, refer to Note 15 "Financial
Instruments and Fair Value Measurements".
Embedded Conversion Option
During 2017, we purchased a convertible note for $3.0 million from a publicly listed company considered a related party. The
embedded conversion option within the convertible note was required to be separated from the convertible note and accounted for
separately as a derivative liability, with changes in fair value reported in our consolidated statements of income (loss) in other
income, net. The embedded cash conversion option was measured and reported at fair value on a recurring basis, within Level 2 of
the fair value hierarchy. During 2020, $3.2 million was collected including the principal including accrued interest. For further
discussion of the inputs used to determine the fair value of the embedded cash conversion option, refer to Note 15 "Financial
Instruments and Fair Value Measurements".
Foreign Exchange Contracts
As a globally active enterprise, we are subject to risks associated with fluctuations in foreign currencies in our ordinary operations.
This includes foreign currency-denominated receivables, payables, debt, and other balance sheet positions including intercompany
items. We manage balance sheet exposure on a group-wide basis using foreign exchange forward contracts, foreign exchange
options and cross-currency swaps.
We are party to various foreign exchange forward, option and swap arrangements which had, at December 31, 2020 and 2019,
aggregate notional values of $1.3 billion and $701.4 million, respectively which expire at various dates through March 2021. The
transactions have been entered into to offset the effects from short-term balance sheet exposure to foreign currency exchange risk.
Changes in the fair value of these arrangements have been recognized in other income, net.
Fair Values of Derivative Instruments
The following table summarizes the fair value amounts of derivative instruments reported in the consolidated balance sheets as of
December 31, 2020 and 2019:
167
(in thousands)
(in thousands)
Current Asset
Current Asset
Long-Term Asset
Long-Term Asset
Current Asset
Current Asset
Long-Term Asset
Long-Term Asset
2020
2020
2019
2019
Interest rate contracts - fair value hedge (1)
Total derivative instruments designated as hedges
$ —
$ —
$ 5,042
$ 5,042
$ —
$ —
$ 2,474
$ 2,474
Equity options
$ 2,415
$ 374,038
$ 101,179
$ 189,792
Foreign exchange forwards and options
11,712
—
6,689
—
Total undesignated derivative instruments
$ 14,127
$ 374,038
$ 107,868
$ 189,792
$ 14,127
$ 379,080
$ 107,868
$ 192,266
(in thousands)
(in thousands)
Current Liability
Current Liability
Current Liability
Liability Current Liability
Liability
2020
2020
2019
2019
Long-Term
Long-Term
Long-Term
Long-Term
Liability
Liability
Interest rate contracts - cash flow hedge (1)
$ —
$ (17,409)
Total derivative instruments designated as hedges
$ —
$ (17,409)
$ —
$ —
$ (6,027)
$ (6,027)
Equity options
$ (5,966)
$ (376,046)
$ (101,361)
$ (190,902)
Foreign exchange forwards and options
(45,498)
—
(1,814)
—
Total undesignated derivative instruments
$ (51,464)
$ (376,046)
$ (103,175)
$ (190,902)
$ (51,464)
$ (393,455)
$ (103,175)
$ (196,929)
(1) The fair value amounts for the interest rate contracts do not include accrued interest.
168
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
Gains and Losses on Derivative Instruments
The following tables summarize the gains and losses on derivative instruments for the years ended December 31, 2020, 2019 and
2018:
((iinn tthhoouussaannddss))
OOtthheerr iinnccoommee,, nneett OOtthheerr iinnccoommee,, nneett OOtthheerr iinnccoommee,, nneett
Total amounts presented in the Consolidated Statements of Income in
which the effects of cash flow and fair value hedges are recorded
$ 114,326
$ 432
$ 5,598
22002200
22001199
22001188
Interest rate contracts
Amount of gain (loss) reclassified from accumulated other
comprehensive loss
$ 18,666
$ (3,888)
$ (9,774)
Amounts excluded from effectiveness testing
—
—
—
Interest rate contracts
Hedged item
(2,568)
(3,668)
2,051
Derivatives designated as hedging instruments
2,568
3,668
(2,051)
Embedded conversion option
—
(349)
131
Equity options
322,580
(104,125)
74,682
Cash convertible notes embedded cash conversion option
(321,213)
106,998
(76,500)
Foreign exchange forwards and options
(12,429)
1,835
(19,857)
$ 7,604
$ 471
$ (31,318)
169
Balance Sheet Line Items in which the Hedged Item is Included
The following tables summarizes the balance sheet line items in which the hedged item is included as of December 31, 2020 and
2019:
CCaarrrryyiinngg AAmmoouunntt ooff tthhee HHeeddggeedd AAsssseettss
((LLiiaabbiiliittiieess))
CCuummuulaattiivvee AAmmoouunntt ooff FFaaiirr VVaaluuee
HHeeddggiinngg AAddjjuussttmmeenntt Innccluuddeedd iinn tthhee
CCaarrrryyiinngg AAmmoouunntt ooff HHeeddggeedd AAsssseettss
((LLiiaabbiiliittiieess))
((iinn tthhoouussaannddss))
Long-term debt
22002200
22001199
22002200
22001199
$ (131,923)
$ (129,290)
$ 5,042
$ 2,474
15. Financial Instruments and Fair Value Measurements
Assets and liabilities are measured at fair value according to a three-tier fair value hierarchy which prioritizes the inputs used in
measuring fair value as follows:
Level 1. Observable inputs, such as quoted prices in active markets;
Level 2. Inputs, other than the quoted price in active markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own
assumptions.
Our assets and liabilities measured at fair value on a recurring basis consist of marketable securities discussed in Note 10
"Investments", which are classified in Level 1, short-term investments, which are classified in Level 2 of the fair value hierarchy,
derivative contracts used to hedge currency and interest rate risk and derivative financial instruments entered into in connection with
the Cash Convertible Notes discussed in Note 16 "Debt", which are classified in Level 2 of the fair value hierarchy, contingent
consideration accruals which are classified in Level 3 of the fair value hierarchy, and are shown in the tables below and non-
marketable equity securities remeasured during the year ended December 31, 2020 and 2019 are classified within Level 3 in the fair
value hierarchy. There were no transfers between levels for the year ended December 31, 2020.
In determining fair value for Level 2 instruments, we apply a market approach, using quoted active market prices relevant to the
particular instrument under valuation, giving consideration to the credit risk of both the respective counterparty to the contract and the
Company. To determine our credit risk, we estimated our credit rating by benchmarking the price of outstanding debt to publicly-
available comparable data from rated companies. Using the estimated rating, our credit risk was quantified by reference tott publicly-
traded debt with a corresponding rating. The Level 2 derivative financial instruments include the Call Options asset and the
embedded conversion option liability. See Note 16 "Debt", and Note 14 "Derivatives and Hedging", for further information. The
derivatives are not actively traded and are valued based on an option pricing model that uses observable market data for inputs.
Significant market data inputs used to determine fair values included our common stock price, the risk-free interest rate, and the
implied volatility of our common stock. The Call Options asset and the embedded cash conversion option liability were designed with
the intent that changes in their fair values would substantially offset, with limited net impact to our earnings. Therefore, the sensitivity
of changes in the unobservable inputs to the option pricing model for such instruments is substantially mitigated.
Our Level 3 instruments include non-marketable equity security investments. Under the measurement alternative, the carrying value is
measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for
identical or similar investments of thtt e same issuer. Adjustments are determined primarily based on a market approach as of the
transaction date.
170
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
Our Level 3 instruments also include contingent consideration liabilities. We value contingent consideration liabilities using
unobservable inputs, applying the income approach, such as the discounted cash flow technique, or the probability-weighted
scenario method. Contingent consideration arrangements obligate us to pay the sellers of an acquired entity if specified future events
occur or conditions are met such as the achievement of technological or revenue milestones. We use various key assumptions, such as
the probability of achievement of the milestones (0% to 100%) and the discount rate (between 6.5% and 6.9%), to represent the non-
performing risk factors and time value when applying the income approach. We regularly review the fair value of the contingent
consideration, and reflect any change in the accrual in the consolidated statements of income (loss) in the line items commensurate
with the underlying nature of milestone arrangements.
The following table presents our fair value hierarchy for our financial assets and liabilities measured at fair value on a recurring basis
as of December 31, 2020 and 2019:
22002200
22001199
LLeevveel 11
LLeevveel 22
LLeevveel 33
TToottaal
LLeevveel 11
LLeevveel 22
LLeevveel 33
TToottaal
$ —
$ —
$ —
$ —
$ — $ 129,586
$ — $ 129,586
117,515
—
—
117,515
870
—
—
870
—
—
4,142
4,142
—
—
70,849
70,849
—
376,453
—
376,453
—
290,971
—
290,971
—
11,712
—
11,712
—
6,689
—
6,689
—
5,042
—
5,042
—
2,474
—
2,474
$ 117,515
$ 393,207
$ 4,142
$ 514,864
$ 870
$ 429,720
$ 70,849
$ 501,439
$ — $ (45,498)
$ — $ (45,498)
$ —
$ (1,814)
$ — $ (1,814)
—
(17,409)
—
(17,409)
—
(6,027)
—
(6,027)
—
(382,012)
—
(382,012)
—
(292,263)
— (292,263)
(iinn
tthhoouussaannddss))
Short-term
investments
Marketable
equity
securities
Non-
marketable
equity
securities
Equity
options
Foreign
exchange
forwards and
options
Interest rate
contracts
Foreign
exchange
forwards and
options
Interest rate
contracts
Equity
options
171
22002200
22001199
((iinn
tthhoouussaannddss))
Contingent
consideration
LLeevveel 11
LLeevveel 22
LLeevveel 33
TToottaal
LLeevveel 11
LLeevveel 22
LLeevveel 33
TToottaal
—
—
(23,593)
(23,593)
—
—
(162,160)
(162,160)
$ — $ (444,919)
$ (23,593) $ (468,512)
— $ (300,104) $ (162,160) $ (462,264)
Refer to Note 10 "Investments" for the change in non-marketable equity securities with Level 3 inputs during the year ended
December 31, 2020 and 2019. For contingent consideration liabilities with Level 3 inputs, the following table summarizes the activity
for the years ended December 31, 2020 and 2019:
((iinn tthhoouussaannddss))
Balance at beginning of year
Additions from acquisitions
Payments
Gain included in earnings
Balance at end of year
22002200
22001199
$ (162,160)
$ (48,971)
(3,223)
(132,422)
141,790
11,800
—
7,433
$ (23,593)
$ (162,160)
As of December 31, 2020, we had $23.6 million accrued for contingent consideration which is included in accrued and other
current liabilities in the accompanying consolidated balance sheet. As of December 31, 2020, the $3.2 million of additions is related
to the time value increases of existing contingent consideration liabilities related to both the 2019 asset acquisition of Formulatrix
discussed in Note 5 "Acquisitions and Divestitures" as well as the 2018 acquisition of STAT-Dx. During 2019, a gain for the
reduction in the fair value of contingent consideration related to unmet milestones of $7.4 million was recognized in restructuring,
acquisition, integration and other, net in the accompanying consolidated statements of income (loss) and additions of $132.4 million
primarily related to the asset acquisition of Formulatrix as discussed in Note 5.
The carrying values of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and other
accrued liabilities, approximate their fair values due to their short-term maturities. The estimated fair value of long-term debt as
disclosed in Note 16 "Lines of Credit and Debt" The estimated fair values may not represent actual values of the financial instruments
that could be realized as of the balance sheet date or that will be realized in the future. There were no fair value differences in the
years ended December 31, 2020 and 2019 for nonfinancial assets or liabilities required to be measured at fair value on a
nonrecurring basis other than the impairments of non-marketable investments not accounted for under the equity method as discussed
in Note 10.
The table below presents the carrying values and the estimated fair values of financial instruments not presented in the tables above
as of December 31, 2020 and 2019.
172
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
((iinn tthhoouussaannddss))
CCaarrrryyiinngg
AAmmoouunntt
LLeevveel 11
LLeevveel 22
CCaarrrryyiinngg
AAmmoouunntt
LLeevveel 11
LLeevveel 22
22002200
22001199
Cash convertible notes
$ 791,000
$ 1,167,201
$ — $ 1,046,511
$ 1,296,334
Convertible notes
442,481
510,930
—
—
U.S. Private placement
German private placement
331,717
357,551
—
—
337,747
328,984
361,957
330,857
—
—
—
$ —
—
329,157
334,371
$ 1,922,749
$ 1,678,131
$ 699,704
$ 1,706,352
$ 1,296,334
$ 663,528
The fair values of the financial instruments presented in the tables above were determined as follows:
Cash Convertible Notes and Convertible Notes: Fair value is based on an estimation using available over-the-counter market
information on the Cash Convertible Notes due in 2021, 2023 and 2024 as well as the Convertible Notes due in 2027.
U.S. Private Placement: Fair value of the outstanding bonds is based on an estimation using the changes in the U.S. Treasury rates.
German Private Placement: Fair value is based on an estimation using changes in the euro swap rates.
The estimated fair values may not represent actual values of the financial instruments that could be realized as of the balance sheet
date or that will be realized in the future. There were no adjustments in the twelve-month periods ended December 31, 2020, 2019
or 2018 for nonfinancial assets or liabilities required to be measured at fair value on a nonrecurring basis.
16. Debt
At December 31, 2020 and 2019, total current long-term debt, net of debt issuance costs of $10.7 million and $10.8 million,
respectively, consists of the following:
((iinn tthhoouussaannddss))
0.875% Senior Unsecured Cash Convertible Notes due 2021
22002200
$ 200
22001199
$ 285,244
0.500% Senior Unsecured Cash Convertible Notes due 2023
361,304
347,995
1.000% Senior Unsecured Cash Convertible Notes due 2024
429,496
413,272
0.000% Senior Unsecured Convertible Notes due 2027
442,481
—
3.75% Series B Senior Notes due October 16, 2022
3.90% Series C Senior Notes due October 16, 2024
304,761
302,040
26,956
26,944
173
((iinn tthhoouussaannddss))
German Private Placement (Schuldschein)
Total long-term debt
Less current portion
Long-term portion
22002200
22001199
357,551
330,857
1,922,749
1,706,352
42,539
285,244
$ 1,880,210
$ 1,421,108
The notes are all unsecured obligations that rank pari passu. Interest expense on long-term debt was $63.5 million, $68.0 million
and $61.2 million for the years ended December 31, 2020, 2019 and 2018, respectively.
In 2020, we repaid $296.4 million of the 2021 Notes, leaving $0.2 million outstanding as of December 31, 2020, which will be
repaid at the original maturity on March 19, 2021.
In 2019, we repaid $506.4 million of long-term debt including $430.0 million for the amount due for the 2019 Cash Convertible
Notes, $73.0 million for amounts due for the U.S. Private Placement and $3.4 million for a portion of the 2021 Cash Convertible
Notes which was converted during the contingent conversion period as discussed further below.
Future maturities (stated at the carrying values) of long-term debt as of December 31, 2020, are as follows:
YYeeaarrss eennddiinngg DDeecceemmbbeerr 3311,, ((iinn tthhoouussaannddss))
2021
2022
2023
2024
2025
thereafter
$ 42,539
485,795
361,304
572,870
—
460,241
$ 1,922,749
Convertible Notes due 2027
On December 17, 2020, we issued zero coupon convertible notes in an aggregate principal amount of $500.0 million with a
maturity date of December 17, 2027 (2027 Notes). The 2027 Notes carry no coupon interest. The net proceeds of the 2027 Notes
totaled $497.6 million, after debt issuance costs of $3.7 million, of which $1.3 million was accrued as of December 31, 2020.
In accounting for the issuance of the 2027 Notes, we separated the 2027 Notes into liability and equity components. We allocated
$445.9 million of the 2027 Notes to the liability component, representing the fair value of a similar debt instrument that does not
have an associated convertible feature; and $54.1 million to the equity component, representing the conversion option, which does
not meet the criteria for separate accounting as a derivative as it is indexed to our own stock.
The effective interest rate of the 2027 Notes is 1.65%, which is imputed based on the amortization of the fair value of the embedded
cash conversion option over the remaining term of the 2027 Note.
174
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
We incurred issuance costs of $3.7 million related to the 2027 Notes. Issuance costs were allocated to the liability and equity
components based on the same proportion used to allocate the proceeds. Issuance costs attributable to the liability component of
$3.3 million are amortized to interest expense over the term of the 2027 Notes, and issuance costs attributable to the equity
component of $0.5 million are included along with the equity component in equity.
The 2027 Notes are convertible into common shares based on an initial conversion rate, subject to adjustment, of 2,477.65 shares
per $200,000 principal amount of notes (which represents an initial conversion price of $80.7218 per share, or 6.2 million
underlying shares). At conversion, we will settle the 2027 Notes by repaying the principal portion in cash and any excess of the
conversion value over the principal amount in shares of common stock.
The notes may be redeemed at the option of each noteholder at their principal amount on December 17, 2025 or in connection with
a change of control or delisting event.
The 2027 Notes are convertible in whole, but not in part, at the option of the noteholders on a net share settlement basis, at the
prevailing conversion price in the following circumstances beginning after January 27, 2021 through June 16, 2027:
if the last reported sale price of our common stock for at least 20-consecutive trading days during a period of 30-consecutive
trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the
conversion price on each applicable trading day; or
if we undergo certain fundamental changes as defined in the agreement; or
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Cash Convertible Notes due 2019, 2021, 2023, and 2024
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(cid:70)(cid:76)(cid:85)(cid:70)(cid:88)(cid:80)(cid:86)(cid:87)(cid:68)(cid:81)(cid:70)(cid:72)(cid:86)(cid:3)(cid:71)(cid:72)(cid:86)(cid:70)(cid:85)(cid:76)(cid:69)(cid:72)(cid:71)(cid:3)(cid:69)(cid:72)(cid:79)(cid:82)(cid:90)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:71)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:72)(cid:81)(cid:87)(cid:3)(cid:70)(cid:82)(cid:81)(cid:89)(cid:72)(cid:85)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:86)(cid:3)(cid:68)(cid:86)(cid:3)(cid:86)(cid:75)(cid:82)(cid:90)(cid:81)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:69)(cid:72)(cid:79)(cid:82)(cid:90)(cid:17)
CCaasshh
CCoonnvveerrttiibblee
NNootteess
AAnnnnuuaal
Inntteerreesstt
RRaattee
(cid:21)(cid:19)(cid:21)(cid:20)(cid:3)(cid:49)(cid:82)(cid:87)(cid:72)(cid:86)
(cid:19)(cid:17)(cid:27)(cid:26)(cid:24)(cid:8)
DDaattee ooff Inntteerreesstt
PPaayymmeennttss
(cid:48)(cid:68)(cid:85)(cid:70)(cid:75)(cid:3)(cid:20)(cid:28)(cid:3)(cid:68)(cid:81)(cid:71)
(cid:54)(cid:72)(cid:83)(cid:87)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:20)(cid:28)
MMaattuurriittyy DDaattee
CCoonnttiinnggeenntt CCoonnvveerrssiioonn PPeerriioodd
(cid:48)(cid:68)(cid:85)(cid:70)(cid:75)(cid:3)(cid:20)(cid:28)(cid:15)(cid:3)(cid:21)(cid:19)(cid:21)(cid:20)
(cid:41)(cid:85)(cid:82)(cid:80)(cid:3)(cid:36)(cid:83)(cid:85)(cid:76)(cid:79)(cid:3)(cid:21)(cid:28)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:23)(cid:3)(cid:87)(cid:82)(cid:3)(cid:54)(cid:72)(cid:83)(cid:87)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:20)(cid:27)(cid:15)
(cid:21)(cid:19)(cid:21)(cid:19)
CCoonnvveerrssiioonn RRaattee
ppeerr $$220000,,000000
PPrriinncciippaal AAmmoouunntt
(cid:26)(cid:15)(cid:19)(cid:25)(cid:22)(cid:17)(cid:20)(cid:25)(cid:23)(cid:26)
(cid:21)(cid:19)(cid:21)(cid:22)(cid:3)(cid:49)(cid:82)(cid:87)(cid:72)(cid:86)
(cid:19)(cid:17)(cid:24)(cid:19)(cid:19)(cid:8)
(cid:48)(cid:68)(cid:85)(cid:70)(cid:75)(cid:3)(cid:20)(cid:22)(cid:3)(cid:68)(cid:81)(cid:71)
(cid:54)(cid:72)(cid:83)(cid:87)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:20)(cid:22)(cid:15)
(cid:41)(cid:85)(cid:82)(cid:80)(cid:3)(cid:50)(cid:70)(cid:87)(cid:82)(cid:69)(cid:72)(cid:85)(cid:3)(cid:21)(cid:23)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:26)(cid:3)(cid:87)(cid:82)(cid:3)(cid:48)(cid:68)(cid:85)(cid:70)(cid:75)(cid:3)(cid:20)(cid:22)(cid:15)
(cid:23)(cid:15)(cid:27)(cid:21)(cid:28)(cid:17)(cid:26)(cid:21)(cid:26)(cid:28)
(cid:54)(cid:72)(cid:83)(cid:87)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:20)(cid:22)
(cid:21)(cid:19)(cid:21)(cid:22)
(cid:21)(cid:19)(cid:21)(cid:22)
(cid:21)(cid:19)(cid:21)(cid:23)(cid:3)(cid:49)(cid:82)(cid:87)(cid:72)(cid:86)
(cid:20)(cid:17)(cid:19)(cid:19)(cid:19)(cid:8)
(cid:48)(cid:68)(cid:92)(cid:3)(cid:20)(cid:22)(cid:3)(cid:68)(cid:81)(cid:71)
(cid:49)(cid:82)(cid:89)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:20)(cid:22)(cid:15)
(cid:41)(cid:85)(cid:82)(cid:80)(cid:3)(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:21)(cid:23)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:87)(cid:82)(cid:3)(cid:36)(cid:88)(cid:74)(cid:88)(cid:86)(cid:87)(cid:3)(cid:21)(cid:15)
(cid:23)(cid:15)(cid:22)(cid:25)(cid:19)(cid:17)(cid:22)(cid:19)(cid:28)(cid:27)
(cid:49)(cid:82)(cid:89)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:20)(cid:22)
(cid:21)(cid:19)(cid:21)(cid:23)
(cid:21)(cid:19)(cid:21)(cid:23)
Additionally, conversion may occur at any time following a Contingent Conversion Period through the fifth business day immediately
preceding the applicable maturity date.
Upon conversion, noteholders will receive an amount in cash equal to the Cash Settlement Amount, calculated as described below.
The Cash Convertible Notes are not convertible into shares of our common stock or any other securities.
Noteholders may convert Cash Convertible Notes into cash at their option at any time during the Contingent Conversion Periods
described above only under the following circumstances (Contingent Conversion Conditions):
if the last reported sale price of our common stock for at least 20-consecutive trading days during a period of 30-consecutive
trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the
conversion price on each applicable trading day;
if we undergo certain fundamental changes as defined in the agreement;
during the five-business day period immediately after any 10 consecutive trading day period in which the quoted price for each
trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and
the conversion rate on each such trading day;
if parity event or trading price unavailability event, as the case maybe occurs during the period of 10 days, including the first
business day following the relevant trading price notification date;
if we elect to distribute assets or property to all or substantially all of the holders of our common stock and those assets or other
property have a value of more than 25% of the average daily volume-weighted average trading price of our common stock for the
prior 20 consecutive trading days;
if we elect to redeem the Cash Convertible Notes; or
if we experience certain customary events of default, including defaults under certain other indebtedness until such event has been
cured or waived or the payment of the Notes have been accelerated.
176
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
The Contingent Conversion Conditions in the 2021, 2023, and 2024 Notes noted above have been analyzed under ASC 815,
Derivatives and Hedging, and, based on our analysis, we determined that each of the embedded features listed above are clearly
and closely related to the 2021, 2023 and 2024 Notes (i.e., the host contracts). As a result, pursuant to the accounting provisions of
ASC 815, Derivatives and Hedging, the Contingent Conversion Conditions noted above are not required to be bifurcated as separate
instruments.
No Contingent Conversion Conditions were triggered for the 2023 Notes and 2024 Notes as of December 31, 2020.
Upon conversion, holders are entitled to a cash payment (Cash Settlement Amount) equal to the average of the conversion rate
multiplied by the daily volume-weighted average trading price for our common stock over a 50-day period. The conversion rate is
subject to adjustment in certain instances but will not be adjusted for any accrued and unpaid interest. In addition, following the
occurrence of certain corporate events that may occur prior to the applicable maturity date, we may be required to pay a cash make-
whole premium by increasing the conversion rate for any holder who elects to convert Cash Convertible Notes in connection with the
occurrence of such a corporate event.
We may redeem the Cash Convertible Notes in their entirety at a price equal to 100% of the principal amount of the applicable Cash
Convertible Notes plus accrued interest at any time when 20% or less of the aggregate principal amount of the applicable Cash
Convertible Notes originally issued remain outstanding.
Because the Cash Convertible Notes contain an embedded cash conversion option, we have determined that the embedded cash
conversion option is a derivative financial instrument, which is required to be separated from the Cash Convertible Notes and
accounted for separately as a derivative liability, with changes in fair value reported in our consolidated statements of income (loss)
until the cash conversion option transaction settles or expires. The initial fair value liability of the embedded cash conversion option
for the 2019 and 2021 Notes was $51.2 million and $54.0 million, respectively, $74.5 million for the 2023 Notes, and $98.5
million for the 2024 Notes, which simultaneously reduced the carrying value of the Cash Convertible Notes (effectively an original
issuance discount). For further discussion of the derivative financial instruments relating to the Cash Convertible Notes, refer to Note
14 "Derivatives and Hedging".
As noted above, the reduced carrying value on the Cash Convertible Notes resulted in a debt discount that is amortized to the
principal amount through the recognition of non-cash interest expense using the effective interest method over the expected life of the
debt, which is five and seven for the 2019 Notes and 2021 Notes, and six years for the 2023 Notes and 2024 Notes, respectively.
This resulted in our recognition of interest expense on the Cash Convertible Notes at an effective rate approximating what we would
have incurred had nonconvertible debt with otherwise similar terms been issued. The effective interest rate of the 2019 Notes, 2021
Notes, 2023 Notes and 2024 Notes is 2.937%, 3.809%, 3.997% and 4.782% respectively, which is imputed based on the
amortization of the fair value of the embedded cash conversion option over the remaining term of the Cash Convertible Notes.
In connection with the issuance of the 2019 and 2021 Cash Convertible Notes, we incurred approximately $13.1 million in
transaction costs. We incurred approximately $6.2 million in transaction costs for the 2023 Cash Convertible Notes. For 2024 Cash
Convertible Notes, we incurred $5.7 million transaction costs. Such costs have been allocated to the Cash Convertible Notes and
deferred and are being amortized to interest expense over the terms of the Cash Convertible Notes using the effective interest
method.
Interest expense for the years ended December 31, 2020 and 2019 related to the 2027 Notes and the Cash Convertible Notes was
comprised of the following:
((iinn tthhoouussaannddss))
Coupon interest
Amortization of original issuance discount
Amortization of debt issuance costs
TToottaal iinntteerreesstt eexxppeennssee
22002200
22001199
$ 9,025
$ 9,954
38,229
36,966
2,942
3,014
$ 50,196
$ 49,934
177
Cash Convertible Notes Call Spread Overlay
Concurrent with the issuance of the Cash Convertible Notes, we entered into privately negotiated hedge transactions (Call Options)
with, and issued warrants to purchase shares of our common stock (Warrants) to, certain financial institutions. We refer to the Call
Options and Warrants collectively as the “Call Spread Overlay”. The Call Options are intended to offset any cash payments payable
by us in excess of the principal amount due upon any conversion of the Cash Convertible Notes. During 2014, we used $105.2
million of the proceeds from the issuance of the 2019 and 2021 Cash Convertible Notes to pay for the Call Options, and
simultaneously received $69.4 million from the sale of the Warrants, for a net cash outlay of $35.8 million for the Call Spread
Overlay.
During 2017, we used $73.7 million of the proceeds from the from the issuance of the 2023 Cash Convertible Notes to pay for the
premium for the Call Option, and simultaneously received $45.3 million from the sale of Warrants, for a net cash outlay of $28.3
million for the Call Spread Overlay. A total of $0.4 million in issuance costs were paid in connection with the Warrant and the Call
Option.
In November 2018, we used $97.3 million of the proceeds from the from the issuance of the 2024 Cash Convertible Notes to pay
for the premium for the Call Option, and simultaneously received $72.4 million from the sale of Warrants, for a net cash outlay of
$24.9 million for the Call Spread Overlay. A total of $0.9 million in issuance costs were paid in connection with the Warrant and
the Call Option.
The Call Options are derivative financial instruments and are discussed further in Note 14 "Derivatives and Hedging". The Warrants
are equity instruments and are further discussed in Note 18 "Equity".
Aside from the initial payment of a premium of $105.2 million (2019 and 2021 Notes), $73.7 million (2023 Notes), and $97.3
million (2024 Notes) for the Call Option, we will not be required to make any cash payments under the Call Options, and will be
entitled to receive an amount of cash, generally equal to the amount by which the market price per share of our common stock
exceeds the exercise price of the Call Options during the relevant valuation period. The exercise price under the Call Options is
initially equal to the conversion price of the Cash Convertible Notes.
During 2019, we received $133.2 million in cash upon the exercise of the call options in connection with the repayment of the 2019
Notes. In the same transaction, we paid $132.7 million for the intrinsic value of the 2019 Notes' embedded cash conversion option.
The net effect of the cash paid and received of $0.5 million was recognized as a gain in other income, net. In connection with the
early conversion of a portion of 2021 Notes during 2019, we received $1.5 million upon the exercise of the related call options.
Also, we paid $1.1 million for the intrinsic value of the 2021 Notes' embedded cash conversion option. As a result of these early
conversions, a gain of $0.4 million was recognized in other income, net.
During 2020, while the 2021 Notes were contingently convertible, we received conversion notices for $119.4 million of outstanding
principal. In December 2020, we initiated a tender offer and repurchased a further $177.0 million of outstanding principal. In
connection with these transactions, we received $239.8 million in cash upon the exercise of the call options and we paid $237.4
million for the intrinsic value of the 2021 Notes' embedded cash conversion option. The net effect of the cash paid and received of
$2.4 million was recognized as a gain in other income, net. Following the completion of the tender offer, $0.2 million of 2021 Notes
will remain outstanding and will be repaid or converted at their stated maturity date on March 19, 2021.
The Warrants that were issued with our Cash Convertible Notes, could have a dilutive effect to the extent that the price of our
common stock exceeds the applicable strike price of the Warrants. For each Warrant that is exercised, we will deliver to the holder a
number of shares of our common stock equal to the amount by which the settlement price exceeds the exercise price, plus cash in lieu
of any fractional shares. We will not receive any proceeds if the Warrants are exercised.
178
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
(cid:56)(cid:17)(cid:54)(cid:17)(cid:3)(cid:51)(cid:85)(cid:76)(cid:89)(cid:68)(cid:87)(cid:72)(cid:3)(cid:51)(cid:79)(cid:68)(cid:70)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)
In October 16, 2012, we completed a private placement through the issuance of new senior unsecured notes at a total amount of
$400.0 million with a weighted average interest rate of 3.66% (settled on October 16, 2012). The notes were issued in three series:
(1) $73.0 million 7-year term due and paid on October 16, 2019 (3.19%); (2) $300.0 million 10-year term due on October 16,
2022 (3.75%); and (3) $27.0 million 12-year term due on October 16, 2024 (3.90%). We paid $2.1 million in debt issuance costs
which will be amortized through interest expense using the effective interest method over the lifetime of the notes. The note purchase
agreement contains certain financial and non-financial covenants, including but not limited to, restrictions on priority indebtedness
and the maintenance of certain financial ratios. We were in compliance with these covenants at December 31, 2020. Based on an
estimation using the changes in the U.S. Treasury rates, the Level 2 fair value of these senior notes as of December 31, 2020 and
2019 was approximately $337.7 million and $329.2 million, respectively. During 2014, we entered into interest rate swaps, which
effectively fixed the fair value of $200.0 million of this debt, which was reduced to $127.0 million following the 2019 $73.0 million
repayment. These interest rate swaps qualify for hedge accounting as fair value hedges as described in Note 14 "Derivatives and
Hedging".
(cid:42)(cid:72)(cid:85)(cid:80)(cid:68)(cid:81)(cid:3)(cid:51)(cid:85)(cid:76)(cid:89)(cid:68)(cid:87)(cid:72)(cid:3)(cid:51)(cid:79)(cid:68)(cid:70)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:11)(cid:54)(cid:70)(cid:75)(cid:88)(cid:79)(cid:71)(cid:86)(cid:70)(cid:75)(cid:72)(cid:76)(cid:81)(cid:12)
In 2017, we completed a German private placement bond ("Schuldschein") which was issued in several tranches totaling $331.1
million due in various periods through 2027. The Schuldschein consists of one U.S. dollar and several Euro denominated tranches.
The Euro tranches are designated as a foreign currency non-derivative hedging instrument that qualifies as a net investment hedge as
described in Note 14 "Derivatives and Hedging". Based on the spot rate method, the change in the carrying value of the Euro
denominated tranches attributed to the net investment hedge as of December 31, 2020 totaled $26.9 million of unrealized loss and
is recorded in equity. We paid $1.2 million in debt issuance costs which are being amortized through interest expense over the
lifetime of the notes. A summary of the tranches is as follows:
(cid:38)(cid:38)(cid:88)(cid:88)(cid:85)(cid:85)(cid:85)(cid:85)(cid:72)(cid:72)(cid:81)(cid:81)(cid:70)(cid:70)(cid:92)(cid:92) (cid:49)(cid:49)(cid:82)(cid:82)(cid:87)(cid:87)(cid:76)(cid:76)(cid:82)(cid:82)(cid:81)(cid:81)(cid:68)(cid:68)(cid:79) (cid:36)(cid:36)(cid:80)(cid:80)(cid:82)(cid:82)(cid:88)(cid:88)(cid:81)(cid:81)(cid:87)(cid:87)
EUR
EUR
EUR
EUR
(cid:189)11.5 million
(cid:189)23.0 million
(cid:189)21.5 million
(cid:189)64.5 million
(cid:44)(cid:81)(cid:81)(cid:87)(cid:87)(cid:72)(cid:72)(cid:85)(cid:85)(cid:72)(cid:72)(cid:86)(cid:86)(cid:87)(cid:87) (cid:53)(cid:53)(cid:68)(cid:68)(cid:87)(cid:87)(cid:72)(cid:72)
Fixed 0.4%
(cid:38)(cid:38)(cid:68)(cid:68)(cid:85)(cid:85)(cid:85)(cid:85)(cid:92)(cid:92)(cid:76)(cid:76)(cid:81)(cid:81)(cid:74)(cid:74) (cid:57)(cid:57)(cid:68)(cid:68)(cid:79)(cid:88)(cid:88)(cid:72)(cid:72) (cid:11)(cid:11)(cid:76)(cid:76)(cid:81)(cid:81) (cid:87)(cid:87)(cid:75)(cid:75)(cid:82)(cid:82)(cid:88)(cid:88)(cid:86)(cid:86)(cid:68)(cid:68)(cid:81)(cid:81)(cid:71)(cid:71)(cid:86)(cid:86)(cid:12)(cid:12) (cid:68)(cid:68)(cid:86)(cid:86) (cid:82)(cid:82)(cid:73)(cid:73)
(cid:48)(cid:48)(cid:68)(cid:68)(cid:87)(cid:87)(cid:88)(cid:88)(cid:85)(cid:85)(cid:76)(cid:76)(cid:87)(cid:87)(cid:92)(cid:92)
(cid:39)(cid:39)(cid:72)(cid:72)(cid:70)(cid:70)(cid:72)(cid:72)(cid:80)(cid:80)(cid:69)(cid:69)(cid:72)(cid:72)(cid:85)(cid:85) (cid:22)(cid:22)(cid:20)(cid:20)(cid:15)(cid:15)
(cid:21)(cid:21)(cid:19)(cid:19)(cid:21)(cid:21)(cid:19)(cid:19)
(cid:39)(cid:39)(cid:72)(cid:72)(cid:70)(cid:70)(cid:72)(cid:72)(cid:80)(cid:80)(cid:69)(cid:69)(cid:72)(cid:72)(cid:85)(cid:85) (cid:22)(cid:22)(cid:20)(cid:20)(cid:15)(cid:15)
(cid:21)(cid:21)(cid:19)(cid:19)(cid:20)(cid:20)(cid:28)(cid:28)
March 2021
$ 14,115
$ 12,905
Floating EURIBOR +
March 2021
28,224
25,811
0.4%
Fixed 0.68%
October 2022
26,361
24,112
Floating EURIBOR +
October 2022
79,083
72,335
0.5%
USD
$45.0 million
Floating LIBOR + 1.2%
October 2022
44,948
44,919
EUR
(cid:189)25.0 million
Floating EURIBOR +
October 2022
30,642
28,026
0.5%
EUR
EUR
(cid:189)64.0 million
(cid:189)31.0 million
Fixed 1.09%
June 2024
78,429
71,747
Floating EURIBOR +
June 2024
37,989
34,753
0.7%
EUR
(cid:189)14.5 million
Fixed 1.61%
June 2027
17,760
16,249
$ 357,551
$ 330,857
179
The financial markets regulators in the United Kingdom and the Eurozone have passed regulations that will become effective in 2021
under which LIBOR and EURIBOR in their current form will not be compliant. Market participants and regulators are working on
establishing new interest rate benchmarks. While the outcome of this work is not clear yet, the Schuldschein, our syndicated loan
facility, and our interest rate swaps continue to make reference to the current LIBOR and EURIBOR benchmark rates. These
agreements contain language for the determination of interest rates in case the benchmark rate is not available. However, it appears
likely that the agreements will need to be adjusted in line with still to be developed market practice once new benchmark rates
become available.
Revolving Credit Facility
Our credit facilities available and undrawn at December 31, 2020 total (cid:189)427.0 million (approximately $524.0 million). This
includes a (cid:189)400.0 million syndicated ESG-linked revolving credit facility expiring December 2023 and three other lines of credit
amounting to (cid:189)27.0 million with no expiration date. The (cid:189)400.0 million facility can be utilized in Euro and bears interest of 0.525%
to 1.525% above EURIBOR, and is offered with interest periods of one, three or six months. The commitment fee is calculated based
on 35% of the applicable margin. In 2020, $0.9 million of commitment fees were paid. The revolving facility agreement contains
certain financial and non-financial covenants, including but not limited to, restrictions on the encumbrance of assets and the
maintenance of certain financial ratios. We were in compliance with these covenants at December 31, 2020. The credit facilities are
for general corporate purposes and no amounts were utilized at December 31, 2020.
17. Income Taxes
Income (loss) before income taxes for the years ended December 31, 2020, 2019 and 2018 consisted of:
((iinn tthhoouussaannddss))
22002200
22001199
22001188
Pretax income in The Netherlands
$ (16,640)
$ 17,455
$ (1,675)
Pretax income (loss) from foreign operations
456,112
(95,231)
227,412
$ 439,472
$ (77,776)
$ 225,737
Income tax expense (benefit) for the years ended December 31, 2020, 2019 and 2018 are as follows:
((iinn tthhoouussaannddss))
Current—The Netherlands
—Foreign
Deferred—The Netherlands
—Foreign
22002200
$ 270
86,720
86,990
(6,921)
215
(6,706)
22001199
$ 5,670
13,371
19,041
4,177
(59,539)
(55,362)
22001188
$ 5,794
52,835
58,629
2,551
(25,823)
(23,272)
Total income tax (benefit) expense
$ 80,284
$ (36,321)
$ 35,357
180
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
The Netherlands statutory income tax rate was 25% for the years ended December 31, 2020, 2019 and 2018. Income from foreign
subsidiaries is generally taxed at the statutory income tax rates applicable in the respective countries of domicile. The principal items
comprising the differences between income taxes computed at The Netherlands statutory rate and our effective tax rate for the years
ended December 31, 2020, 2019 and 2018 are as follows:
((iinn tthhoouussaannddss))
Income taxes at The Netherlands statutory rate
Unrecognized tax benefits (1)
Valuation allowance (2)
Taxation of foreign operations, net (3)
Prior year taxes
Tax impact from intangible property transfer
Excess tax benefit related to share-based compensation
Government incentives and other deductions (4)
Changes in tax laws and rates
Other items, net
EEffffeeccttiivvee ttaaxx rraattee
22002200
22001199
22001188
25.0 %
25.0 %
25.0 %
(8.2)
(14.1)
(8.1)
(26.9)
6.0
1.5
33.1
(15.1)
(2.1)
(1.6)
(0.8)
(1.4)
27.2
(0.6)
(0.6)
(0.3)
0.0
5.1
9.7
(0.4)
(0.3)
18.3 %
46.7 %
15.7 %
0.2
–
1.3
(2.1)
(1.2)
0.8
(0.7)
Tax impact from (deductible) nondeductible items
(0.8)
(10.3)
(1) During 2020, we analyzed accruals for tax contingencies, primarily related to the potential nondeductibility of the $95.0 million
expense reimbursement paid in connection with the unsuccessful acquisition attempt by Thermo Fisher and ongoing income tax audits.
(2) Due to increased taxable income and deferred tax liability position in 2020, we released a net $35.6 million valuation
allowance primarily related to U.S. disallowed interest.
(3) Our effective tax rate reflects the benefit of our global operations where certain income or loss is taxed at rates higher or lower
than The Netherlands’ statutory rate of 25% as well as the benefit of some income being partially exempt from income taxes due to
various intercompany operating and financing activities. These foreign tax benefits are due to a combination of favorable tax laws,
regulations and exemptions in these jurisdictions. Partial tax exemptions exist on foreign income primarily derived from operations in
Germany, The Netherlands and Singapore. Further, we have intercompany financing arrangements in which the intercompany income
is nontaxable or partially exempt or subject to lower statutory tax rates. During 2020, we had intercompany arrangements through
Dubai, and in 2018 through mid-2019 had arrangements through Luxembourg and Ireland.
(4) Government incentives include favorable tax regulations in the U.S. relating to research and development expense and other
government incentives.
We conduct business globally and, as a result, file numerous consolidated and separate income tax returns in The Netherlands,
Germany, and the U.S. federal jurisdiction, as well as in various other state and foreign jurisdictions. In the normal course of
business, we are subject to examination by taxing authorities throughout the world. Tax years in The Netherlands are potentially open
back to 2008 for income tax examinations by tax authorities. The German group is open to audit for the tax years starting in 2014
181
and in 2019, the German tax authority commenced an audit for the 2014-2016 tax years. The U.S. consolidated group is subject to
federal and most state income tax examinations by tax authorities beginning with the year ending December 31, 2017 through the
current period. Our other subsidiaries, with few exceptions, are no longer subject to income tax examinations by tax authorities for
years before 2016.
Changes in the amount of unrecognized tax benefits for the years ended December 31, 2020, 2019, and 2018 are as follows:
((iinn tthhoouussaannddss))
Balance at beginning of year
22002200
22001199
22001188
$ 58,002
$ 55,780
$ 44,033
Additions based on tax positions related to the current year
31,758
5,770
3,359
Additions for tax positions of prior years
Decrease for tax position of prior years
Decrease related to settlements
Decrease due to lapse of statute of limitations
Increase (decrease) from currency translation
3,560
14,532
11,984
(57)
(9,073)
—
(7,605)
—
—
(520)
(409)
(1,238)
7,349
(993)
(2,358)
Balance at end of year
$ 100,092
$ 58,002
$ 55,780
At December 31, 2020 and 2019, our net unrecognized tax benefits totaled approximately $100.1 million and $58.0 million,
respectively, which, if recognized, would favorably affect our effective tax rate in any future period. It is reasonably possible that
approximately $38.0 million of the unrecognized tax benefits may be released or utilized during the next 12 months due to lapse of
statute of limitations or settlements with tax authorities; however, various events could cause our current expectations to change in the
future. The above unrecognized tax benefits, if ever recognized in the financial statements, would be recorded in the statements of
income (loss) as part of income tax expense (benefit).
Our policy is to recognize interest accrued related to an underpayment of income taxes in interest expense and penalties within
income tax expense. For the years ended December 31, 2020, 2019 and 2018, we recognized a net expense for interest and
penalties of $1.9 million, $1.6 million and $1.1 million, respectively. At December 31, 2020 and 2019, we have accrued interest of
$4.4 million and $2.5 million, respectively, which are not included in the table above.
We have recorded net deferred tax assets of $15.7 million and $33.1 million at December 31, 2020 and 2019, respectively. The
components of the net deferred tax asset and liability at December 31, 2020 and 2019 are as follows:
182
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
((iinn tthhoouussaannddss))
22002200
22001199
DDeeffeerrrreedd TTaaxx
AAsssseett
DDeeffeerrrreedd TTaaxx
LLiiaabbiiliittyy
DDeeffeerrrreedd TTaaxx
AAsssseett
DDeeffeerrrreedd TTaaxx
LLiiaabbiiliittyy
Net operating loss and tax credit carryforward
Accrued and other liabilities
$ 67,856
22,926
$ —
—
$ 50,274
17,977
$ —
—
Inventories
3,872
(2,269)
4,726
(1,439)
Unrealized gain (loss) on investments
—
(25,779)
–
(4,973)
Property, plant and equipment
6,099
(23,376)
5,297
(20,332)
Intangible assets
2,817
(55,999)
1,078
(26,294)
Share-based compensation
Disallowed interest carryforwards
Convertible notes
Other
18,377
42,090
—
—
6,512
(13,513)
9,428
(6,046)
13,787
73,690
7,104
5,998
—
—
—
(6,174)
179,977
(126,982)
179,931
(59,212)
Valuation allowance
(37,332)
—
(87,619)
—
Net deferred tax assets
$ 15,663
$ 33,100
$ 142,645
$ (126,982)
$ 92,312
$ (59,212)
At December 31, 2020, we had $686.3 million in total net operating loss (NOL) carryforwards which included $318.6 million for
Germany, $176.4 million for the U.S., $68.5 million for The Netherlands, $49.8 million for Spain, and $73.0 million for other
foreign jurisdictions. The NOL carryforwards in Germany and Spain carryforward indefinitely and we expect them to be fully utilized
in future years. The entire NOL carryforward in the U.S. is subject to limitations under Section 382 of the U.S. Internal Revenue Code.
The NOL carryforwards in the U.S. expire between 2024 and 2034 and in The Netherlands the NOL carryforwards expire between
2026 and 2028. NOL carryforwards of $25.3 million in other foreign jurisdictions expire between 2021 and 2030 while the
remainder can be carried forward indefinitely. At December 31, 2020, we had $158.8 million of disallowed interest carryforwards
which can be carried forward indefinitely. At December 31, 2020, tax credits total $3.0 million which expire between 2030 and
2039.
For the years ended December 31, 2020, 2019 and 2018, the changes in the valuation allowance charged to income tax expense
totaled $36.8 million, $19.0 million and $0.8 million, respectively. For the year ended December 31, 2020, the changes in the
valuation allowance charged to additional paid in capital totaled $13.5 million. The valuation allowance principally relates to
disallowed interest carryforwards and net operating loss carryforwards. The Company can only recognize a deferred tax asset to the
extent it is "more likely than not" that these assets will be realized. Judgments around realizability depend on the availability and
weight of both positive and negative evidence.
As of December 31, 2020, a deferred tax liability has not been recognized for residual income taxes in The Netherlands on the
undistributed earnings of the majority of our foreign subsidiaries as these earnings are considered to be either indefinitely reinvested
or can be repatriated tax free under the Dutch participation exemption. The indefinitely reinvested earnings retained of our
subsidiaries that would be subject to tax if distributed amounted to $538.3 million at December 31, 2020. Estimating the amount of
the unrecognized deferred tax liability on indefinitely reinvested foreign earnings is not practicable. Should the earnings be remitted
as dividends, we may be subject to taxes including withholding tax. We have $28.1 million of undistributed earnings that we do not
consider indefinitely reinvested and have recorded a deferred tax liability at December 31, 2020 and 2019, of $1.6 million and
$1.5 million, respectively.
183
18. Equity
Shares
The authorized classes of our shares consist of Common Shares (410 million authorized), Preference Shares (450 million authorized)
and Financing Preference Shares (40 million authorized). All classes of shares have a par value of (cid:189)0.01. No Financing Preference
Shares or Preference Shares have been issued. Like all shareholders' equity accounts, common shares are translated to U.S. dollars at
the foreign exchange rates in effect when the shares are issued.
Issuance and Conversion of Warrants
In connection with the issuance of the Cash Convertible Notes as described in Note 16 "Lines of Credit and Debt", we issued
Warrants as summarized in the table below. The number of warrants and exercise prices are subject to customary adjustments under
certain circumstances. The proceeds, net of issuance costs, from the sale of the Warrants are included as additional paid in capital in
the accompanying consolidated balance sheets.
The Warrants are exercisable only upon expiration. For each Warrant that is exercised, we will deliver to the holder a number of
shares of our common stock equal to the amount by which the settlement price exceeds the exercise price, divided by the settlement
price, plus cash in lieu of any fractional shares. The Warrants could separately have a dilutive effect on shares of our common stock
to the extent that the market value per share of our common stock exceeds the applicable exercise price of the Warrants (as
measured under the terms of the Warrants).
Caasshh ccoonnvveerrttiibblee nnootteess
Issssuueedd oonn
NNuummbbeerr ooff sshhaarree
wwaarrrraannttss
((iinn mmiilliioonnss))
EExxeerrcciissee pprriiccee ppeerr
sshhaarree
PPrroocceeeeddss ffrroomm
iissssuuaannccee ooff
wwaarrrraannttss,, nneett ooff
iissssuuaannccee ccoossttss
((iinn mmiilliioonnss))
WWaarrrraannttss eexxppiirree
oovveerr aa ppeerriioodd ooff
5500 ttrraaddiinngg ddaayyss
bbeeggiinnnniinngg oonn
2019
2021
2023
2024
March 19, 2014
15.2
$32.0560
$40.6
December 27,
2018
March 19, 2014
10.6
$32.0560
$28.3
December 29,
2020
September 13,
9.7
$50.9664
$45.3
June 26, 2023
2017
November 13,
10.9
$52.1639
$72.4
August 27, 2024
2018
During 2020, 0.8 million common shares were issued in connection with the early conversion of 4.2 million warrants related to the
2021 Notes which resulted in a $7.5 million decrease to additional paid in capital, a $22.7 million decrease in retained earnings,
and a decrease of $30.3 million in treasury shares. The remaining warrants related to the 2021 Notes of 6.3 million were terminated
in 2020, resulting in a cash payment of $174.6 million, a $30.3 million decrease to additional paid in capital and a $144.3 million
decrease in retained earnings.
During 2019, 2.1 million common shares were issued in connection with the conversion of the 15.2 million warrants related to the
2019 Notes which resulted in a $31.1 million decrease to additional paid in capital, a $37.7 million decrease in retained earnings,
a decrease of $68.8 million in treasury shares and an approximately $4 thousand cash payment for fractional shares.
184
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
Share Repurchase Programs
On May 6, 2019, we announced our sixth share repurchase program of up to $100 million of our common shares. During 2020, we
repurchased 1.3 million QIAGEN shares for $64.0 million (including transaction costs). This program ended on December 17, 2020.
On January 31, 2018, we announced our fifth share repurchase program of up to $200 million of our common shares. During 2018,
we repurchased 2.9 million QIAGEN shares for $104.7 million (including transaction costs). During 2019, we repurchased 2.0
million QIAGEN shares for $74.5 million (including transaction costs), bringing the total shares repurchased under this program to
4.9 million for $179.1 million (including transaction costs). This program ended on June 30, 2019.
The cost of repurchased shares is included in treasury stock and reported as a reduction in total equity when a repurchase occurs.
Repurchased shares will be held in treasury in order to satisfy various obligations, which include exchangeable debt instruments,
warrants and employee share-based remuneration plans.
Accumulated Other Comprehensive Loss
The following table is a summary of the components of accumulated other comprehensive loss as of December 31, 2020 and 2019:
((iinn tthhoouussaannddss))
Net unrealized loss on hedging contracts, net of tax
Net unrealized loss on pension, net of tax
22002200
22001199
$ (23,268)
$ (2,289)
(599)
(561)
Foreign currency effects from intercompany long-term investment transactions, net of tax of
(25,717)
(22,587)
$10.7 million and $9.7 million in 2020 and 2019, respectively
Foreign currency translation adjustments
Accumulated other comprehensive loss
(194,238)
(284,182)
$ (243,822)
$ (309,619)
19. Earnings per Common Share
We present basic and diluted earnings per share. Basic earnings per share is calculated by dividing the net income (loss) by the
weighted average number of common shares outstanding. Diluted earnings per share reflect the potential dilution that would occur if
all “in the money” securities to issue common shares were exercised.
The following schedule summarizes the information used to compute earnings per common share for the years ended December 31,
2020, 2019 and 2018:
185
((iinn tthhoouussaannddss,, eexxcceepptt ppeerr sshhaarree ddaattaa))
22002200
22001199
22001188
Net income (loss)
$ 359,188
$ (41,455)
$ 190,380
Weighted average number of common shares used to compute basic net
income per common share
228,427
226,777
226,640
Dilutive effect of stock options and restrictive stock units
Dilutive effect of outstanding warrants
Weighted average number of common shares used to compute diluted
net income per common share
3,350
2,437
—
—
4,613
2,203
234,214
226,777
233,456
Outstanding options and awards having no dilutive effect, not included
in above calculation
11
107
272
Outstanding warrants having no dilutive effect, not included in above
26,438
32,938
35,939
calculation
Basic earnings (loss) per common share
Diluted earnings (loss) per common share
$ 1.57
$ (0.18)
$ 1.53
$ (0.18)
$ 0.84
$ 0.82
For purposes of considering the 2027 Notes in determining diluted earnings (loss) per common share, only an excess of the
conversion value over the principal amount would have a dilutive impact using the treasury stock method. Since the 2027 Notes were
out of the money and anti-dilutive during the period from December 17, 2020 through December 31, 2020, they were excluded from
the diluted earnings (loss) per common share calculation in 2020.
Due to the net loss for the year ended December 31, 2019, stock options and restricted stock units representing approximately 3.9
million weighted-average shares of common stock and warrants representing 1.7 million shares of common stock were excluded from
the computation of diluted net loss because the impact would have been antidilutive.
20. Commitments and Contingencies
Licensing and Purchase Commitments
We have licensing agreements with companies, universities and individuals, some of which require certain up-front payments. Royalty
payments are required on net product sales ranging from 0.45 percent to 25 percent of covered products or based on quantities
sold. Several of these agreements have minimum royalty requirements. The accompanying consolidated balance sheets include
accrued royalties relating to these agreements in the amount of $7.4 million and $5.5 million at December 31, 2020 and 2019,
respectively. Royalty expense relating to these agreements amounted to $12.2 million, $13.5 million, and $14.0 million for the years
ended December 31, 2020, 2019 and 2018, respectively. Royalty expense is primarily recorded in cost of sales, with a small
portion recorded as research and development expense depending on the use of the technology under license. Some of these
agreements also have minimum raw material purchase requirements and requirements to perform specific types of research.
186
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
At December 31, 2020, we had commitments to purchase goods or services, and for future license and royalty payments. They are
as follows:
Yeeaarrss eennddiinngg DDeecceemmbbeerr 3311,, ((iinn tthhoouussaannddss))
2021
2022
2023
2024
2025
Thereafter
PPuurrcchhaassee
CCoommmmiittmmeennttss
LLiicceennssee && RRooyyaalttyy
CCoommmmiittmmeennttss
$ 199,843
$ 10,003
42,628
5,364
3,000
—
—
7,217
4,483
2,623
2,349
3,364
$ 250,835
$ 30,039
As of December 31, 2020, $28.4 million of the total purchase commitments are with companies in which we hold an interest and are
considered related parties.
Contingent Consideration Commitments
Pursuant to the purchase agreements for certain acquisitions and other contractual arrangements, we could be required to make
additional contingent cash payments totaling up to $26.6 million based on the achievement of certain revenue and operating results
milestones as follows:
YYeeaarrss eennddiinngg DDeecceemmbbeerr 3311,, ((iinn tthhoouussaannddss))
2021
2022
$ 8,850
17,700
$ 26,550
Of the $26.6 million total contingent obligation as discussed further in Note 9 "Financial Instruments and Fair Value Measurements,"
we have assessed the fair value at December 31, 2020 to be $23.6 million which is included in accrued and other current liabilities
in the accompanying consolidated balance sheet.
Employment Agreements
Certain of our employment contracts contain provisions which guarantee the payments of certain amounts in the event of a change in
control, as defined in the agreements, or if the executive is terminated for reasons other than cause, as defined in the agreements. At
December 31, 2020, the commitment under these agreements totaled $21.2 million.
Contingencies
In the ordinary course of business, we provide a warranty to customers that our products are free of defects and will conform to
published specifications. Generally, the applicable product warranty period is one year from the date of delivery of the product to
187
the customer or of site acceptance, if required. Additionally, we typically provide limited warranties with respect to our services. We
provide for estimated warranty costs at the time of the product sale. The changes in the carrying amount of warranty obligations for
the years ended December 31, 2020 and 2019 are as follows:
((iinn tthhoouussaannddss))
Balance at beginning of year
Provision charged to cost of sales
Usage
Adjustments to previously provided warranties, net
Currency translation
Balance at end of year
Litigation
22002200
22001199
$ 3,141
$ 2,848
5,645
3,229
(3,978)
(2,921)
(125)
130
(1)
(14)
$ 4,813
$ 3,141
From time to time, we may be party to legal proceedings incidental to our business. As of December 31, 2020, certain claims, suits
or legal proceedings arising out of the normal course of business have been filed or were pending against QIAGEN or our
subsidiaries. These matters have arisen in the ordinary course and conduct of business, as well as through acquisition. Although it is
not possible to predict the outcome of such litigation, we assess the degree of probability and evaluate the reasonably possible losses
that we could incur as a result of these matters. We accrue for any estimated loss when it is probable that a liability has been
incurred and the amount of probable loss can be estimated.
Litigation accruals recorded in accrued and other current liabilities totaled $5.2 million as of December 31, 2020 and $0.8 million
as of December 31, 2019. The estimated amount of a range of possible losses as of December 31, 2020, is between $4.7 million
and $16.3 million. During the year ended December 31, 2020, $0.3 million was paid. Based on the facts known to QIAGEN and
after consultation with legal counsel, management believes that such litigation will not have a material adverse effect on our financial
position or results of operations above the amounts accrued. However, the outcome of these matters is ultimately uncertain, thus any
settlements or judgments against us in excess of management's expectations could have a material adverse effect on our financial
position, results of operations or cash flows.
21. Segment Information
We operate as one operating segment in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards
Codification (ASC) Topic 280, Segment Reporting. We have a common basis of organization and our products and services are
offered globally. Considering the acquisitions made during 2020 and our continued restructuring and streamlining of the growing
organization, our chief operating decision maker (CODM) continues to make decisions with regards to business operations and
resource allocation based on evaluations of QIAGEN as a whole. Accordingly, we operate and make decisions as one business
segment. Product category and geographic information follows below.
Product Category Information
Net sales for the product categories are attributed based on those revenues related to sample and assay products and similarly
related revenues including bioinformatics solutions, and revenues derived from instrumentation sales. Refer to Note 4 "Revenue" for
disaggregation of revenue based on product categories and customer class.
188
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
Geographical Information
Net sales are attributed to countries based on the location of the customer. QIAGEN operates manufacturing facilities in Germany,
China, and the United States that supply products to customers as well as QIAGEN subsidiaries in other countries. The intersegment
portions of such net sales are excluded to derive consolidated net sales. No single customer represents more than ten percent of
consolidated net sales. Our country of domicile is The Netherlands, which reported net sales of $17.8 million, $15.8 million and
$15.9 million for the years ended 2020, 2019 and 2018, respectively, and these amounts are included in the line item Europe,
Middle East and Africa as shown in the table below.
Neett ssaaleess ((iinn tthhoouussaannddss))
Americas:
United States
Other Americas
Total Americas
22002200
22001199
22001188
$ 728,577
$ 663,869
$ 632,660
96,880
58,121
60,359
825,457
721,990
693,019
Europe, Middle East and Africa
682,289
487,476
490,301
Asia Pacific, Japan and Rest of World
362,600
316,958
318,528
Total
$ 1,870,346
$ 1,526,424
$ 1,501,848
Long-lived assets include property, plant and equipment. The Netherlands, which is included in the balances for Europe, reported
long-lived assets of $1.5 million and $1.3 million as of December 31, 2020 and 2019, respectively.
Americas:
United States
Other Americas
Total Americas
Europe, Middle East and Africa:
Germany
Other Europe, Middle East and Africa
Total Europe, Middle East and Africa
Asia Pacific and Japan
Total
22002200
22001199
$ 154,843
$ 147,027
2,436
3,507
157,279
150,534
304,571
229,225
71,444
49,004
376,015
278,229
26,078
26,480
$ 559,372
$ 455,243
189
22. Share-Based Compensation
We adopted the QIAGEN N.V. Amended and Restated 2005 Stock Plan (the 2005 Plan) in 2005 and the QIAGEN N.V. 2014 Stock
Plan (the 2014 Plan) in 2014. The 2005 Plan expired by its terms in April 2015 and no further awards will be granted under the
2005 Plan. The plans allow for the granting of stock rights and incentive stock options, as well as non-qualified options, stock grants
and stock-based awards, generally with terms of up to 5 or 10 years, subject to earlier termination in certain situations. The vesting
and exee ercisability of certain stock rights will be accelerated in the event of a Change of Control, as defined in the plans. All option
grants have been at the market value on the grant date or at a premium above the closing market price on the grant date. We issue
Treasury Shares to satisfy option exercises and award releases and had approximately 14.4 million Common Shares reserved and
available for issuance under the 2005 and 2014 Plans at December 31, 2020.
Stock Options
We have not granted stock options since 2013. A summary of the status of employee stock options as of December 31, 2020 and
changes during the year then ended is presented below:
AAll EEmmpplooyyeeee OOppttiioonnss
Outstanding at January 1, 2020
Exercised
Outstanding at December 31, 2020
Vested at December 31, 2020
Vested and expected to vest at December 31, 2020
NNuummbbeerr ooff
SShhaarreess ((iinn
tthhoouussaannddss))
WWeeiigghhtteedd
AAvveerraaggee EExxeerrcciissee
PPrriiccee
WWeeiigghhtteedd
AAvveerraaggee
CCoonnttrraaccttuuaal TTeerrmm
((iinn yyeeaarrss))
AAggggrreeggaattee
Innttrriinnssiicc VVaaluuee
((iinn tthhoouussaannddss))
792
(365)
427
427
427
$ 20.06
$ 20.97
$ 19.28
$ 19.28
$ 19.28
1.25
1.25
1.25
$ 14,338
$ 14,338
$ 14,338
The total intrinsic value of options exercised during the years ended December 31, 2020, 2019 and 2018 was $6.5 million, $2.0
million and $5.0 million, respectively. The actual tax benefit for the tax deductions from option exercises totaled $1.3 million, $0.5
million, and $0.8 million during the years ended December 31, 2020, 2019 and 2018, respectively. At December 31, 2020, there
was no unrecognizezz d share-based compensation expense related to employee stock option awards.
At December 31, 2020, 2019 and 2018, 0.4 million, 0.8 million and 0.9 million options were exercisable at a weighted average
price of $19.28, $20.06 and $20.04 per share, respectively. The options outstanding at December 31, 2020 expire in various
years through 2023.
Stock Units
Stock units represent rights to receive Common Shares at a future date and include restricted stock units which are subject to time-
vesting only and performance stock units which include performance conditions in addition to time-vesting. The final number of
performance stock units earned is based on the performance achievement which for some grants can reach up to 200% of the
granted shares. There is no exercise price and the fair market value at the time of the grant is recognized over the requisite vesting
period, generally up to 5 or 10 years. The fair market value is determined based on the number of stock units granted and the market
value of our shares on the grant date. Pre-vesting forfeitures were estimated to be approximately 6.2%. At December 31, 2020, there
was $73.1 million remaining in unrecognized compensation cost including esee timated forfeitures related to these awards, which is
expected to be recognized over a weighted average period of 2.25 years. The weighted average grant date fair value of stock units
granted during the years ended December 31, 2020, 2019 and 2018 was $36.92, $37.28 and $35.37, respectively. The total fair
value of stock units that vested during the years ended December 31, 2020, 2019 and 2018 was $29.3 million, $123.9 million and
$54.3 million, respectively.
190
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
A summary of stock units as of December 31, 2020 and changes during the year are presented below:
SSttoocckk UUnniittss
Outstanding at January 1, 2020
Granted
Vested
Forfeited
Outstanding at December 31, 2020
Vested and expected to vest at December 31, 2020
WWeeiigghhtteedd
AAvveerraaggee
CCoonnttrraaccttuuaal TTeerrmm
((iinn yyeeaarrss))
AAggggrreeggaattee
Innttrriinnssiicc VVaaluuee
((iinn tthhoouussaannddss))
SSttoocckk UUnniittss
((iinn tthhoouussaannddss))
5,183
1,035
(720)
(365)
5,133
3,881
2.25
$ 261,458
2.02
$ 205,097
Beginning in 2019, we began net share settlement for the tax withholding upon the vesting of awards. Shares are issued on the
vesting dates net of the applicable statutory tax withholding to be paid by us on behalf of our employees. As a result, fewer shares
are issued than the number of stock units outstanding. We record a liability for the tax withholding to be paid by us as a reduction to
treasury shares.
Compensation Expense
Share-based compensation expense before taxes for the years ended December 31, 2020, 2019 and 2018 totaled approximately
$40.9 million, $65.9 million and $40.1 million, respectively, as shown in the table below.
((iinn tthhoouussaannddss))
Cost of sales
Research and development
Sales and marketing
General and administrative
Restructuring, acquisition, integration and other,
net
Share-based compensation expense
Less: income tax benefit (1)
22002200
$ 2,897
7,014
15,889
15,136
—
40,936
9,552
22001199
$ 2,493
5,810
7,947
23,705
25,938
65,894
12,153
22001188
$ 2,879
6,457
9,372
21,405
—
40,113
8,277
Net share-based compensation expense
$ 31,384
$ 53,740
$ 31,836
(1) Does not include the excess tax benefit realized for the tax deductions of the share-based payment arrangements which totaled
$2.5 million, $4.0 million and $4.7 million, respectively, for the years ended December 31, 2020, 2019 and 2018.
Share-based compensation expense includes amounts related to the restructuring programs discussed in Note 6 "Restructuring and
Impairment"", including accelerated expense in 2019. No share-based compensation costs were capitalized for the years ended
December 31, 2020, 2019 or 2018 as the amounts were not material.
191
23. Employee Benefits
We maintain various benefit plans, including defined contribution and defined benefit plans. Our U.S. defined contribution plan is
qualified under Section 401(k) of the Internal Revenue Code, and covers substantially all U.S. employees. Participants may contribute
a portion of their compensation not exceeding a limit set annually by the Internal Revenue Service. This plan includes a provision for
us to match a portion of employee contributions. Total expense under the 401(k) plans, including the plans acquired via business
acquisitions, was $3.6 million, $4.0 million and $4.0 million for the years ended December 31, 2020, 2019 and 2018,
respectively. We also have a defined contribution plan which covers certain executives. We make matching contributions up to an
established maximum. Matching contributions made to the plan, and expensed, totaled approximately $0.2 million in each of the
years ended December 31, 2020, 2019 and 2018.
We have five defined benefit, non-contributory retirement or termination plans that cover certain employees in Germany, France,
Japan, Italy and the United Arab Emirates. These defined benefit plans provide benefits to covered individuals satisfying certain age
and/or service requirements. For certain plans, we calculate the vested benefits to which employees are entitled if they separate
immediately. The benefits accrued on a pro-rata basis during the employees’ employment period are based on the individuals’
salaries, adjusted for inflation. The liability under the defined benefit plans was $9.3 million at December 31, 2020 and $8.2 million
at December 31, 2019, and is included as a component of other long-term liabilities on the accompanying consolidated balance
sheets.
24. Related Party Transactions
From time to time, we have transactions with other companies in which we hold an interest, all of which are individually and in the
aggregate immaterial, as summarized in the table below.
Net sales to related parties for the years ended December 31, 2020, 2019, and 2018 are as follows:
FFoorr tthhee yyeeaarrss eennddeedd DDeecceemmbbeerr 3311,,
((iinn tthhoouussaannddss))
Net sales
22002200
$ 6,025
22001199
22001188
$ 20,002
$ 23,358
Net sales with related parties primarily reflects our ventures in China including our partnership to externalize the HPV test franchise
for cervical cancer screening in China as well as our joint venture with Sichuan Maccura Biotechnology Co., Ltd which was
terminated in conjunction with the 2019 restructuring activities discussed further in Note 6 "Restructuring and Impairments" which
also details related party restructuring charges.
192
F i n a n c i a l R e s u l t s › Notes to Consolidated Financial Statements
As of December 31, 2020 and 2019 balances with related parties are as follows:
((iinn tthhoouussaannddss))
Accounts receivable
Prepaid expenses and other current assets
Other long-term assets
Accounts payable
Accrued and other current liabilities
22002200
$ 3,961
$ 25,429
$ 9,594
$ 4,050
$ 1,380
22001199
$ 7,589
$ 13,697
$ 16,830
$ 1,775
$ 15,404
Prepaid expenses and other current assets include supplier advances from companies with which we have an investment or
partnership interest. As of December 31, 2019, this also included short-term loan receivables that were collected during 2020.
During 2018, we purchased a convertible note for $15.0 million from a privately held company due in December 2021. During
2020, we purchased an additional convertible note from the same company for $10.0 million due in August 2023. Both notes bear
interest at 8%. In the event the company goes public, the notes will convert into common shares in the company ranking pari passu
with existing common shares. As of December 31, 2020, $17.1 million is included in prepaid expenses and other current assets and
$9.0 million is included in other long-term assets in the accompanying consolidated balance sheets related to the principal, accrued
interest and allowance for credit loss upon adoption of ASC 326 on January 1, 2020. As of December 31, 2019, $16.3 million is
included in other long-term assets related to the principal and accrued interest due from this company related to the convertible note.
In connection with the 2019 Restructuring further discussed in Note 6 "Restructuring and Impairments", we entered into an agreement
with a non-publicly traded company considered a related party to reduce future purchase commitments. As of December 31, 2019
due to this agreement, $12.8 million was included in accrued and other current liabilities in the accompanying consolidated balance
sheet. Payment occurred during the year ended December 31, 2020.
193
List of Subsidiaries
(cid:55)(cid:75)(cid:72) (cid:73)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74) (cid:76)(cid:86) (cid:68) (cid:79)(cid:76)(cid:86)(cid:87) (cid:82)(cid:73) (cid:87)(cid:75)(cid:72) (cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:214)(cid:86) (cid:86)(cid:88)(cid:69)(cid:86)(cid:76)(cid:71)(cid:76)(cid:68)(cid:85)(cid:76)(cid:72)(cid:86) (cid:68)(cid:86) (cid:82)(cid:73) (cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85) (cid:22)(cid:20)(cid:15) (cid:21)(cid:19)(cid:21)(cid:19)(cid:15) (cid:82)(cid:87)(cid:75)(cid:72)(cid:85) (cid:87)(cid:75)(cid:68)(cid:81) (cid:70)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81)
(cid:86)(cid:88)(cid:69)(cid:86)(cid:76)(cid:71)(cid:76)(cid:68)(cid:85)(cid:76)(cid:72)(cid:86) (cid:87)(cid:75)(cid:68)(cid:87) (cid:71)(cid:76)(cid:71) (cid:81)(cid:82)(cid:87) (cid:76)(cid:81) (cid:87)(cid:75)(cid:72) (cid:68)(cid:74)(cid:74)(cid:85)(cid:72)(cid:74)(cid:68)(cid:87)(cid:72) (cid:70)(cid:82)(cid:81)(cid:86)(cid:87)(cid:76)(cid:87)(cid:88)(cid:87)(cid:72) (cid:68) (cid:86)(cid:76)(cid:74)(cid:81)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:81)(cid:87) (cid:86)(cid:88)(cid:69)(cid:86)(cid:76)(cid:71)(cid:76)(cid:68)(cid:85)(cid:92)(cid:85)(cid:85) (cid:17)
CCoommppaannyy NNaammee
Amnisure International, LLC
Cellestis Pty. Ltd.
Life Biotech Partners B.V.
NeuMoDx Inc.
STAT-Dx Life S.L.
QIAGEN Aarhus A/S
QIAGEN AB
QIAGEN AG
QIAGEN Australia Holding Pty. Ltd.
QIAGEN Benelux B.V.
QIAGEN Beverly LLC
QIAGEN China (Shanghai) Co. Ltd.
QIAGEN Luxembourg SARL
QIAGEN Deutschland Holding GmbH
QIAGEN Finance (Malta) Ltd.
QIAGEN France S.A.S.
QIAGEN Gaithersburg LLC
QIAGEN GmbH
QIAGEN Hamburg GmbH
QIAGEN Inc.
QIAGEN Instruments AG
QIAGEN K.K.
QIAGEN LLC
QIAGEN Ltd.
QIAGEN Manchester Ltd.
QIAGEN Marseille S.A.
QIAGEN North American Holdings Inc.
QIAGEN Pty. Ltd.
QIAGEN Redwood City Inc.
QIAGEN Sciences LLC
QIAGEN S.r.l.
QIAGEN Treasury Management Services Ltd.
QIAGEN U.S. Finance LLC
194
JJuurriissddiiccttiioonn ooff Innccoorrppoorraattiioonn
USA
Australia
Netherlands
USA
Spain
Denmark
Sweden
Switzerland
Australia
Netherlands
USA
China
Luxembourg
Germany
Malta
France
USA
Germany
Germany
Canada
Switzerland
Japan
USA
UK
UK
France
USA
Australia
USA
USA
Italy
UAE
USA
F i n a n c i a l R e s u l t s › List of Subsidiaries Auditor’s Report
›
Auditor’s Report
Report of the Independent Registered Public Accounting Firm
To the Shareholders and Supervisory Board
QIAGEN N.V.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of QIAGEN N.V. and subsidiaries (the “Company”) as of December
31, 2020 and 2019, the related consolidated statements of income (loss), comprehensive income (loss), changes in equity, and cash
flows for each of the years in the three-year period ended December 31, 2020, and the related notes and financial statement
schedule as listed in Item 18 (A) (collectively, the consolidated financial statements). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the
results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020, in conformity
with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of December 31, 20200 0, based on criteria established in Internal
Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our
report dated March 4, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial
reporting.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, in 2020 the Company has changed its method of accounting for
expected credit losses on financial instruments and other commitments due to the adoption of Accounting Standards Codification
Topic 326 – Measurement of Credit Losses on Financial Instruments. In 2019, the Company has changed its method for accounting
for leases due to the adoption of Accounting Standards Codification Topic 842 – Leases.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether
due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or
disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the
critical audit matters or on the accounts or disclosures to which they relate.
195
Assessment of unrecognized tax benefits
(cid:36)(cid:86)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:49)(cid:82)(cid:87)(cid:72)(cid:3)(cid:20)(cid:26)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:70)(cid:82)(cid:81)(cid:71)(cid:88)(cid:70)(cid:87)(cid:86)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:74)(cid:79)(cid:82)(cid:69)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:80)(cid:82)(cid:85)(cid:72)(cid:3)(cid:87)(cid:75)(cid:68)(cid:81)
(cid:24)(cid:19)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:86)(cid:88)(cid:69)(cid:86)(cid:76)(cid:71)(cid:76)(cid:68)(cid:85)(cid:76)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:80)(cid:88)(cid:79)(cid:87)(cid:76)(cid:83)(cid:79)(cid:72)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:77)(cid:88)(cid:85)(cid:76)(cid:86)(cid:71)(cid:76)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)(cid:3)(cid:55)(cid:75)(cid:76)(cid:86)(cid:3)(cid:80)(cid:88)(cid:79)(cid:87)(cid:76)(cid:16)(cid:77)(cid:88)(cid:85)(cid:76)(cid:86)(cid:71)(cid:76)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:76)(cid:81)(cid:89)(cid:82)(cid:79)(cid:89)(cid:72)(cid:86)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:72)(cid:91)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)
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(cid:83)(cid:82)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:76)(cid:85)(cid:3)(cid:87)(cid:72)(cid:70)(cid:75)(cid:81)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3)(cid:80)(cid:72)(cid:85)(cid:76)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:69)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:83)(cid:82)(cid:86)(cid:86)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3)(cid:86)(cid:72)(cid:87)(cid:87)(cid:79)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:79)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:86)(cid:17)
Initial measurement of fair value of developed technology and in-process research and development assets
related to a business combination
As discussed in Note 1 and 5 to the consolidated financial statements, in September 2020, the Company acquired the remaining
80.1% shares of NeuMoDx Molecular, Inc. (“NeuMoDx”) for a purchase price of $239.4m, net of cash acquired. In allocating the
purchase price, the Company recognized intangible assets at fair value in the amount of $157.2m, including developed technology
($101.0m) and in-process research and development (IPR&D) assets ($55.0m), and goodwill in the amount of $157.6m.
We identified the assessment of the initial measurement of fair value of developed technology and IPR&D acquired in the NeuMoDx
business combination as a critical audit matter. Evaluating the key fair value assumptions, including the projected revenue and
related growth rates, the estimated customer attrition rates and discount rates, involved a high degree of auditor judgment. Minor
changes in those assumptions could have a significant effect on the determination of fair value. In addition, the audit effort required
specialized skills and knowledge.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the
operating effectiveness of an internal control related to the Company’s acquisition-date fair value measurement process of intangible
assets, including the development of the key assumptions. We evaluated the growth rates used by the Company to determine
projected revenue by comparing them to industry benchmarks and publicly available data. We assessed the customer attrition rates
by comparing it to historical data of the Company. We involved valuation professionals with specialized skills and knowledge, who
assisted in:
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F i n a n c i a l R e s u l t s › Auditor’s Report
performing sensitivity analyses to assess the impact of possible changes to the key assumptions on the fair value of these intangible
assets, and
developing an estimated range of fair values of the intangible assets acquired using the Company’s key assumptions and an
independently developed range of discount rates using publicly available market data for comparable entities and comparing them
to the Company’s selected discount rates.
/s/ KPMG AG Wirtschaftsprüfungsgesellschaft
We have served as the Company’s auditor since 2015.
Düsseldorf, Germany
March 4, 2021
(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87) (cid:82)(cid:73) (cid:44)(cid:81)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:87) (cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:72)(cid:85)(cid:72)(cid:71) (cid:51)(cid:88)(cid:69)(cid:79)(cid:76)(cid:70) (cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74) (cid:41)(cid:76)(cid:85)(cid:80)
To the Shareholders and Supervisory Board
QIAGEN N.V.:
(cid:50)(cid:83)(cid:76)(cid:81)(cid:76)(cid:82)(cid:81) (cid:82)(cid:81) (cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79) (cid:38)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79) (cid:50)(cid:89)(cid:72)(cid:85) (cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79) (cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)
We have audited QIAGEN N.V.’s and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31,
2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements
of income (loss), comprehensive income (loss), changes in equity, and cash flows for each of the years in the three-year period ended
December 31, 2020, and the related notes and financial statement schedule as listed in Item 18 (A) (collectively, the consolidated
financial statements), and our report dated March 4, 2021 expressed an unqualified opinion on those consolidated financial
statements.
The Company acquired NeuMoDx Molecular, Inc. during 2020, and management excluded from its assessment of the effectiveness of
the Company’s internal control over financial reporting as of December 31, 2020, NeuMoDx Molecular, Inc.’s internal control over
financial reporting associated with 6.31% of total assets and 0.53% of total revenues included in the consolidated financial
statements of the Company as of and for the year ended December 31, 2020. Our audit of internal control over financial reporting of
the Company also excluded an evaluation of the internal control over financial reporting of NeuMoDx Molecular, Inc.
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Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the accompanying ‘Report of Management on Internal
Control over Financial Reporting’. Our responsibility is to express an opinion on the Company’s internal control over financial
reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of
the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could
have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG AG Wirtschaftsprüfungsgesellschaft
Düsseldorf, Germany
March 4, 2021
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A p p e n d i x › Auditor’s Report Service
›
Service
Corporate Communications
For Investors
Phone worldwide: +49 2103 29 11711
Phone U.S.: +1 240 686 2222
Email: IR@QIAGEN.COM
For Media
Phone worldwide: +49 2103 29 11826
Phone U.S.: +1 240 686 7425
Email: PR@QIAGEN.COM
QIAGEN on the web
www.QIAGEN.com
www.corporate.QIAGEN.com
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www.twitter.com/QIAGEN
www.linkedin.com/company/QIAGEN
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Financial Calendar
Annual General Meeting of Shareholders of QIAGEN N.V.
June 2021
Second Quarter 2021 Results
July 2021
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Third Quarter 2021 Results
November 2021
Fourth Quarter 2021 Results (provisional)
February 2021
Publication Date
May 2021
Trademarks
Our name together with our logo is registered as a trademark in the United States and a number of other countries: QIAGEN ® .
For a complete list of QIAGEN’s trademarks and disclaimers, please refer to QIAGEN’s webpage under
www.QIAGEN.com/trademarks_disclaimers.aspx.
As of February 2021, QIAGEN molecular diagnostics products included 24 FDA (PMA-approved or 510 (k)-cleared) products, 18
clinical sample concentrator products (14 kits and 4 instruments) 60 EU CE IVD assays, 17 EU CE IVD sample preparation products,
18 EU CE IVD instruments for sample purification or detection, 34 China CFDA IVD assays/sample preparations and 9 China CFDA
IVD instruments.
This Annual Report may also contain trade names or trademarks of companies other than QIAGEN.
© 2021 QIAGEN, all rights reserved.
This document contains detailed financial information about QIAGEN prepared under generally accepted accounting standards in the
U.S. (U.S. GAAP) and included in our Form 20-F annual report filed with the U.S. Securities and Exchange Commission. QIAGEN
also publishes an Annual Report under IFRS accounting standards, which is available on our website at www.QIAGEN.com.
200