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Aiming to Buy Tm Bio, Luminex Sets Sights On Greater Slice of Molecular Dx Market

Seeking to compete directly in the molecular diagnostics market, Luminex last week announced that it has agreed to acquire Tm Bioscience in a stock-for-stock deal worth roughly $44 million.
 
The deal will move Luminex beyond its primary partnership model and put the firm in direct competition with other molecular diagnostic developers, particularly those working on multiplex assays, such as Qiagen and Illumina. It also provides Luminex with both US- and European-approved molecular diagnostic tests and manufacturing facilities.
 
“This transaction is a transforming event for our company,” said Patrick Balthrop, CEO of Luminex. “The molecular diagnostics market is a large market and … is forecasted to continue to grow at double-digit rates over the next decade, driven by innovative new products in genetic diseases, infectious diseases, cancer, and personalized medicine.”
 
Tm sells DNA-based tests that run on Luminex’s xMAP platform. The firm is one of several that have partnered with Luminex to use the xMAP technology to develop their own multiplex assays. Among Luminex’s other partners are some of the world’s largest diagnostics firms, such as Abbott Laboratories and Bayer Healthcare, as well as Bio-Rad Laboratories and Focus Diagnostics, among others.
 
Tm sells a cystic fibrosis molecular diagnostic panel that has been cleared by both the US Food and Drug Administration and European regulatory authorities. In addition, it has submitted a respiratory virus panel to the FDA and expects to receive clearance for that product in the first quarter of 2007.
 
“Tm does have FDA-cleared products as well as ASRs in products that are in other categories,” said Balthrop during a conference call last week. “And so Luminex has been actively engaged with the Food and Drug Administration in response to their recent guidance document that addresses ASRs and other clinical laboratory methodologies.”
 
Beyond those tests and ASRs, Balthrop believes Tm will bring significant benefits to Luminex as it builds its own molecular diagnostics portfolio to compete in a market estimated at $1.5 billion to $2 billion and growing 20 percent annually.
 
“Menu is crucial in this market, as it is in all markets, and the acquisition of Tm gives us the ability to control our destiny and drive menu,” said Balthrop. “The key assets that will allow us to build [our] menu include Tm's cGMP manufacturing capability and overall regulatory compliant processes as well as their intellectual property.”
 
He said that a key trend in the molecular diagnostics market is the customers’ growing need for multiplexing capabilities.
 
“Historically, the molecular diagnostics market has had not quite as much a compelling need for multiplexing, and the reason for that is because a lot of the molecular diagnostics markets to date have been single-marker markets — things like the infectious disease market for HIV and so on,” said Balthrop.
 
“However, going forward, as cystic fibrosis has demonstrated, the result of all the genomic research that has been done over the past several years is creating … these new markets where the need for multiplexing in double-digit numbers will continue to grow.
 
“Looking forward, particularly in personalized medicine and pharmacokinetics, pharmacogenomics and so on, the need to be able to test for multiple markers simultaneously will be an absolute requirement,” he said.
 
This view is shared by other firms who have been jumping into the molecular diagnostics market. Less than two months ago, Qiagen, which has been steadily building its molecular diagnostics portfolio through acquisitions over the past couple of years, acquired Genaco Biomedical for $22 million. That deal gave Qiagen a PCR-based multiplexing technology and a handful of assays that will be paired with its quantitative molecular diagnostic products (see BioCommerce Week 11/1/2006).
 
Meanwhile, Illumina is hoping to roll out its BeadXpress multiplex platform by the end of this year, with an ultimate goal of selling tests that run on the system by 2008. The firm said recently that it plans to acquire next-generation gene sequencing firm Solexa for $600 million, and is hoping content generated from Solexa’s platform will uncover SNPs and other biomarkers that could be used in diagnostic panels on the BeadXpress (see BioCommerce Week 11/21/2006).
 
Earlier this year, Invitrogen, whose BioSource division also is a Luminex partner, licensed its Lux reagent technology to Prodesse, a developer of multiplex PCR-based diagnostic tests that plans to use the reagents to develop assays for its own clinical lab and tests to sell to other labs (see BioCommerce Week 7/26/2006).
 
Retaining Partnership Model
 
Though the firm will be able to develop its own molecular diagnostic products as a result of the Tm acquisition, it believes the lion’s share of its revenue will still be derived from partnerships.
 
“The Luminex partner model on which the company is based drives almost all of our results [and] has been and will remain a priority for Luminex into the future,” said Balthrop. “Luminex will continue to execute this model … by working closely with our partners and adding new partners. We will also continue to invest in our core technology, both systems and beads, to drive long-term growth,” he said during the call.
 
In addition to the diagnostic partnerships, Luminex has many research and drug discovery alliances that use the xMAP platform. Among these partners are Qiagen, PerkinElmer, and the BioSource business of Invitrogen.
 

“Looking forward, particularly in personalized medicine and pharmacokinetics, pharmacogenomics and so on, the need to be able to test for multiple markers simultaneously will be an absolute requirement.”

“We believe that we have a solid position in the life science proteins, immunodiagnostics, and HLA markets,” said Balthrop. “Molecular diagnostics, however, is different. Although we have partnerships with key players, we believe that it is important we have more control over our destiny in this segment.”

 
He said that part of the firm’s strategy to gain better market penetration will be through partnerships, under which Luminex will design and deliver molecular assays for its partners to sell. Luminex hopes those partners will sell those assays along with their own and offer customers a broader menu.
 
Such a strategy also would enable Luminex to gain a greater cut of the sales than it currently does — as much as 70 percent versus the 10 percent it gets now. “More importantly, the absolute dollar amounts are five to the seven times higher than the model that makes up Luminex's financials today,” said Balthrop.
 
During the conference call, Balthrop announced that Luminex has signed an agreement with Thermo Fisher Scientific, under which its Fisher Healthcare business will distribute Luminex’s molecular diagnostic products to clinical labs. He didn’t provide any further details about the pact.
 
However, he said, “We believe there is an opportunity for additional market penetration as a result of having more feet on the street and driving those products into the market, particularly with their favorable reimbursement.”
 
Terms of the Deal
 
Under the terms of the deal, Luminex will exchange .06 Luminex shares for every Tm Bioscience share. The per-share consideration represents a 41.5 percent premium for Tm’s shares, and places a $44 million value on the transaction.
 
Luminex shareholders will own approximately 91 percent of the combined company, and Tm Bioscience shareowners will own approximately 9 percent. The deal is subject to approval by Tm shareholders, as well as regulatory approvals, and is expected to close in early 2007.
 
Tm Bioscience will continue to operate in Toronto as a separate unit with support from Luminex in Austin.
 
Ed. Note: Luminex is one of several firms that will join the BCW Index at the beginning of 2007.

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