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With Increased Focus on MDx, Tm Assays Help Drive Luminex’s 32 Percent Q2 Revenue Growth

This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
 
Luminex last week reported a 32 percent increase in second-quarter revenues with a significant contribution coming from a cystic fibrosis assay developed by Tm Bioscience, which Luminex acquired for $44 million earlier this year.
 
While the acquisition of Tm and a recent partnership inked with Thermo Fisher Scientific are expected to greatly expand Luminex’s sales in the diagnostics market, the firm’s instrument sales for research applications still drive the majority of revenues. The firm’s Bioscience Group also recently introduced its first product, a microRNA assay, which pushed the company into a new market.
 
Luminex reported second-quarter revenues of $17.5 million compared with revenues of $13.3 million in the second quarter last year.
 
Luminex now reports results for two business segments: the Assay Group, which consists of the Luminex Bioscience Group and Luminex Molecular Diagnostics, the name given to the former Tm Bioscience, which Luminex acquired in March (see BioCommerce Week 3/14/2007); and the Technology Group, which includes system sales to partners, raw bead sales, royalties, and service and support of the company’s core xMAP technology.
 
Second-quarter revenues for the Technology Group grew to $14.8 million from $13.3 million in the second quarter of 2006, while the Assay Group posted revenues of $4 million in the current quarter, compared to $14,000 in the prior-year period.
 
“The vast majority of LMD sales consist of our genetic disease products, more specifically cystic fibrosis, and the CF franchise continues to grow with increased market penetration and the equivalent of same-store sales … within existing accounts,” Patrick Balthrop, president and CEO of Luminex, said during a conference call last week.
 
The firm’s system revenue slipped 3.4 percent to $5.6 million; consumables rose 10 percent to $3.3 million; royalties rose 10 percent to $2.2 million; reagent revenue was $3.7 million compared with $14,000 in the previous year's second quarter; service revenue increased to $1.1 million from $811,000 year over year; and other revenue ticked up one percent to $1.6 million.
 
Luminex’s R&D spending increased to $3.9 million from $1.8 million year over year.
 
The company's second-quarter net loss was $3.2 million, or $.09 per share, compared with a $271,000 profit, or $.01 per share, in the year-ago period.
 
Luminex said it had around $11.8 million in cash and cash equivalents and $3.3 million in short-term investments as of the end of the quarter on June 30.
 
Increased MDx Focus
 
Balthrop said the integration of Tm’s operations is proceeding on schedule. He also said Luminex is working with the US Food and Drug Administration regarding the upcoming launch of its respiratory virus panel, which the firm anticipates happening this fall.
 
The respiratory virus panel is expected to receive de novo clearance from the FDA, said Balthrop. Answering a question as to whether the FDA may clear the panel but not all of the 19 assays that are planned for it, Balthrop said, “It’s a possibility that [the FDA] may for a variety of reasons … ask us to take the product to market with something fewer than the 19 [assays].
 
“Depending on how those conversations go, this is very speculative,” he said. “But if they were to ask us to go to the market with something fewer than the 19, we may very well agree depending on what the number was and what the constituents were.”
 
Luminex also expects the FDA to clear its warfarin pharmacogenetic assay in 2008. The test would be its second PGx product. The firm also sells five CYP450 assays as analyte-specific reagents that it plans to file for regulatory approval.
 
Balthrop also was asked about his opinion of the recent flurry of high-profile and big-money acquisitions in the diagnostics market.  
 
“We believe this all bodes well for Luminex as the underlying and overlapping themes here are the value of research and diagnostics, the importance of protein and nucleic acids detection capability, the value of molecular diagnostics and multiplexing, and increased overall investment,” said Balthrop.
 
Luminex, along with BCW Index companies Beckman Coulter and Cepheid, have been mentioned recently in various media and analyst reports as potential takeover candidates. Balthrop, however, did not comment on this particular speculation.
 
Luminex also expects its diagnostics business to get a boost from its partnership with Thermo Fisher Scientific unit Fisher Healthcare, forged in January, under which Fisher will sell Luminex’s diagnostic products in exchange for rights to use Luminex’s xMAP technology.
 
Balthrop said that since that pact was signed the firm has transitioned some of its customer base to Fisher and has retained a portion for itself, with each case based on customer preference. He noted that Fisher had a presence at the recent American Association for Clinical Chemistry meeting in San Diego, where it displayed its molecular diagnostics products and an instrument based on the xMAP.
 

“We believe this all bodes well for Luminex as the underlying and overlapping themes here are the value of research and diagnostics, the importance of protein and nucleic acids detection capability, the value of molecular diagnostics and multiplexing, and increased overall investment.”

Since acquiring Tm, Luminex has had to adapt from its previous partnership model to one in which it is both a partner and potential competitor to certain firms. Luminex’s xMAP platform provides the base for many multiplex instruments and assays that are sold by firms targeting the molecular diagnostics and biomarker research markets.
 
As of the end of the second quarter, Luminex had more than 4,500 instruments placed worldwide, a 20 percent increase in its installed base from a year ago.
 
In addition to the diagnostics market, the firm got its Bioscience Group off the ground with the recent launch of its first product, a microRNA assay being sold by Exiqon.
 
“One of the things we focused our early efforts on was getting the product in the hands of the appropriate thought leaders that would be able to publish papers and so on,” said Balthrop. “As the product became available we evaluated a number of distribution options, and we decided to go with Exiqon because they know the particular niche well.”
 
He said that the company plans to pursue this partnership strategy for the product through the remainder of 2007.
 
“As we look toward 2008, we may choose to expand our distribution network to include larger companies … but as this was the first research product coming out of the Bioscience Group, and it’s a particularly hot area for us, we wanted to make sure that we established it in a firm way to build on for the longer term and not get too far ahead of ourselves, which is why the thought leaders strategy in our mind is so critical.”