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Luminex Divests Newborn Screening Group Citing 'Unpredictable, Burdensome' US Regulatory Process

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Luminex's recent decision to reduce its workforce by 5 percent, close an office in Australia, and seek a buyer for its newborn screening business, was in part influenced by its attempt to obtain US regulatory clearance for its NeoPlex4 test, according to the firm's CEO.

Luminex's NeoPlex4 assay is based on the firm's xMAP bead array technology and tests for four analytes related to congenital hypothyroidism, congenital adrenal hyperplasia, and cystic fibrosis.

CEO Patrick Balthrop said in a conference call last week that while Luminex had expected the US Food and Drug Administration to clear the immunoassay for clinical use in the second half of this year, the regulatory pathway for the assay had been "variable, unpredictable, and burdensome" for the Austin, Texas-based company.

Luminex did achieve a CE-IVD Mark for NeoPlex4 last year but Balthrop said that the CE marking process is a "self declaration" and is "entirely different" from US regulatory processes. "It's an apples and oranges comparison to look at FDA review versus, say, a CE mark," he said.

He also said that Luminex had been working with a different department within the FDA to clear NeoPlex4 than it did with its Respiratory Viral Panel and its Gastrointestinal Pathogen Panels, the latter of which was cleared by the agency earlier this year for use on the Luminex LX 200 and MagPix instruments (BAN 4/16/2013).

"The departments that review ... our molecular products are different from the [departments] that would review an immunoassay like this one," Balthrop said, adding that, "from our perspective, we consider this to be a unique and ... one-off kind of a situation."

Seeking a buyer

According to Balthrop, the announced restructuring mostly affects the firm's newborn screening business.

He said the business has four main elements: the NeoPlex4 assay; the NeoPlex system, which consists of a Tecan automated liquid handler robot and the firm's LX 200 system; its BSD 300 Semi-Automated Punch system for processing dried blood spots prior to analysis, sold and supported by its Brisbane office; and an ongoing co-development agreement with Tecan.

Luminex is now taking steps to spin out this combined newborn screening business to a third party, Balthrop said. While the company had found the regulatory process burdensome, he predicted that a firm with a "broader public health portfolio" could bring these various products to market.

"NeoPlex4 has been well received by customers outside the US," said Balthrop, "and we believe that once it's commercialized it will be inside the US as well."

Balthrop acknowledged that Luminex has been discussing arrangements with different prospective partners but cautioned that such talks are in the early stages. He said that the potential buyer is more likely to be a larger, public firm than a small, private company. Balthrop also said that Luminex could take an equity stake in the spin-off venture, and that the firm is flexible about the deal terms.

Growth opportunities

Luminex currently employs 700 people, so its planned restructuring should affect about 35 employees.

Altogether, the firm expects to incur costs of $4.5 million to $5 million related to the closure of the Brisbane office, $1.5 million to $2 million to write down its newborn screening assets and inventory, and $1 million in severance and employee separation costs.

Luminex expects to record half of the restructuring charges in the third quarter of this year, and the remainder spread over the following two quarters. The company said it also expects to recognize annualized cost savings of between $5 million and $6 million, of which $3.5 million to $4 million will come from savings to SG&A and the remainder from R&D.

The restructuring will also allow Luminex to focus on other growth opportunities, particularly in molecular diagnostics, said Balthrop.

"This streamlining effort will result in reduced headcount and operating expenses overall, but we have also taken steps to reallocate some headcount and expenses to those programs and areas that will drive short and long-term growth," he said.

Where Luminex will invest, though, remains unclear. The firm continues to develop its RT-PCR-based molecular diagnostics platform, dubbed Project Aries, as well as other xMAP-based diagnostics.

Harriss Currie, the company's chief financial officer, said on the call that one of the reasons that Luminex decided to restructure is to "increase the likelihood of success in some of those future programs."

Both Balthrop and Currie said they would not further discuss the firm's diagnostics pipeline.

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