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Luminex Provides Updates on xTAG Test Sales, US Reimbursement Environment, New Multiplexing Tech

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NEW YORK (GenomeWeb) – Luminex said this week that double-digit growth in sales of its xTAG Respiratory Viral and Gastrointestinal Pathogen Panels contributed to an increase in first quarter revenues.

CEO Patrick Balthrop on an earnings call discussed the "solid performance" of the Austin, Texas-based company's assay business, which grew by 18 percent year over year, pushing the company's total Q1 revenues up 6 percent to $56.6 million compared to the first quarter of 2013.

Sales of the company's infectious disease assays, led by its xTAG RVP and GPP products, generated 65 percent of assay sales in the quarter, while genetic testing sales contributed 35 percent. Balthrop noted that in the same period of 2013, infectious disease tests contributed 62 percent to assay revenues, with genetic testing sales accounting for the remaining 38 percent.

Balthrop attributed the rise in assay sales to the company's decision last year to switch to a direct sales model for its molecular diagnostics business. Luminex previously had been relying on distribution partners to sell its tests. Balthrop said that the experience the company's representatives have gained in the past year has contributed to corresponding growth in Luminex's assay business.

"A year ago, we had just established our direct sales force and our reps had to concentrate much of their energy on converting customers from their prior distributors and basics like building a sales prospect pipeline," said Balthrop. "Now, a year later in 2014, with our sales force now able to focus all of their attention on selling our products, we're realizing the full benefit of this strategic initiative and we expect to continue to build momentum," he said.

According to Balthrop, the "key growth drivers" in the company's assay portfolio were its xTAG RVP and GPP tests. The US Food and Drug Administration has cleared both assays for clinical use, and both are based on the company's bead array technology. Luminex's xTAG RVP enables users to detect eight respiratory viruses and subtypes, while its xTAG GPP allows labs to test for 11 gastrointestinal pathogens in a single, five-hour assay.

Balthrop said that the firm has won back some RVP customers who had previously moved to competitors' platforms, noting that they had been enticed back because of "performance issues and insufficient throughput" issues with those other products. He did not name the competitors.

With regards to the GPP assay, Balthrop said that Luminex experienced its "strongest quarter to date" since achieving FDA clearance of the assay last year. "In the field we made good progress in optimizing the validation period [for the assay], and our pipeline of account additions has never been better," he said.

Earlier this year, Salt Lake City-based BioFire Diagnostics announced that it had submitted a gastrointestinal pathogen detection panel based on its FilmArray platform to the FDA for 510(k) clearance. Balthrop said during the call that Luminex expects BioFire to focus on lower volume accounts, "because of their instrument platform and what their capabilities are regarding throughput," while Luminex will continue to focus on higher-volume accounts. He also said that BioFire's market entry could ultimately benefit Luminex, too.

"The increased awareness that having more than one company in the space around the benefits of a differential diagnosis of gastroenteritis using a multiplex panel will likely be a rising tide that will lift them and lift us," he said.

Reimbursement landscape

Changes to US reimbursement policies negatively impacted Luminex last year, when some of its customers experienced delays in receiving reimbursement, or lower reimbursement, for tests after the US Centers for Medicare & Medicaid Services moved to the gap-fill process for pricing new codes for molecular diagnostics. Those issues caused the company to miss its internal guidance and Wall Street estimates for its 2013 third quarter revenues.

At the time, Luminex executives portrayed the reimbursement issues as temporary, a characterization that seems to have been borne out by its Q1 results. Balthrop said this week that the 2014 clinical laboratory fee schedule rates for CPT codes that apply to Luminex's assay portfolio have now been set, and that the reimbursement rates for its tests are once again healthy. "Even more important is that the uncertainty which existed for our customers through 2013 appears to be subsiding," Balthrop said.

CFO Harriss Currie also discussed the US reimbursement landscape during the call. "It's obviously been a critical issue for us and other diagnostic companies, and we've been working through those challenges with our customers," he said.

Like Balthrop, he regarded any reimbursement issues impacting Luminex's assay portfolio as being mostly over.

"The biggest issues that our customers encountered last year as you recall was the uncertainty associated with the administrative process where those reimbursement rates were kind of up in the air," Currie said. "We believe that most of it is behind us."

Project xTAG and Aries v2

Luminex continues to develop a new multiplexing technology, an effort the firm has dubbed internally as Project xTAG. Balthrop said that the development of Luminex's next-generation multiplexing technology will deliver "one-step ease-of-use and a highly simplified workflow to our multiplexing customers," and that the company hopes to have a product for evaluation in customers' hands soon.

Luminex previously provided some information on its new xTAG technology platform during its annual investor event last November. Jeremy Bridge-Cook, the firm's vice president of R&D, said during the webcast event that the new xTAG chemistry will combine xTAG primers, enzymes, and fluorescent reporters into a single mix in the wells of a sealed 96-well plate. Luminex customers using the new technology will only need to pipette their nucleic acid samples into the plate's wells, re-seal it, and run it in a thermal cycler. When the PCR program is complete, the plate is transferred to the company's benchtop MagPix instrument to be read out, Bridge-Cook said.

Luminex is also looking to integrate its multiplexing technology into its new automated, RT-PCR-based Aries platform, which it aims to launch for clinical use in Europe in the second half of this year, followed by a US launch after achieving FDA clearance sometime in early 2015.

Though Aries has yet to launch, the company is already developing an expanded platform called Aries v2 that will integrate its RT-PCR and multiplexing technologies. He described the Aries v2 platform as being "in feasibility," and said that for now Luminex's R&D priorities are to develop its new xTAG technology as well as the Aries v2 platform.

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