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Luminex Moving Ahead With EUA Applications Despite Deprioritization of SARS-CoV-2 Test Submission

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This article has been updated from a previous version to include comments from the US Food and Drug Administration.

NEW YORK ─ Luminex shares dropped almost 8 percent on Tuesday following the release of its earnings and the revelation that the US Food and Drug Administration has deprioritized an Emergency Use Application for its Verigene I standalone SARS-CoV-2 assay. The firm's share price closed at $27.67 in trading on the Nasdaq Tuesday.

Luminex had reported fourth quarter revenue of $111.4 million, beating analysts' average estimate and in line with its preliminary estimates. However, CEO Nachum Shamir noted in a conference call to discuss the firm's financial results that the EUA application for its Verigene I SARS-CoV-2 test wouldn't be reviewed.

In a letter to the firm last Thursday, the FDA said it is instead prioritizing review of EUAs that significantly improve overall testing capacity, including at-home rapid and point-of-care tests for the coronavirus. "We were hoping to receive [EUA] almost any day, and suddenly out of the blue we got the letter from the FDA," Shamir said.

However, the agency's letter was not the first Luminex received during the pandemic. Last June, the Austin, Texas-based firm received a warning letter from the FDA relating to the Verigene I hybridization heater. The agency demanded that Luminex address technical issues related to the heater but didn't request that the firm remove Verigene I from the market.

"We continue to make good progress on the warning letter and are almost done and ahead of schedule to complete all our deliverables [associated with the letter and] committed to the agency," Shamir said on Monday.

He added that the status of its submission for a standalone SARS-CoV-2 assay running on its Verigene I molecular diagnostic instrument is "puzzling," and the FDA's rationale for not authorizing the test may be illogical. Close to 800 customers are already using its Verigene I instrument, Shamir noted. "All of them are major hospitals across the nation" with a substantial need for the SARS-CoV-2 assay, Shamir added.

The deprioritization of the EUA for the Verigene I SARS-CoV-2 assay may also be influenced by a US national testing strategy that focuses on rapid testing at home and in other point-of-care settings to stem the coronavirus pandemic, Piper Sandler analyst Steven Mah wrote in a research note on Monday evening. "We have anecdotally heard that the bar for new EUAs has been raised, but this is the first time we have seen this," Mah said.

The FDA told 360Dx that it prioritizes review of EUA requests for tests considering various factors such as the public health need for the product and the availability of the product. "We have, for example, prioritized review of EUA requests for tests where authorization would increase testing accessibility, [including, for example,] point-of-care tests, home-collection tests, and at-home tests, or would significantly increase testing capacity, [including, for example,] tests that reduce reliance on test supplies and high-throughput, widely distributed tests," an FDA spokesperson said.

When asked whether the decision to deprioritize the review of Luminex's EUA was influenced by the June warning letter, the spokesperson said, "The FDA cannot comment on our interactions with test developers or forecast any action the agency may or may not take." 

Though the deprioritization of the Verigene I assay came as a surprise to Luminex, "The FDA has communicated for months that its priorities for EUA review are tests that significantly improve overall testing capacity, offer point-of-care or at-home testing, or target multiple pathogens," William Blair analyst Brian Weinstein wrote in a research note on Tuesday. "Since the Verigene I SARS assay does not meet any of these priorities … this was not entirely surprising to us."

In the fourth quarter, Luminex reported 49 percent revenue growth for its MDx products, but segment revenue growth declined quarter over quarter for the second quarter running. "Given commentary from others in the space and the demand we are seeing, [the quarter-over-quarter sequential decline] is a bit hard for us to rationalize," Weinstein wrote. 

Nonetheless, Luminex on Monday confirmed its guidance for 2021, saying it expects at least $480 million in revenue and 15 percent year-over-year growth.

The company anticipates an easier path to authorization in the near term for other tests. The diagnostics firm has already submitted an EUA application for its NxTag RPP plus COVID panel and believes an EUA is imminent. Further, Luminex is moving forward with plans to submit an EUA application for an Aries multiplex panel that consists of tests for influenza A and B, respiratory syncytial virus (RSV), and SARS-CoV-2. Separately, it is planning a submission this quarter for a Verigene II RPP plus SARS-CoV-2 combination panel.

In estimating 2021 revenues, "one important factor to consider is that a number of MDx systems that we placed are under reagent rental agreements with our customers," Shamir said. These agreements typically provide a committed revenue stream over the next three to five years.

Further, the firm believes that coronavirus-driven demand for its tests "will be with us for the long term," Shamir said, adding that the company consistently hears from customers that they need more test capacity. "When the absolute volume of testing ultimately slows, we will be well positioned to continue our growth, although at the more normal growth rate," he said.

Additionally, with its diversified model, the firm is also ready for a "post-COVID marketplace," Shamir said, adding, "also, as COVID testing slows and research institutions, pharma laboratories, and academic labs open back up, we should see growth in both our [partner and flow cytometry businesses]."

As a result of a lingering uncertainty associated with the coronavirus pandemic and new strains, Luminex decided to withhold quarterly guidance.

In 2021, Luminex expects assay revenue growth in excess of 20 percent will be a primary contributor to overall revenue growth, with the biggest boost coming from molecular diagnostic assays, CFO Harriss Currie said during the conference call. The firm further sees an expansion in manufacturing capacity for its Aries products to about 5 million tests per year as a primary contributor to future revenue growth.

"Obviously, new product launches, including those requiring EUA or approval from the FDA, are also key to our success," Currie added.

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