NEW YORK (GenomeWeb News) – While GenMark Diagnostics continues to seek clarification around the consequences of Luminex's collaboration and licensing deal with Natural Molecular Testing, GenMark officials said that it appears that the deal is independent of its own contract with NMT, and NMT is not looking to switch platforms.
On Tuesday, NMT and Luminex announced the deal, sending GenMark's stock reeling amid confusion around whether NMT was replacing GenMark's platform with Luminex's xMAP technology. In the announcement, NMT CEO Beau Fessenden seemed to suggest such a transition was, in fact, happening when he said, "By converting to Luminex's xMAP technology, we can improve our throughput and workflow efficiency with more comprehensive and highly sensitive assays that set us apart in the marketplace."
The announcement caught GenMark off-guard, its CEO Hany Massarany said at an investment conference on Tuesday, adding that his firm found out about the Luminex-NMT deal by reading about it in the press release.
For Carlsbad, Calif.-based GenMark, the loss of NMT could be a serious blow as NMT is a major customer of GenMark's, and during the first quarter NMT-associated revenues accounted for an estimated 60 percent-plus of GenMark's total revenues. Last year, the two firms inked a four-year reagents deal that expires in 2016.
Since the announcement of the Luminex-NMT deal, GenMark officials said, NMT has reassured the firm that the Luminex deal is independent of its alliance with GenMark, and NMT plans to continue using GenMark's platform, as well as Luminex's xMAP platform, for its work. GenMark CFO Richard Slansky told GenomeWeb Daily News on Wednesday that NMT has always been open about the possibility that it could use two platforms.
Based in Seattle, NMT provides high-complexity molecular testing services.
Nonetheless, GenMark continues to research what impact Tuesday's announcement could have on its revenues moving forward, Slansky said. GenMark expects to issue a statement in a few days, after its diligence has been completed, he added.
GenMark's four-year contract with NMT is for the use of reagents only. It provides its instruments to NMT free of charge, though NMT has to buy a minimum amount of reagents, under the terms of the contract.
Piper Jaffray analyst William Quirk said in a research note on Wednesday that he spoke with Fessenden and came away "more encouraged about a less significant impact for GenMark," but added that "as [NMT] reps will be incentivized to upsell their cardiac panel (42 markers vs. a la carte testing with GenMark), we think there could still be some financial implications."
On Tuesday, Quirk lowered his full-year 2013 revenue estimate for GenMark to $29.6 million from an earlier estimate of $35.7 million, and reduced his full-year 2014 revenue estimate to $39.7 million from $51.7 million, but maintained an Overweight rating on the company's stock.
In his conversation with Fessenden, he said, the NMT CEO "repeatedly stressed the [Luminex and GenMark] deals are separate within," NMT. The personalized medicine panel that NMT launched on Tuesday as part of its deal with Luminex is "a stepping stone to wider patient genomic profiling (panels to exomes to whole-genome sequencing). Conversely, GenMark tests are for doctors utilizing an a la carte approach," Quirk said. "With torrid growth recently, Fessenden opined that both companies would likely see volumes increase in the future."