Luminex’s well-timed plans to acquire Tm Bioscience may end up transforming the company into a formidable player in pharmacogenomics.
Luminex’s announcement last week that it plans to acquire Tm Bioscience in a stock-for-stock deal worth roughly $44 million comes months after Tm said it aimed to submit several assays for regulatory clearance in the US, including three P450 mutation detection kits and a warfarin CYP2C9 and VKORC1 mutation detection kit.
Anticipating that the US Food and Drug Administration will clear these tests as IVDs by late 2006 or early 2007, Tm Bioscience, and now possibly Luminex, may be poised to compete with Roche Molecular Diagnostics' AmpliChip CYP450 assay and Third Wave’s 2C19 and VKORC1 warfarin test [see PGx Reporter 03-22-06].
“This transaction is a transforming event for our company,” Luminex CEO Patrick Balthrop said during a conference call last week. “The molecular diagnostics market is a large market and … is forecasted to continue to grow at double-digit rates over the next decade, driven by innovative new products in genetic diseases, infectious diseases, cancer, and personalized medicine.”
The deal will move Luminex beyond its primary partnership model and put the firm in direct competition with other molecular diagnostic developers, particularly those working on multiplex assays, such as Qiagen and Illumina. It will also provide Luminex both with US and European-approved molecular diagnostic tests and manufacturing facilities.
Tm sells DNA-based tests that run on Luminex’s xMAP platform. The firm is one of several that have partnered with Luminex to use the xMAP technology to develop its own multiplex assays. Among Luminex’s other partners are some of the world’s largest diagnostics firms, such as Abbott Laboratories and Bayer Healthcare, as well as Bio-Rad Laboratories and Focus Diagnostics.
Tm sells a cystic fibrosis molecular diagnostic panel that has been cleared for sale by both the FDA and European regulatory authorities. In addition, it has submitted a respiratory virus panel to the FDA and expects the product to receive clearance in the first quarter of 2007.
“Tm does have FDA-cleared products as well as ASRs in products that are in other categories,” said Balthrop. “And so Luminex has been actively engaged with the FDA in response to [its] recent guidance document that addresses ASRs and other clinical laboratory methodologies.”
He was referring to the FDA’s Draft Guidance for Industry and FDA Staff – Commercially Distributed Analyte Specific Reagents and to the FDA’s Draft Guidance for Industry, Clinical Laboratories, and FDA Staff – In Vitro Diagnostic Multivariate Index Assays. Both draft guidances seek to encourage molecular diagnostic companies to file for pre- and post-market review tests that use an algorithm to generate results from multiple data points, rather than following traditional homebrew rules [see 9/13/2006 PGx Reporter].
Beyond those tests and ASRs, Balthrop believes Tm will bring significant benefits to Luminex as it builds its own molecular diagnostics portfolio to compete in a market estimated at $1.5 billion to $2 billion and growing 20 percent annually.
“Menu is crucial in this market, as it is in all markets, and the acquisition of Tm gives us the ability to control our destiny and drive menu,” said Balthrop during a conference call last week. “The key assets that will allow us to build menu include Tm's cGMP manufacturing capability and overall regulatory compliant processes as well as their intellectual property.”
He said that a key trend in the molecular diagnostics market is customers’ growing need for multiplexing capabilities.
“Historically, the molecular diagnostics market has had not quite as much a compelling need for multiplexing, and the reason for that is because a lot of the molecular diagnostics markets to date have been single-marker markets — things like the infectious disease market for HIV and so on,” said Balthrop.
“However, going forward, as cystic fibrosis has demonstrated, the result of all the genomic research that has been done over the past several years is creating … these new markets where the need for multiplexing in double-digit numbers will continue to grow.
“Looking forward, particularly in personalized medicine and pharmacokinetics, pharmacogenomics and so on, the need to be able to test for multiple markers simultaneously will be an absolute requirement,” he said.
Retaining Partnership Model
“Menu is crucial in this market, as it is in all markets, and the acquisition of Tm gives us the ability to control our destiny and drive menu.”
Though Luminex will be able to develop its own molecular diagnostic products as a result of the Tm acquisition, it believes the lion’s share of its revenue will still be derived from partnerships.
“The Luminex partner model on which the company is based drives almost all of our results [and] has been and will remain a priority for Luminex into the future,” said Balthrop. “Luminex will continue to execute this model … by working closely with our partners and adding new partners. We will also continue to invest in our core technology, both systems and beads, to drive long-term growth,” he said during the call.
In addition to the diagnostic partnerships, Luminex has many research and drug discovery alliances that use the xMAP platform. Among these partners are Qiagen, PerkinElmer, and the BioSource business of Invitrogen.
“We believe that we have a solid position in the life science proteins, immunodiagnostics, and HLA markets,” said Balthrop. “Molecular diagnostics, however, is different. Although we have partnerships with key players, we believe that it is important we have more control over our destiny in this segment.”
He said that part of the firm’s strategy to gain better market penetration will be through partnerships, under which Luminex will design and deliver molecular assays for its partners to sell. Luminex hopes those partners will sell those assays along with their own and offer customers a broader menu.
Such a strategy also would enable Luminex to gain a greater cut of the sales than it currently does — as much as 70 percent versus the 10 percent it gets now. “More importantly, the absolute dollar amounts are five to seven times higher than the model that makes up Luminex's financials today,” said Balthrop.
During the conference call, Balthrop announced that Luminex has signed an agreement with Thermo Fisher Scientific, under which its Fisher Healthcare business will distribute Luminex’s molecular diagnostic products to clinical labs. He didn’t provide any further details about the pact.
However, he said, “We believe there is an opportunity for additional market penetration as a result of having more feet on the street and driving those products into the market, particularly with their favorable reimbursement.”