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Luminex's 2013 Priorities Include GPP, NeoPlex Adoption, MagPix Placements, Project Aries


For Luminex, 2013 is shaping up to be a year of molecular diagnostics menu expansion, instrument placements, and platform development.

CEO Patrick Balthrop told investors during the firm's fourth-quarter earnings call this week that the "areas of priority" for the company include "driving continued adoption" of its MagPix platform; making progress in the development of its next-generation sample-to-answer system, an effort dubbed Project ARIES; "driving market penetration" of its Gastrointestinal Pathogen Panel, or GPP, in the US and Europe; "continued market development activities" related to NeoPlex4, its newborn screening assay, which Luminex expects will be available for clinical use by midyear; and the expansion of its laboratory-developed-test market opportunities.

All of these endeavors build on existing momentum in the company's business, which saw assay and instrument sales drive fourth-quarter revenues up 16 percent year over year.

CFO Harriss Currie said on the call that more than two-thirds of the company's assay sales fell into its infectious disease category, which includes its xTAG bead-array-based Respiratory Virus Panel, or RVP, and now the xTAG GPP, though the latter just received US Food and Drug Administration clearance for clinical use last month (BAN 1/15/2013). Sales of its FDA-cleared, RT-PCR-based MultiCode-RTx HSV 1&2 Kits for herpes testing also contributed to the firm's Q4 revenue growth, Currie noted.

On the instrument side, the company sold 226 multiplexing systems in Q4, with customers favoring its newer MagPix system, which enables customers to perform qualitative and quantitative analysis of up to 50 protein and nucleic acid markers in a variety of sample matrices, over its higher-throughput Luminex 100/200 System, which enables users to survey 100 analytes at a time.

In 2011, 100/200 and MagPix systems represented 65 percent and 28 percent, respectively, of total multiplexing systems placements, but in 2012 the mix was closer, with 100/200 and MagPix systems accounting for 52 percent and 43 percent of total multiplexed systems placed, respectively, Currie said.

Currie added that Luminex expects MagPix sales will account for a "growing percentage of total number of multiplex analyzers" sold as the firm moves through 2013. Moreover, the continued placements of the bead array systems also feed Luminex's play in the LDT market, as its customers run their internally validated tests on the instruments.

"We find the majority of higher volume molecular labs to be struggling to handle the ever increasing number of assays they’re expected to perform," said Balthrop, "so they are searching for platform technologies that offer a combination of flexibility and throughput, that can give them the ability to incorporate these emerging assays into a validated, affordable, flexible diagnostic tool."

He added that the company's LDT business is "quite sticky," as labs often prefer to offer their LDTs, even when a commercial assay for the same target achieves regulatory clearance for clinical use. The company is betting on this dynamic to increase revenues this year.

"We’ve been extremely pleased with the contribution from this segment in 2012 and believe additional growth opportunities lay ahead," said Balthrop.

In terms of its own test menu's 2013 prospects, Luminex believes that many of its existing RVP customers will become GPP customers as the firm rolls out the recently cleared assay. While Balthrop declined to answer an analyst's question about the firm's pipeline of GPP customers, he said its sales force is "engaged" in selling the GPP and that the response the firm has seen so far has been "very encouraging."

By the end of the second quarter, Luminex also expects to receive FDA clearance for its xMAP NeoPlex 4 assay. NeoPlex 4 can be used to test newborns for analytes that can be indicators of congenital hypothyroidism, congenital adrenal hyperplasia, and cystic fibrosis.

Since Jan. 1, Luminex has been selling its molecular diagnostics products directly rather than via distributors (BAN 1/15/2013). Balthrop said that the transition provides the firm with the opportunity to "represent our first-mover products more effectively and to manage the customer relationships more directly." He added that the financial benefits of the firm's strategy over the longer term can "be significant," as Luminex is now in the position to capture "100 percent of the end customer dollar."

During the call, Balthrop also said that the firm is focused on Project Aries, the development a new multiplex platform that combines technologies it gained through its recent acquisitions of GenturaDx and EraGen. He said that Luminex aims to join Gentura's IDbox platform, which performs low-plex, real-time PCR tests on a single-use cassette, with EraGen's MultiCode chemistry, and that Luminex next year intends to launch the Aries system, which will enable customers to develop their own tests on the platform.

Revenues and Guidance

Luminex saw its total revenues for the three months ended Dec. 31, 2012, rise 16 percent to $55.5 million from $47.9 million in the year-ago period.

By segment, assay and related product revenues rose 42 percent to $25.9 million from $18.2 million in the fourth quarter of 2011; technology and strategic partnership revenues were flat at $29.7 million; system sales dipped to $7.1 million from $10.4 million a year ago; consumable sales increased to $12.4 million from $10.1 million; and royalty revenues rose slightly to $7.5 million from $7.1 million. Assay revenues spiked to $23.8 million from $16.4 million in the quarter and all other revenues grew to $4.7 million from $3.9 million.

The company's Q4 profit increased to $4.3 million from $3.4 million a year ago. Its R&D expenses increased 11 percent to $11 million from $9.9 million a year ago and its SG&A costs rose 14 percent to $20.1 million from $17.6 million.

For full-year 2012, total revenues were up 10 percent to $202.6 million from $184.3 million in 2011. Assays and related product revenues rose to $81.6 million, a 44 percent increase from $56.6 million in 2011. Technology and strategic partnership revenues fell 5 percent year over year to $121 from $127.8 million; system sales dropped to $31.1 million during the year from $35.9 million a year ago, and consumables sales fell to $48.0 million from $55.5 million due to volatility from a single customer during the first half of the year, Currie said.

In 2012, Luminex's royalty revenues climbed to $31.2 million from $29.2 million, and assay revenues grew to $75 million from $48.7 million. All other revenues rose to $17.3 million from $15.1 million.

For the year, Luminex's profit declined to $12.4 million from $14.5 million in 2011.

The firm's annual R&D costs rose 22 percent to $40.8 million from $33.4 million, while SG&A costs were up 15 percent to $74.8 million from $64.9 million. Luminex ended 2012 with $42.8 million in cash and cash equivalents.

For 2013, Currie said that Luminex expects full-year revenues to be between $220 million and $230 million. The company anticipates a "positive contribution" from the US launch of the GPP assay, though it did not factor in a material contribution from NeoPlex 4 sales in its 2013 guidance.

"We believe having a direct molecular diagnostic sales force to take advantage of these novel, innovative assays will be a significant step forward in 2013, but our guidance factors in conservative assumptions regarding their contribution for the year," said Currie.

The company also expects to continue selling between 200 and 250 multiplex analyzers per quarter, calling the estimate "reasonable" despite "seasonality in hardware sales" and an unpredictable research market that could face diminished federal funding.

Currie said that Luminex took ino account this"relative weakness in the life science research market, opportunities for further weakness, and the potential effects of the US debt and sequestration situations" in making its forecast.

Given the firm's Project Aries effort, Currie added that R&D spending will continue to be about 20 percent of revenues. Though the company has accelerated its spending on the next-gen platform, Currie said that Luminex has reallocated other R&D spending to cover those costs. Because of this, the firm doesn’t expect 2013 R&D spending to be "significantly higher than what it has been historically," he said.