NEW YORK (GenomeWeb) – Luminex this week sketched out plans for long-term growth while addressing reasons for missing analysts' expectations for the first quarter.
Following a Q1 in which the firm fell short of the consensus Wall Street expectations on both the top and bottom lines, Luminex executives said on a conference call Monday that it has several strategic projects in place that will help elevate the company's overall growth trajectory.
Among the projects, the firm plans submissions to the US Food and Drug Administration for a methicillin-resistant Staphylococcus aureus test on its Aries system by June of this year; an enteric panel on its Verigene II system in August; and a respiratory panel for use on Verigene II soon after.
The firm's CEO Homi Shamir said on the call that he is hopeful that the first Verigene II system and panel will be available for marketing in the US about three months after the company applies in August for clearance with the FDA.
Verigene II, which has been in development for several years, is the next-generation iteration of the current Verigene platform, which Luminex expects to grow at rate of about 30 percent year over year on a revenue basis for the next few quarters, Shamir said.
The annual utilization rate per customer for Verigene products increased to $111,000 in Q1 up 6 percent from the prior year, according to Luminex.
The current Verigene system provides automated multiplexing for detection of infectious pathogens and drug resistance markers. The system's processor — a benchtop analyzer — combines automated nucleic acid extraction, purification, amplification, and hybridization in each module, enabling on-demand targeted and syndromic testing without the need for batch processing.
Luminex anticipates that Verigene II will improve flexibility in laboratory management by enabling customers to configure the system based on their sample volume requirements. With a cleared system anticipated in the future, customers would be able to use assay panels that report only the selected targets of interest.
The firm is developing its Verigene II plus system to integrate the single-plex functionality of the Aries instrument inside a Verigene II box and enable users to define which bays in the system to select for single-plex or multiplex testing.
Shamir said that the firm has a "very full" sales pipeline for Verigene II and Verigene II-Plus, and development work continues on its Sensiplex instrument — an update of its current xMAP system — with availability for customer testing expected by midyear and market launch anticipated by the end of 2019.
Last year, Luminex acquired MilliporeSigma's flow cytometry business, and this week it said that in the first quarter, overall system revenues nearly doubled year over year, primarily driven by sales from the acquired business. Year-over-year revenue growth for the flow cytometry business was above Luminex's expectations at 25 percent. The firm doesn't expect that level of growth to continue but believes that it can achieve a 10 percent annual revenue growth rate in future years, Shamir said.
The acquired flow cytometry portfolio includes Amnis imaging flow cytometry products for cell-based analysis and the Guava portfolio of products, which leverage microcapillary technology and are used for cell-based analysis. Flow cytometry revenues of $11.4 million in the first quarter were generally above analysts' estimates.
"We feel good about where the business is going," Shamir said, adding that the firm is continuing to integrate the business. He said most of the integration should be concluded by the end of the second quarter, including the transfer of manufacturing from India to Austin, Texas, where Luminex has its headquarters.
Harriss Currie, the firm's CFO, senior vice president of finance, and treasurer, said on the call that Luminex remains "really comfortable" with projected revenues in the mid-$40 million range for the flow business for the full year.
Company officials also discussed the firm's misses on analyst expectations, and Shamir noted that the firm had encountered several business challenges, primarily lower-than-expected respiratory product sales against tough comparison revenues in the prior-year quarter and an expected loss of revenues from business it formerly conducted with Laboratory Corporation of America associated with women's health products.
Q1 represented the first quarter in which the loss of business to LabCorp "significantly impacted" the firm's results, said Shamir, who added that the company, nonetheless, expects the negative residual effect to continue for the next two quarters, "and then it will be largely behind us." Afterward, Luminex should be growing at a double-digit rate and return to "consistent profitability and cash flow."
During the quarter, about 20 percent fewer patients presented with respiratory-related symptoms compared to the prior year, Shamir said, and "We believe that [overall] the weak flu season impacted Q1 by a few million dollars…with the impact being felt evenly between sample-to-answer and non-automated systems."
Its sample-to-answer product sales performance in the quarter "came in shy" of what the firm expected by about $600,000 to $700,000, mainly due to respiratory-season effects, he said.
In a research note on Monday, Piper Jaffray analyst William Quirk said that Luminex placed 50 Verigene and Aries sample-to-answer systems in the quarter, "well below our 83 estimate," but he noted that part of the company's overall business was up 16 percent year over year.
Currie addressed issues associated with the firm's profitability in Q1, noting that with several new products in its development pipeline, Luminex had "a lot of clinical trial activity occurring in 2019 and as a result R&D expenses are higher than 2018."
He said that the firm is "heavily engaged in three clinical trials and we do not anticipate that this level of spending on clinical trials will continue."
Quirk said in the research note that Luminex has several points in its favor going into the next three quarters of 2019 with Verigene II clinical trials remaining on track; Sensiplex being tested by customers and Luminex management believing they may be able to bring it to market quickly; and the firm remaining confident in its flex pricing strategy.