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Luminex to Acquire Nanosphere for $58M

NEW YORK (GenomeWeb) – Molecular diagnostics and life sciences research tools firm Luminex announced today that it will acquire molecular diagnostics company Nanosphere in an all-cash transaction valued at approximately $58 million.

The transaction values Nanosphere at $1.35 per share, Luminex said. The company will also pay or help Nanosphere pay $25 million in debt outstanding as of March 31. Net of acquired cash, the total deal is valued at $72 million. Both companies' boards have unanimously approved the deal, which is expected to close on or before July 1.

The deal is expected to add $13 million to $16 million to Luminex's 2016 consolidated revenues, though it will not materially impact the company's second quarter earnings, and is expected to be accretive to Luminex's adjusted earnings by the end of 2017.

Luminex said Nanosphere's Verigene platform, test menu, and presence in the molecular microbiology market will complement Luminex's customer base and its current infectious disease portfolio. Following the acquisition, the company added, Luminex will be the only company able to offer customers automated molecular platforms for both syndromic and targeted molecular diagnostic testing through the Verigene and Aries platforms.

"The acquisition of Nanosphere will significantly enhance Luminex's growth trajectory by expanding our product portfolio, delivering access to new markets, and strengthening our pipeline of future products to make us the partner of choice for all molecular labs," said Luminex President and CEO Homi Shamir in a statement.  "The deal demonstrates prudent execution of our fourth strategic growth pillar — leveraging our financial strength to accelerate growth in our target markets."

Luminex's first quarter earnings release earlier this month showed the company ended the quarter with $134.3 million in cash and cash equivalents. Shortly after the earnings release on May 2, Shamir and CFO Harriss Currie made it clear that the company was making it a priority to make an acquisition with the cash by the end of 2016.

On a call with analysts about the acquisition this morning, Currie said Luminex may look for additional M&A targets, but would focus first on the successful integration of this deal.

Shamir added that the deal uses "a portion of cash on hand to accelerate growth and enhance our customer footprint in the automated molecular diagnostic testing market." He further called the acquisition a strategic step in Luminex's evolution in the molecular diagnostics market.

When asked about possible overlaps in the companies' product pipelines, CMO Russell Bradley told analysts that the combined menus of tests create comprehensive coverage in the microbiology space, adding that although it's still early days, Luminex will take closer look at pipeline overlaps once Nanosphere is integrated into the company.

Shamir also praised Nanosphere's growth as a company. Since 2013, he said, Nanosphere has grown revenues from $5 million to a projected $28 million to $30 million in 2016. Nanosphere also has a substantial customer base of 240 in the US. "This impressive year-over-year growth combined with the uncertainty in their financial position created an attractive opportunity for Luminex," he said, adding that he expects the deal to accelerate the firms' combined revenue growth to the double-digit range.

Nanosphere separately announced its first quarter earnings today, reporting 43 percent year-over-year growth.

For the quarter ended March 31, Nanosphere reported Q1 revenues of $6.6 million, up from $4.6 million in Q1 2015. The growth was predominantly driven by 55 percent revenue growth in test consumables in Q1, the company said.

Nanosphere's net loss for the quarter narrowed to $6.6 million, or $.55 per share, from $7.5 million, or $1.29 per share, a year ago.

Its R&D costs for the quarter rose 3 percent to $3.7 million from $3.6 million. SG&A expenses fell 6 percent to $4.9 million from $5.2 million a year ago, due to the repeal of a medical device tax, a decrease in equity compensation expense, and a decrease in bad debt expense.

Nanosphere ended the quarter with cash and cash equivalents of $13.4 million and an additional $5.0 million in restricted cash.

Nanosphere's shares rose 69 percent to $1.32 in morning trading on the Nasdaq, while Luminex shares rose 2 percent to $19.96.

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