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With Luminex Acquisition, DiaSorin to Broaden MDx Portfolio, Expand US Presence

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NEW YORK ─ DiaSorin's $1.8 billion acquisition of Luminex, announced earlier this week, is expected to transform the Saluggia, Italy-based in vitro diagnostics company into an American-European firm, broaden its portfolio of molecular diagnostic products, and provide it with a new life science research testing portfolio, DiaSorin CEO Carlo Rosa said on a conference call discussing the transaction.

"We always stated that our … strategic goal would be to have more than 50 percent of our revenues generated in the US," Rosa said as he described the strategic process that led it to acquiring Austin, Texas-based Luminex. "With this combination, we will go to around 53 percent."

Following the acquisition, which is expected to close in the third quarter, the combined entity will have 2020 revenues of approximately €1.25 billion ($1.49 billion), and the transaction will be immediately accretive to DiaSorin's earnings per share.

The combined company will also have more American than Italian employees and will focus on developing and selling tests for the laboratory diagnostics market, with a specialization in the immunodiagnostics and molecular diagnostics segments, Rosa said.

Luminex's multiplexing technology, tests, and instruments are expected to strengthen DiaSorin's molecular diagnostics product portfolio, which was an objective identified during a recent review of its strategic business plan, Rosa said.

DiaSorin has built a reputation as a firm providing specialty immunoassay and molecular diagnostics, Rosa noted. The company develops and sells chemiluminescent immunoassays that are run on its fully automated Liaison and Liaison XL immunodiagnostics platforms for a range of diagnostic applications, including for infectious diseases, bone and calcium metabolism, endocrinology, hypertension, gastrointestinal infections, and autoimmune conditions. However, during its strategic review, DiaSorin decided that the "immunoassay [business] was fine, and we did not really need any acquisition in that space," Rosa said.

On the other hand, given anticipated testing demand, it identified a need to further strengthen its molecular business.

In 2016, the company had acquired the Focus Diagnostics immunoassay and molecular diagnostics business from Quest Diagnostics for $300 million in cash. "When we acquired Focus … we stated it was a way for us to get our hands dirty and learn [about the molecular] space," Rosa said.

As a result of the Focus buy, DiaSorin's current molecular assays cover a range of testing applications, including for Bordetella, C. difficile, cytomegalovirus, Epstein-Barr virus, strep, and influenza A/B and RSV. Its Simplexa line of real-time PCR kits run on DiaSorin's Liaison MDx analyzer, and the firm's single- and low-plex molecular diagnostic kits comprise either eight-well discs for use in moderate-complexity laboratories or 96-well discs for use in high-volume laboratories.

With the onset of the COVID-19 pandemic, the company also quickly developed a SARS-CoV-2 molecular diagnostic test that received US Food and Drug Administration Emergency Use Authorization.

DiaSorin rapidly scaled up manufacturing from 50,000 tests a month to its current capacity of 1.2 million molecular tests per month, and increased its instrument manufacturing capacity, converting what was largely a US-based business into a global molecular business, Rosa said. During the pandemic, the company doubled its global installed base of molecular diagnostic instruments and now has more than 600 customers using its molecular platforms.

"Very clearly, we developed an appetite for scale … and scale and technology is what we thought was clearly needed to nurture the business and develop the business post-COVID," Rosa added.

When DiaSorin evaluated what it needed to achieve its future business goals, it opted for multiplex testing technology, which has also recently been identified by diagnostic companies such as Roche as vital to future revenue growth, Rosa noted.

"When we looked at the companies in multiplexing, we came to know Luminex, a company that was founded on multiplexing technology," he said.

Luminex has a broad menu of infectious disease tests that complement DiaSorin's test menu, including assays for respiratory, vector-borne, hospital-acquired, and gastroenterology infections. Though there is overlap between the Luminex low-plex Aries and DiaSorin molecular diagnostic menus, product sales should not suffer given the continued demand for MDx testing and the runway for further penetration of both company's products, Rosa said.

DiaSorin said it believes that the acquisition of Luminex establishes a foundation for new partnerships and business development through life science research products, and broadens its presence in the US. Similarly, the deal is expected to accelerate the penetration of Luminex's testing products outside the US through DiaSorin’s commercial and geographical reach.

"[Luminex has] an interesting position in the market today and … a super platform, Verigene II, that is in development and is going to be launched in the next few quarters," Rosa said.

Luminex's Verigene system is a sample-to-answer benchtop instrument that it acquired with Nanosphere in 2016 and uses gold nanoparticles to detect target nucleic acids for a range of infectious disease diagnostic applications. The next-generation Verigene II system, which comprises the same core nanoparticle chemistry as the Verigene system, consolidates four consumables into a single cartridge for a simpler workflow.

Luminex noted recently that it is planning a submission soon to the FDA for a Verigene II respiratory pathogen plus SARS-CoV-2 combination panel.

Luminex's Verigene product strategy, which allows for the selection and payment of a specific number of analytes during testing, may be particularly appealing to European customers that have "so far been shy of very complex multiplexing technologies," Rosa said.

DiaSorin noted that after the transaction with Luminex its product portfolio will comprise 44 percent immunoassay diagnostic products compared to 62 percent prior to the deal, and 37 percent molecular diagnostic products compared to 29 percent prior to the deal. Its new life sciences research products portfolio acquired through Luminex is expected to make up 12 percent of its total product mix, DiaSorin said.

"On the MDx side, [Luminex's] multiplexing technology (Verigene I and soon-to-launch Verigene II, along with xTag and xMap) enables [DiaSorin] to enter the syndromic panel market in the acute care setting," JP Morgan analyst Tycho Peterson said in a research note Monday. Luminex's low-plex and low-throughput Aries molecular diagnostics platform gives DiaSorin "a critical mass" in the point-of-care and hospital setting when it is combined with DiaSorin's Liaison MDx products, Peterson added.

Rosa said that Luminex's life science research instruments, including its flow cytometry portfolio, is expected to enable DiaSorin to forge new partnerships with current Luminex customers for these products, including biopharmaceutical companies doing drug development. With its bead-based technology for life sciences applications, Luminex has forged "very strong partnerships with top-notch players in this industry that have been utilizing the technology to develop their own product lines," Rosa noted.

In one recent example of the use of Luminex technology by biopharma companies, investigators evaluated the immunogenicity of the COVID-19 vaccine developed by Pfizer and BioNTech using a SARS-CoV-2 S1 binding IgG direct Luminex immunoassay to determine antibody binding levels.

"We intend to continue to nurture and develop and foster these relationships with these very large players because … traditionally DiaSorin is not shy of collaborating with people as long as there is a win-win situation," Rosa said.

For example, in 2019 DiaSorin and Qiagen announced FDA clearance and the US launch of an automated workflow for Qiagen's QuantiFeron-TB Plus test for latent tuberculosis detection running on DiaSorin’s Liaison platforms. A year earlier, DiaSorin and Meridian Bioscience entered into a strategic collaboration to sell DiaSorin's Helicobacter pylori stool antigen test for use on DiaSorin's Liaison platform.

The Luminex acquisition is expected to provide overall cost synergies of approximately $55 million within three years of closing, and a component of the cost savings is expected from lower-cost plastic parts for Luminex products. DiaSorin already sources large volumes of plastics at competitive prices for its immunoassays, Rosa said, adding that it anticipates using negotiating power with suppliers to obtain plastic materials at a lower cost than Luminex is currently paying.

The transaction represents a premium of about 23.1 percent to Luminex's closing share price on Feb. 24, the day before rumors of the acquisition emerged. On Feb. 25, as a result of the rumors, shares of Luminex had risen as much as 16 percent in trading on the Nasdaq.

On Feb. 9, on the other hand, Luminex shares dropped almost 8 percent following the release of its earnings and the revelation that the FDA had deprioritized an EUA for its Verigene I standalone SARS-CoV-2 assay.

Further, last June, the firm had received a warning letter from the FDA relating to the Verigene I hybridization heater and demanded that Luminex address technical issues related to the heater but did not request that it remove the instrument from the market.

On Monday, Rosa said that the warning letter "certainly was part of due diligence [for the acquisition], and we believe that a proper effort has been…put in place by Luminex to address the FDA concerns."

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