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Investment Bank Downgrades Luminex, Qiagen Stocks

NEW YORK (GenomeWeb News) – Investment bank Cowen and Co. has downgraded the stocks of Luminex and Qiagen to Underperform from Neutral.

Analysts Doug Schenkel and Shaun Rodriguez wrote in a research note published today that concerns about competition and a lack of "significant near-term catalysts" has led them to downgrade Luminex. "We believe competitive pressures have intensified for [Luminex's] molecular diagnostics franchise and anticipate pronounced share loss in [Respiratory Virus Panel] and a muted [Gastrointestinal Pathogen Panel] launch as a result."

Luminex has said that it expects US Food and Drug Administration clearance of its xTag GPP product in the first quarter of this year. Last week at the JP Morgan Healthcare Conference, Luminex President and CEO Patrick Balthrop highlighted the upcoming launch and said that the GPP test would address a $150 million market.

The Cowen analysts said that a recent survey they conducted among hospital labs suggests "significant share loss potential" for Luminex in its RVP franchise to newer entries, including Nanosphere, GenMark Diagnostics, and BioFire Diagnostics.

They added that they view customers for the GPP test to be existing RVP customers, around 200 labs, and believe the launch of the panel could be muted if customers are looking to switch to a different test platform. As a result, they lowered their revenue forecast for Luminex's Assay Group by $2 million, and lowered their total revenues estimate for Luminex in FY 2013 to $224.2 million from $226.1 million.

The Cowen analysts also cut their rating on Qiagen to Underperform from Neutral. They said that the firm's QIAsymphony platform "has not been demonstrated to be attractive, the outlook for companion diagnostics economics remains unclear, and the company appears to face ongoing competitive pressures in key higher-margin areas such as HPV and sample prep that are unlikely to abate soon."

Schenkel and Rodriguez noted that the QIAsymphony platform is central to Qiagen's molecular diagnostics strategy, and while it "appears to be a competitive platform [it's] likely not a differentiator to catalyze Qiagen's entry into key MDx markets."

The analysts also noted that since its 2007 acquisition of Digene, Qiagen has spent close to $2 billion on mergers and acquisitions and R&D. "Yet 2013 appears to be the 4th consecutive year where organic revenue growth has lingered in the low single-digit range; earnings growth has been virtually non-existent, and the returns profile remains below the peer group average," they wrote.

The Cowen analysts said that they remain enthusiastic about Qiagen's position in the companion diagnostics market and its potential for leveraging its sample prep technologies into adjacent markets, but they believe Qiagen's shares are "at least fully valued given the company's growth and returns profile and a mixed cash deployment history."

They lowered their FY 2013 revenues estimate for Qiagen to $1.280 billion from $1.285 billion, but upped their earnings-per-share estimate to $1.08 from a previous $1.07.

In Monday morning trade on the Nasdaq, shares of Luminex were down 6 percent at $17.36, while shares of Qiagen dropped 1 percent to $18.92.

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