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Luminex Goes to Direct Sales Channel for MDx

NEW YORK (GenomeWeb News) – Luminex will be offering its molecular diagnostics directly to customers starting Jan. 1, 2013, the company said on Tuesday at its annual investor day conference.

The decision comes as Luminex's distribution deals with Abbott and Thermo Fisher Scientific expire at the end of this year and the Austin, Texas-based firm plans several new product launches in the US.

CEO Patrick Balthrop told GenomeWeb Daily News' sister publication PCR Insider this week that Luminex already works with some customers on a direct basis and has been preparing with Abbott and Thermo Fisher for its move to a direct sales channel.

"Therefore, our investors and customers should not perceive this as a significant risk," he said. "It's not like we're transitioning a tremendous book of business and just got started on the process – we've been working on it for a long time. So the transition, we believe, is going to be relatively minor and smooth."

He emphasized that the shift affects only Luminex's molecular assay business and that other licensing partnerships, including with One Lambda, "remain intact."

One Lambda, purchased by Thermo Fisher earlier this year, operates in the transplant diagnostics space, not in molecular diagnostics.

Brian Weinstein, an analyst at William Blair & Co., said in a research note today that the move makes sense for Luminex on several fronts. With an expansion of its menu, "taking it to a critical mass" with a direct sales force is a natural step. Among launches planned in the US is Luminex's xTAG Gastrointestinal Pathogen Panel; the xMAP NeoPlex 4 assay for newborn genetic disease screening; and a new CYP2C19 test.

The firm also is better prepared for a direct sales channel now that it has been in the molecular diagnostic space for a few years, Weinstein said.

Additionally, Luminex controls 77 percent of total molecular assay revenues, he said, "so this move is merely a continuation of existing trends that the company has been seeing."

Lastly, moving to a direct sales channel should translate to additional revenues for Luminex. Through the first nine months of the year, sales achieved through its agreements with Abbott and Thermo Fisher comprised 23 percent of total molecular assay revenues. Those sales are also subject to an average 30 percent distributor margin, Weinstein said.

Annualizing the molecular diagnostic revenues and giving Luminex the distributor margin from the Abbott and Thermo Fisher agreements would provide Luminex an estimated incremental $6 million in revenues and gross profit in 2013, according to Weinstein.

"We believe much of this will flow through the P&L, as most of the incremental spending has already taken place," Weinstein said.

Jeffries analyst Jon Wood also said in a research note that the Abbott and Thermo Fisher agreements account for about $15 million in annualized revenues and estimated that Luminex's direct sales shift will add upwards of $2.5 million of incremental revenue next year "while investments needed to support the transition appear minimal."

For more on Luminex and its molecular diagnostic plans, please see PCR Insider's article this week.