Luminex this week provided investors with an update on its molecular diagnostics pipeline, including the integration of recently acquired GenturaDx and its sample-to-answer testing platform and the market uptake and opportunity for its xTAG Gastrointestinal Pathogen Panel.
Luminex also discussed the continuing market opportunity for its xTag Respiratory Viral Panel in the face of increasing competition, and provided an update on the pending launch of its xMAP NeoPlex 4 assay for newborn genetic disease screening.
Luminex CEO Patrick Balthrop discussed these and other items in a conference call this week recapping the company's third-quarter financial results. In the quarter, ended Sept. 30, Luminex logged a 10 percent spike in revenues, but fell short of consensus Wall Street estimates on the top line and lowered its annual revenue guidance.
Austin, Texas-based Luminex reported total revenues of $50 million for the quarter, up from $45.6 million for the third quarter of 2011. Analysts, on average, had expected revenues of $51.3 million.
System sales were $8.6 million, down 1 percent year over year from $8.6 million. Its consumables sales were up 8 percent to $12.9 million from $12 million, and its royalty revenue rose 3 percent to $7.7 million from $7.5 million. The firm's assay revenue jumped 22 percent to $16.4 million from $13.4 million.
By segment, revenues for its Technology & Strategic Partnerships segment increased 6 percent to $31.6 million from $29.9 million, and sales for its Assays & Related Products segment jumped 18 percent to $18.5 million from $15.6 million.
Luminex said in July that it was acquiring privately held Hayward, Calif.-based molecular diagnostics developer GenturaDx for $50 million (PCR Insider, 7/12/2012).
Luminex acquired GenturaDx primarily for its IDBox platform, a fully integrated and automated real-time PCR system that uses disposable testing cassettes. Luminex also said that it expected to be able to develop real-time PCR assays on the platform using the MultiCode-RTx chemistry that it acquired along with EraGen Biosciences in 2011 (PCR Insider, 6/23/2011).
"It's now about four months since we closed the acquisition of GenturaDx, and we are pleased with the results," Balthrop said during the call this week. "Early integration activities are progressing well, as we've refocused our combined resources to develop this exciting platform."
Balthrop also noted, however, that during the third quarter, Luminex recorded "better-than-expected" operating margins of 13 percent (excluding one-time costs such as the acquisition cost), and that the reasons for this performance included the fact that Luminex "aggressively executed integration activities at GenturaDx … and continues to focus our allocated resources towards those projects with the highest long-term return on invested capital."
Asked by an analyst to provide additional clarity on this, and on why the GenturaDx operating costs were so low compared to GenturaDx's historical operating costs, Balthrop noted that GenturaDx "had headcount … on staff, and after we acquired the business, we assigned some of our Luminex staff to [work] on the GenturaDx system, and the GenturaDx staff are no longer there."
As such, the amount of money that Luminex is spending on operating the business has decreased "because we absorbed some of those activities," Balthrop said, adding that the company now has "a lot of people working on … that program … primarily here in Austin as well as in Madison, with the engineering work being done in Austin and the assay development in Madison. But … not very many of those are people that came from GenturaDx."
Balthrop also said that Luminex "believes strongly in the strategic position of this platform that, once commercialized, will exceed future customer expectations for ease of use, throughput, capacity, scalability, and breadth of menu."
In particular, he noted that at the Association for Molecular Pathology annual meeting held last week, representatives from many clinical diagnostic laboratories expressed "dissatisfaction" with current molecular diagnostic instrumentation, and an interest in gaining early access to the GenturaDx system.
Luminex has maintained that it hopes to launch the new platform in 2014. The company is currently building out the test menu on the system in hopes of addressing what it sees as a burgeoning opportunity in higher volume molecular labs that may need "additional throughput and capacity," and larger hospitals "with, say, over 300 or 400 beds," Balthrop said, adding that Luminex estimates the "incremental opportunity for [GenturaDx's platform] to be $5 billion and growing at a healthy rate in the mid-teens."
The system will be able to perform up to 12 assays at a time, either all the same assay or a mix of different assays.
"As it has happened in the industry over the years, the market will trend toward having systems that will provide increased capacity, increased menu, and increased throughput," Balthrop said. "The reason for that is because we expect the overall molecular diagnostic assay menu across the industry to increase. And so, to serve those customers where the vast majority of the business resides, it will be very important to have instrument capacity and throughput capability, as well as a competitive menu."
Balthrop declined to disclose the assay pipeline for IDBox, noting only that the platform would feature some "unique content of what I would call workhorse assays."
"We learned our lesson regarding our menu intentions, because as a company that has a track record of introducing first of their kind products, a lot of that only serves to allow our competitors to take advantage of our innovation," he said. "We intend to have a differentiated position as it relates to menu. We don't have any intention of taking on a large, entrenched competitor."
Luminex plans to provide more information on the GenturaDx development and integration at an investor meeting in December in New York.
xTAG Update
Luminex received the CE Mark for its xTAG Gastrointestinal Pathogen Panel, or GPP, in early 2011, at which time it launched the product in Europe. The product is still not available in the US, though the company has filed for US Food and Drug Administration approval and hopes to have the product on the market in the states in early 2013.
The xTAG GPP is a qualitative, multiplex molecular test intended for the simultaneous detection and identification of multiple gastrointestinal and diarrhea-causing pathogens — including bacteria, viruses, and parasites — in about five hours.
The assay uses Luminex's xTAG technology and xMAP platform to detect multiple targets in a single sample. In an xTAG assay, PCR products are subjected to an allele-specific primer extension step. The 5' end of the primers is then attached to an xTAG universal tag sequence that is hybridized to the complementary anti-tag sequence coupled to a particular xMAP bead array. The hybridized beads are subsequently read on the firm's 100/200 and MagPix instruments, and the results are analyzed by data-analysis software.
The assay can detect 15 total GI pathogens: Salmonella, Shigella, Campylobacter, Clostridium difficile, Enterotoxigenic E. coli, E. coli O157, Shiga-like toxin producing E. coli, Vibrio cholera, Yersinia enterocolitica, Adenovirus 40/41, Rotavirus A, Norovirus GI/GII, Giardia, Entamoeba histolytica, and Cryptosporidium.
"We continue to experience increasing interest among a broad spectrum of laboratories for our gastrointestinal pathogen panel," Balthrop said. "This momentum is likely to accelerate as performance data and healthcare economic data from early-access centers gets published. We've seen the data from a few centers and are very encouraged with the significant reduction in hands-on time compared to legacy technologies, and savings from a reduction in in-patient days."
Balthrop also noted that the company is "beginning to see this interest convert to revenue as we generated triple-digit growth in the third quarter, although off a base that is relatively small."
However, Luminex also noted during the call that it was cutting its full-year revenue guidance to a range of $200 million to $204 million from an initial estimate of $205 million to $215 million. It blamed this reduction in expectations on several factors, but pointed primarily to slowness in the European economy in general, and slower-than-expected uptake of the xTAG GPP.
"We continue to experience growing interest in our CE-marked GPP, yet this first of a kind product requires lengthy sales cycles," Balthrop said. "On a positive note, we believe that performance data and healthcare economic data soon to be published will help speed up this process, and our pending US launch will benefit from our experiences to date."
At a corporate-sponsored workshop at AMP, which PCR Insider did not attend, a collaborator from Public Health Wales presented preliminary data regarding Luminex's GPP. Namely, during the London 2012 Olympic Games, clinical researchers at Public Health Wales evaluated the Luminex GPP assay on 1,000 routine clinical specimens and achieved a greater than 2-fold increase in diagnostic yield "compared to conventional testing algorithms," according to an abstract provided by Luminex.
The Luminex GPP was subsequently chosen for rapid detection of gastrointestinal infectious agents in Olympic-related outbreak investigations in Wales. Although no such outbreak occurred, "the results of the evaluation have prompted a review of current methodologies for the diagnosis of infectious intestinal disease," the abstract stated.
Increasing Competition
Luminex is hoping that xTAG GPP will take a similar tack to its xTAG Respiratory Virus Panel, or RVP, which used the same xTAG and xMAP technology and has entrenched itself in the past few years as a popular product in the highly multiplexed molecular diagnostics market.
Yet the company is beginning to feel the heat from increasing competition in this space, as several vendors have followed suit with highly multiplexed molecular or other assays for detecting and identifying respiratory viruses.
In particular, as one analyst pointed out on the call, that competition was more noticeable than ever coming out of last week's AMP meeting as several presentations and studies centered on other respiratory virus panels.
"The most significant competition that we continue to encounter is the legacy technologies of culture, [direct fluorescence], et cetera," Balthrop said. "We understand that there is a lot of activity going on with other, what I would call automated competitors. Prodessa … a Hologic franchise, is one of those; Gen-Mark; BioFire [Diagnostics] … and so we're aware of the activities of those other companies."
Balthrop added that among Luminex customers who have evaluated these alternatives "almost all either stay with Luminex or switch back shortly thereafter," though he conceded that there are "some customers that we've lost, and that is a single-digit number. And all of those are relatively low-volume customers that switched due to some unique needs that they had. So the net of that is that we're maintaining or slightly growing our share."
Balthrop claimed that Luminex's RVP assay still maintains an advantage over competitors in terms of "throughput and capacity," and that it serves "a different subsegment" of the market than other tests.
"One of the things [customers are] concerned about is whatever tool they're using needs to be able to handle whatever their peak volumes might be in the middle of the season," he said. "So if they have a system that can only do five or 10 tests or 20 tests per day, that's not really the market segment that we serve."
BioFire Diagnostics, formerly Idaho Technology, recently launched the FilmArray respiratory viral panel to high customer praise, and is also developing a gastrointestinal pathogen panel on the same platform, thus providing a challenge to Luminex on two fronts.
Other Opportunities
Lastly, Luminex noted that it also hopes early next year to win FDA approval for its xMAP NeoPlex 4 assay, which is intended to test newborns for four analytes — T4, hTSH, 17-OHP and IRT — which can be indicators of congenital hypothyroidism, congenital adrenal hyperplasia, and cystic fibrosis.
The test is also based on xMAP technology, according to the company's website, but in addition uses the NeoPlex System, a fully automated, walk-away sample-processing instrument that incorporates the BSD 300 Semi-Automated Punch System and CardScan reader.
Balthrop said during the call that the combined market opportunity for xTAG GPP and NeoPlex 4 is about $200 million annually.
At AMP, Luminex perhaps provided a clue about additional future directions for its molecular diagnostic pipeline, particularly using the xTAG and xMAP technologies.
Also at its corporate-sponsored workshop at the conference, a researcher from ViroMed Laboratories discussed how his group partnered with Luminex to develop and clinically validate a Luminex xTAG assay diagnosing bacterial vaginosis.
According to the presentation, the Luminex test is an example of a more efficient and potentially higher-throughput alternative to what has become the gold standard for bacterial vaginosis diagnosis: "semi-quantitative evaluation of vaginal microflora based on observation of different bacterial morphotypes in Gram-stained preparations of vaginal samples," which is "laborious and impractical for routine clinical use."
Balthrop noted this week during the call that its corporate-sponsored AMP workshop sessions provided "a glimpse into our ability to quickly seize a new market opportunity by working with a high-volume customer to develop a customizable solution that exceeded the lab's needs. This quick and nimble response was part of our key strategy, and reflects not only the flexibility of our technology and the dedication of our R&D personnel, but also the strength of our relationships with these elite customers."