AFFX Affymetrix, Inc.

Luminex Corporation (LMNX), a developer of biological testing technologies, has completed its previously-announced acquisition of privately-held diagnostic testing company EraGen Biosciences, Inc. for $34 million in cash. The companies struck a definitive agreement on June 21.

Madison, Wisconsin-based EraGen, with annual sales of $8 million, makes molecular reagent products for infectious diseases and genetic-based conditions. The company’s products are based on its proprietary MultiCode technology platform.

The acquisition provides Luminex a highly complementary portfolio of molecular diagnostic tests based on the MultiCode platform. Besides, it enables the company to tap new markets leveraging EraGen’s innovative technologies. 

Luminex envisions the acquisition to add between $5 million and $7 million to its sales for 2011. Moreover, the company expects the transaction to dilute its earnings (on a reported basis) in 2011 and be accretive in 2012. On an adjusted basis (excluding acquisition-related charges), the acquisition is expected to be neutral to earnings in 2011.

Texas-based Luminex develops and markets proprietary biological testing technologies, which have applications across the life sciences industry. Its proprietary open-architecture xMAP technology enables fast, cost-effective and accurate conduct and analysis of biological tests.

Luminex possesses an extensive product portfolio and a healthy pipeline of novel assays. Moreover, the company has a strong international presence which has helped it to expand its product portfolio and customer base.

However, Luminex operates in the highly competitive life sciences industry, characterized by rapid and continuous technological innovation. The company competes with Affymetrix (AFFX) and Sequenom (SQNM), among others.

Moreover, Luminex is challenged by sluggish growth in its core markets, faces regulatory uncertainties, and heavily depends on partners to market its instruments and assays, a strategy that has its risks. Our Neutral recommendation on the stock is in agreement with a short-term Zacks #3 Rank (Hold).

 
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