Luminex Remains Neutral - Analyst Blog
September 17 2012 - 11:55AM
Zacks
We reiterate our Neutral
recommendation on Luminex Corporation (LMNX)
following its second quarter results. In the reported quarter,
adjusted (excluding one-time charges) earnings of 7 cents per share
were in line with the Zacks Consensus Estimate. Profit generated
was $3 million, down 36.4% from the prior-year quarter mainly due
to higher operating expenses associated with the EraGen and
GenturaDx acquisitions.
However, revenues rose 1.3% in the
reported quarter to $48.3 million, slightly below the Zacks
Consensus Estimate of $49 million. Overall increase in revenue was
primarily driven by solid growth in the Assay business, partially
offset by lower System and Consumable sales. Sluggish growth in its
core markets is a challenge being faced by Luminex.
Luminex’s strong international
presence has helped it to expand its product portfolio and customer
base. The company’s current success in the global market can be
ascribed to its Gastrointestinal Pathogen Panel (GPP) product line.
The products have already received excellent international reviews
for setting new standards in gastrointestinal diagnostic patient
care.
Moreover, Luminex possesses a
healthy pipeline and is working on developing several new assays.
The company is currently seeking the Food and Drug Administration
(FDA) approval for both NeoPlex4 and the GPP assay and plans to
launch the devices in the U.S. around year-end 2012 and early 2013,
respectively.
In April 2012, on the back of the
growing assay business, the company decided to develop strategies
to ramp up its market development activities and dedicated the next
few quarters to the identification of potential targeted markets
that will prove to be beneficial in the long term. In this
connection, Luminex announced its plans to expand its Life Science
and Biodefense Groups, as these offer significant growth
opportunities to leverage technology as well as assay sales. The
BioWatch project is a major growth driver for this business
segment.
Luminex’s buyout of privately-held
diagnostic testing company EraGen Biosciences represents an
attractive prospect. The acquisition provides Luminex with 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.
Recently, in July 2012, the company
announced a definitive deal to buy U.S.-based diagnostic testing
company, GenturaDx. Luminex plans to launch a number of assays,
which can be used along with GenturaDx’s innovative platform by
2014.
However, the GenturaDx deal is
expected to be dilutive to 2012 earnings. Apart from acquisition
charges, the deal will add roughly $6 million to the company’s
operating expenses in 2012. Luminex intends to pursue acquisitions
in the coming years to drive growth, a strategy which has inherent
risks. The company needs to successfully integrate its acquisitions
to avoid resource wastage.
Furthermore, Luminex is susceptible
to regulatory delays and demand for research and diagnostics
applications is expected to remain weak given the soft
macroeconomic backdrop. Moreover, sluggish growth in its core
markets may weigh on the company’s performance moving forward.
Luminex operates in the highly
competitive life sciences industry. The company competes with
Affymetrix (AFFX) and Sequenom
(SQNM), among others. We are currently Neutral on the stock, which
carries a Zacks #3 Rank (short-term Hold rating).
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