NEW YORK (360Dx) – Following on Luminex's $77 million acquisition last year of Nanosphere, company officials are targeting 35 percent to 40 percent compound annual growth for Luminex's automated, sample-to-answer instruments over the next three years.
At the center of Luminex’s growth strategy is the dual offering of tests and instruments related to Nanosphere's Verigene platform, which provides high-plex syndromic testing with a focus on infectious disease applications, and the firm's existing and new tests launching on its Aries lower-plex, real-time, PCR-based sample-to-answer platform.
Taken together, sales from Verigene and Aries are expected to outgrow sales in Luminex’s partner business, in which it collaborates with strategic partners such as Thermo Fisher Scientific, Bio-Rad Laboratories, and Millipore. Luminex sells beads and instruments to its partners. The partners develop kits for sale with instruments and sell this combination to users, playing a royalty to Luminex.
In a presentation to analysts in mid-March at the Barclay’s Global Healthcare Conference held in Miami, Luminex CEO Homi Shamir said he expects the firm to report around 11 percent sales growth this year. Shamir said that the firm is operating in a space that provides a large available market opportunity worth "a couple of a billion dollars."
The critical time to begin measuring the expected success of Luminex, including the integration of Nanosphere and the potential for uptake of Verigene and Aries tests and instruments, may be toward the end of this year and 2018, Piper Jaffray analyst William Quirk said in an interview.
As with any new system — be it molecular or another type of instrument — menu is going to drive placements and utilization over time, he said. "At this point, Luminex has a fairly modest menu," he said, adding that the company should benefit from the launch of new assays on its Aries platform, as well as the launch of a future Verigene instrument and assays as part of a project that Luminex has named Atlas.
In January, Luminex received FDA clearance for its Group B Strep assay on the Aries system for antepartum detection of GBS colonization in pregnant women. The company already has clearance for HSV and Flu A/B/RSV assays running on Aries. And in addition to the Group B Strep assay, by the end of 2017, Luminex expects to also have cleared Aries assays for C. difficile, Novovirus, Group A Strep, and Bordetella.
For future growth, Luminex is putting a lot of faith in its molecular, sample-to-answer solutions. Of the $295 to $305 million in revenue the company expects to bring in during 2017, around $45 million should come from Verigene- and Aries-related sales, Shamir said recently on a conference call discussing 2016 financial results.
Nanosphere had around $9.5 million in revenues in the fourth quarter of 2016, and that level of revenue "annualized, plus some growth gets you pretty close" to the $45 million target that Luminex has established for its sample-to-answer solutions for 2017, Quirk said. "When you add in revenues for Aries, it seems like a reasonable target," he noted.
The company’s strategic partners are expected to provide around half of Luminex's total revenues — $150 million — in 2017. Although the partner business grew around 13 percent in 2016, Shamir expects it to grow at a pace that's more in line with that of the life sciences industry over the next few years. "We believe that on an annual basis and looking forward this growth will be 6 to 8 percent," or hopefully higher, he said at the Barclay’s conference.
By the end of 2016, Luminex had 75 strategic partners, of which 51 had commercial reagent-based products that uses Luminex technology. By the end of the year, Luminex and its partners had placed around 13,782 xMAP-based, non-automated molecular instruments in laboratories worldwide.
In 2016, around two thirds of the revenues in Luminex's partner business came from royalties, Shamir noted. Consumables, the largest portion of this business, worth $49 million in 2016, also provided high margins, he said, adding that overall the partner business "provides us with a very good platform, and we can use the cash and profitability we are generating from this business to invest in ourselves and build a very strong molecular diagnostics business or use it for an acquisition."
The firm is devoting resources and R&D dollars to developing the next generation of Nanosphere's Verigene platform. In favor of the project, the firm halted development work on the next generation of its Aries platform, dubbed Aries v2.
It expects to start clinical trials for the new Nanosphere instrument by the end of the second quarter this year, and a high-plex enteric assay running on the instrument is scheduled for launch in 2018, followed by respiratory and blood culture identification assays also in 2018.
The firm will run trials at 12 sites around the end of 2017, or beginning of 2018, and it expects to submit the instrument for clearance by the US Food and Drug Administration.
Prioritizing the firm's R&D investments during the recent Q4 conference call, Luminex CFO Harriss Currie said that the number one cost investment in 2017 would be related to developing Atlas and putting it through clinical trials. The number two investment priority is related to Aries and launching its new tests. A "significant effort" is going into the development of Atlas, he said, adding that it is "a higher-plexed assay and therefore requires a more complicated clinical trial and more cost."
Quirk noted that direct competition for Aries includes instrument and assays provided by Cepheid, Quidel, Meridian, Hologic, Roche, and Becton Dickinson. For the high-plexed instruments and panels, Luminex's competitors include BioMérieux’s Biofire FilmArray and GenMark.
In December 2016, Luminex said it reorganized "to both facilitate the integration of Nanosphere and to better focus" on its core business, reducing its headcount by more than 50 employees, reallocating responsibilities within the R&D organization, and "significantly" reducing its biodefense efforts.
The firm added that due to the reorganization it expected to save around $9 million per year.
The company expects to face headwinds soon in its non-automated molecular diagnostics business. LabCorp intends to shift to next-gen sequencing technology for its cystic fibrosis testing by mid-year 2017, and it has indicated to Luminex a desire to shift its women's health testing performed using Luminex's reagents to the Roche Cobas 8800 system by mid-year 2018.
Luminex's expects that 2017 revenues will contract for its non-automated solutions by between 6 and 10 percent as a result of the loss of LabCorp CF testing business by mid-year 2017.
In the Q4 conference call, Shamir said that the firm was continuing to look for additional acquisition opportunities like that provided by Nanoshere. "If we find it we will execute on it," he said. "I think Nanosphere was a very good acquisition for Luminex, and we continue to search for that" type of company.