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Luminex Q3 Revenues Drop 2 Percent, Shares Down on Missed Top Line Expectations

NEW YORK (GenomeWeb) – Luminex reported after the close of the market on Monday that its third quarter revenues were down 2 percent year over year, driven in part by a delay in the timing of customer orders that closed a few days after the end of the quarter.

For the quarter ended Sept. 30, the molecular diagnostics company reported revenues of $72.4 million, down from $74.1 million in the year-ago quarter, and short of the average Wall Street estimate for revenues of $74.1 million.

The miss on analyst expectations and uncertainty over reimbursements for highly multiplexed testing panels, which could reduce some of the firm's future revenues for these panels, startled some investors. In early morning trading Tuesday on the Nasdaq, Luminex shares were down 16 percent to $24.88.

Luminex President and CEO Homi Shamir said in a statement that as a result of its recently announced agreement to acquire the flow cytometry research assets of MilliporeSigma and the expected loss of sales to Laboratory Corporation of America for its women's health products, Luminex will be a more diversified company with a "substantial pipeline of products and a solid foundation" for increasing its growth.

In a conference call to discuss the firm's financial results, he noted that Q3 was the first time under his leadership that Luminex fell short of its revenue guidance. This was mainly due to several molecular diagnostic product orders that the firm had expected to receive in Q3, but which closed two days after the quarter ended, he said. If the orders had been received as planned, the firm's Q3 revenues would have been elevated to the middle of its guidance range, he said.

Shamir said that the acquisition of the assets from MilliporeSigma — the firm's first acquisition in the life science space, but probably not its last — will enable Luminex to sell directly to customers who have already adopted its xMAP technology. "We believe that this acquisition could add between $40 million and $50 million of revenue to our top line next year and be accretive," Shamir said, adding that overall the firm remains on track to meet its targeted run rate of $100 million by the end of 2019.

He noted that a clinical trial is ongoing for the firm's next generation Verigene II platform along with a gastrointestinal panel in anticipation of a future submission for clearance to the US Food and Drug Administration, and that Luminex anticipates commencing a clinical trial for a respiratory panel on the new system in December.

In September Medicare administrative contractor Palmetto GBA issued a final local coverage determination that the use of small multiplex viral respiratory panels in susceptible populations may be reasonable and necessary, but the use of highly multiplexed nucleic acid amplification tests as front-line diagnostics cannot currently be justified.

On Luminex's call on Monday, Shamir said the LCD "can be an opportunity" for the company. Its strategy of flexible testing options aligned with flexible pricing for customers "should end up being a value driver for us because one-size-fits-all panels are becoming more difficult to sell these days," he said.

Some analysts, however, were more cautious about Luminex's approach in the near term. William Blair's Brian Weinstein wrote in a research note today that he remains skeptical about Luminex's sample-to-answer growth targets "due to competitive dynamics and pricing concerns in multiplexing."

Piper Jaffray analyst William Quirk wrote in a research note on Monday that he believes overall syndromic panel pricing is likely to experience downward pressure in the coming years. Luminex is well positioned as a low cost provider in the syndromic panel market, but uncertainty in the near term could hold back its share performance, he said.

Revenues from the Millipore flow cytometry acquisition should "more than offset" an expected $30 million loss of revenues from LabCorp, he said.

In Q3 2018, the firm's assay revenues were down 11 percent year over year to $33.7 million from $37.9 million; system sales rose 1 percent to $10.0 million from $9.9 million; and consumables revenues rose 9 percent to $11.6 million from $10.6 million.

Q3 royalty revenues were up 10 percent year over year to $12.1 million from $11.0 million; service revenues rose 3 percent to $3.0 million from $2.9 million; and other revenues rose 6 percent to $1.9 million from $1.8 million a year earlier.

Luminex said that excluding sales to LabCorp, assay revenues increased 6 percent year over year in Q3. Total sample-to-answer molecular product revenue grew about 15 percent to $13.6 million from $11.9 million in the prior-year quarter. The firm said that it placed 81 sample-to-answer molecular systems under contract during Q3, and it now has more than 550 active sample-to-answer customers.

Sample-to-answer utilization per Verigene customer grew about 7 percent to $104,000 from $97,000 in the prior-year quarter, and utilization per Aries customer grew about 28 percent to approximately $55,000 from $43,000 in the prior-year quarter.

In Q3, Luminex shipped 284 multiplexing analyzers — consisting of Magpix, Lx, and Flexmap 3D systems — and it has shipped more than 15,700 since the company's inception.

Luminex's Q3 net income dropped to $1.7 million, or $.04 per share, from $17.6 million, or $.40 per share, a year earlier. On an adjusted basis, the firm reported EPS of $.05 per share in line with analyst expectations.

The firm's R&D expenses for the quarter rose 12 percent to $12.0 million from $10.7 million a year earlier. SG&A costs were down slightly lower year over year at $26.3 million from $26.5 million.

Luminex also reported that in the recently completed quarter it had an income tax expense of $2.0 million, compared to a benefit of $11.1 million a year ago.

The company ended the quarter with $146.9 million in cash and cash equivalents.

Luminex said that it expects fourth quarter 2018 revenue to be between $77 million and $79 million and to be in the middle of its full-year 2018 revenue guidance of between $310 million and $316 million. Prior to the release of the financial results, analysts on average expected revenues of $77.5 million in Q4 and $313.6 million in 2018.