We reiterate our Neutral recommendation on
) 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
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
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
), among others. We are currently Neutral on the stock, which
carries a Zacks #3 Rank (short-term Hold rating).
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