) recently announced a definitive deal to buy US-based diagnostic
testing company, GenturaDx. Per the agreement, Luminex will buy all
the outstanding shares of the privately-owned company for $50
million in cash, subject to certain terms and conditions.
In addition to $50 million, Luminex may end up making contingent
payments based on the achievement of certain milestones and also on
the basis of product performance.
Financial Impact of the Acquisition
On a reported basis, the acquisition of GenturaDx is expected to
be dilutive to Luminex's 2012 earnings. The company expects to
recognize a part of the costs in the second quarter itself, given
the timing of the deal. The rest of the non-recurring costs will be
accounted for in the subsequent quarters. In addition, apart from
acquisition charges, the deal will add roughly $6 million to the
company's operating expenses in 2012.
Luminex's share price dropped 18% following the announcement of
the acquisition. We believe the drop in share price reflects
disappointment regarding the dilutive nature of the deal and higher
Acquisition to Boost Instruments Portfolio
The acquisition of GenturaDx will expand Luminex's instrument
products portfolio, as Luminex plans to advance the late-stage
development of GenturaDx's integrated sample-to-answerreal-time
polymerase chain reaction ("PCR") system and combine it with its
MultiCode-RTx assay to develop a highly efficient yet affordable
system for molecular diagnostic testing. Luminex plans to launch a
number of assays, which can be used along with GenturaDx's
innovative platform by 2014.
Luminex will record acquisition-related cash and non-cash
expenses, the full extent of which will be determined once
valuation is done under purchase accounting rules. Moreover,
according to ASC 805 Business Combinations, professional fees shall
be paid as incurred, as required by GAAP.
The GenturaDx deal is in line with Luminex's strategy of
pursuing acquisitions to drive growth. Last year, the company had
acquired privately-held diagnostic testing company EraGen
Biosciences, Inc. in June 2011. The acquisition provided the
company a highly complementary portfolio of molecular diagnostic
tests based on the MultiCode platform. Besides, it enabled the
company to tap new markets leveraging EraGen's innovative
technologies. The acquisition continues to contribute meaningfully
to the company's assay revenues in 2012.
Luminex possesses an extensive product portfolio and a strong
pipeline of novel assays, which are expected to support growth
going ahead. The company's strong international presence has helped
it to further expand its product portfolio. Its customer base is
also quite encouraging.
However, Luminex operates in the highly competitive life
sciences industry. The company competes with
), among others. Moreover, sluggish growth in its core markets is a
challenge faced by Luminex. We are currently Neutral on the stock,
which carries a Zacks #3 Rank (short-term Hold rating).
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