Luminex (LMNX) Gets FDA Nod For Assays; Q2 Earnings Beat

Luminex Corporation (NASDAQ:LMNX) recently received approval from the US Food and Drug Administration (FDA) for its ARIES Flu A/B & RSV Assay. Notably, this is the second assay which has been approved by the FDA for use on the ARIES System.

Meanwhile, Luminex has also reported second-quarter 2016 adjusted earnings of 26 cents per share, which surpassed the Zacks Consensus Estimate of 18 cents. Adjusted earnings also surged 18.2% on a year-over-year basis, thanks to strong top-line growth.

Revenues increased almost 9% year over year to almost $64.2 million well ahead of the Zacks Consensus Estimate of $62 million. The year-over-year upside may be attributed to impressive consumable sales, strength in the Assay product portfolio and robust system sales.

Segment Details

System sales jumped 37.4% on a year-over-year basis to $8.9 million. Notably, the company shipped 277 multiplexing analyzers in the reported quarter that led to higher system revenues.

Royalty revenues increased 2.5% on a year-over-year basis to $11.4 million. Consumables sales surged 12.3% to $13.3 million. The increase is primarily attributable to strong demand across the partner base of the company.

Notably, MDx (Molecular Diagnostic) business generated over $27 million in revenues for the quarter, buoyed by growth across the portfolios of infectious disease and genetic tests.

Luminex’s partner revenues grew 17% year over year primarily driven by robust demand for the company’s products in the life science market.

Assay revenues increased 6.8% to almost $26 million, reflecting the successful execution of the company’s molecular diagnostic strategy. Infectious disease assay sales accounted for approximately 66% of the total assay sales in the quarter, with genetic testing assays representing 34%.

Adjusted gross margin contracted 340 bps on a year-over-year basis to 70%.

We note that salary, general and administrative (SG&A) costs were up 15.1% for the quarter from a year ago. This includes $2 million worth of one-time deal-related costs. According to management, excluding these one-time costs, SG&A expenses surged 6% and represented 35% of the total revenue. As a percentage of revenues, the SG&A expenses expanded 200 basis points (bps).

Meanwhile, research and development (R&D) expenses, as a percentage of revenues, contracted 150 bps to 18% in the reported quarter.

Guidance

Luminex now expects full-year 2016 revenues in the range of $261–$269 million, up from the previous range of $247–$255 million. We note that Nanosphere is expected to add $13–$16 million of revenues in 2016.

The company expects weak Consumer revenues in the second half of the year. However, revenues are likely to grow 10% growth in the full year.

Management at Luminex expects assay revenue growth in the mid single-digit range in 2016. Meanwhile, the company assumes that LabCorp CF will remain its customer throughout 2016.

The company continues to expect LabCorp to discontinue by the end of 2016 or early 2017.

The company also anticipates contributions of around $14 million from the sales of ARIES.

Luminex is highly optimistic about Nanosphere’s Verigene System and the ARIES M1 platform, as these products are likely to fortify its market position.

We note that in the third quarter, Luminex expects revenues in the band of $67--$70 million. Nanosphere is likely to contribute approximately 10% to third-quarter revenues.

Zacks Rank & Key Picks

Currently, Luminex carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the medical space are Cepheid (NASDAQ:CPHD) , Masimo Corporation (NASDAQ:MASI) and Mesa Laboratories Inc (NASDAQ:MLAB) . All the three stocks sport a Zacks Rank #1 (Strong Buy).