On Aug 7, Luminex (LMNX) announced an initiative to reinvigorate its Assay and Related Products ("ARP") Segment's Newborn Screening Group and Brisbane office. This restructuring initiative is a part of its efforts to counter the oncoming tough reimbursement environment.
Management plans to reduce headcount by 5% as well as shutdown the Brisbane office to realign resources in a better manner. Luminex intends to use the savings from the restructuring initiative to develop and market new molecular diagnostics products.
LMNX is expected to spend $7 million–$8 million for restructuring. Out of this, half will be incurred in this quarter (ending Sep 30, 2013), while the other half will be spent in the subsequent two quarters. However, the successful completion of the restructuring is expected to result in operating cost savings of roughly $5 million to $6 million annually.
Meanwhile, Luminex reiterated its 2013 revenue guidance in the range of $220 million−$230 million, up 9%–14% year over year. However, the company expects revenues to be at the lower end of the guidance due to reimbursement-related changes implemented by the Centers for Medicare and Medicaid Services (CMS) from Jan 1, 2013.
Management is optimistic that the realignment strategy will boost the company’s overall growth. An increase in LMNX’s share price by 3% on Aug 7 reflects that the restructuring initiative is boosting investor confidence as well.
Luminex possesses an extensive product portfolio and a healthy pipeline of novel assays, which are expected to support growth going ahead. Moreover, Luminex is developing innovative platforms by combining resources from its latest acquisitions and strategic partnerships. The company’s initiative to establish a direct sales force for its molecular diagnostics customers is likely to improve operating efficiency.
However, Luminex operates in a highly competitive life sciences industry. Moreover, the underlying market is anticipated to be negatively affected in the near term by the current molecular diagnostic related reimbursement changes implemented by the CMS. This might result in sluggish sales of certain assays.
LMNX has a Zacks Rank #3 (Hold). Other medical instrument companies that worth to look include Cyberonics (CYBX) and Thoratec (THOR), both with a Zacks Rank #1 (Strong Buy), and IDEXX Laboratories (IDXX) with a Zacks Rank #2 (Buy).
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