Luminex Corp LMNX reported second-quarter 2015 adjusted earnings of 22 cents per share, which beat the Zacks Consensus Estimate of 12 cents. Adjusted earnings per share (EPS) also increased 37.5% on a year-over-year basis owing to higher revenues and expanding margins.
The Quarter in Details
Revenues climbed nearly 6% year over year to $58.9 million, which managed to steer ahead of the Zacks Consensus Estimate of $57 million.
Meanwhile, System sales plunged 21% on a year-over-year basis to $6.5 million. Royalty revenues rose 17% on a year-over-year basis to $11.1 million. Consumables sales fell 6% to $11.9 million, primarily due to inventory management problem at Luminex’s largest customer.
Assay revenues surged an impressive 22% to $24.2 million, reflecting the successful execution of the company’s molecular diagnostic strategy. Infectious disease assay sales comprised approximately 66% of the total assay sales in the quarter, with genetic testing assays representing 34%.
During the second quarter of 2015, 234 multiplexing analyzers were shipped, including 119 MAGPIX systems, 94 LX systems, and 21 FLEXMAP 3D systems.
Gross margin expanded 480 basis points (bps) on a year-over-year basis to 73.4%. This was primarily due to improved revenue contribution from the company’s higher margin items.
Selling, general and administrative (SG&A) expenses, as a percentage of revenues, contracted 200 bps on a year-over-year basis to 35.7%, while research and development (R&D) expenses fell 80 bps to 19.5%.
Adjusted operating margin expanded 630 bps on a year-over-year basis to 24%. The impressive upside is primarily due to higher revenues as well as stringent cost curtailment initiatives.
Product Pipeline
In July, Luminex announced that it has duly submitted 510(k) applications for its ARIES System and ARIES HSV 1&2 Assay to the U.S Food and Drug Administration (FDA). Management expects to receive the FDA clearance and CE-IVD marking before the end of 2015.
Luminex expects to complete the FDA submissions for ARIES GBS assay and Group B strep assay by the end of 2015. Clinical trials for both the assays are ongoing.
Management at Luminex expects to complete the FDA submission for its multiplexing assay NxTAG RPP (Respiratory Pathogen Panel) before the end of Aug 2015. During the second quarter of 2015, the company launched the research use only version of the product and received positive customer feedback. NxTAG RPP is expected to follow a similar timeline like ARIES with the FDA clearance targeted for the fourth quarter of 2015.
Financial Position
Cash and cash equivalents, as of June 30, 2015, were $111.1 million, compared with $95 million as of Mar 31, 2015. Cash flow from operating activities in the second quarter of 2015 was $20.6 million, compared with $10.9 million for the preceding quarter.
Guidance
Luminex raised the lower end of its 2015 revenue projection. Revenues are now expected to lie in the range of $232–$236 million, as compared with the previous guidance of $230–$236 million.
Luminex expects assay revenues to grow in the low to mid teens for 2015 (more than $100 million).
Given Luminex’s investments in the development of additional ARIES assays, management expects R&D expenditure for 2015 to be around 20% of revenues. Management also anticipates SG&A expenses to increase in the second half of 2015 as the company gears up for the launch of the ARIES platform.
Third-quarter revenues are projected between $56 million and $58 million.
Our Take
We remain concerned with the volatility that persists with respect to consumables revenues. However, Luminex’s Assay business continues to act as a primary growth driver for the company with impressive revenue generation. We are also encouraged by the company’s healthy product pipeline.
Luminex’s ARIES system, set to be launched before the end of this year, is expected to be a major revenue opportunity for the company. Additionally, the launch of its NxTAG RPP should also help boost the company’s product portfolio.
While ARIES is positioned to target the low-plex testing market, NxTAG RPP eyes the moderate-to-high volume labs in the multiplex market.
We believe that by offering targeted testing on the ARIES system along with syndromic panels through the company’s xTAG and NxTAG product lines, Luminex will enjoy the strategic advantage of being the only company offering a complete testing solution to laboratories.
Zacks Rank
Currently, Luminex carries a Zacks Rank #3 (Hold).
Some well-placed stocks in the medical sector are Agios Pharmaceuticals AGIO, NuVasive NUVA and Abaxis ABAX. All the three stocks sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment