Luminex to Acquire GenturaDx - Analyst Blog
July 10 2012 - 7:45AM
Zacks
Luminex
Corporation (LMNX) 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 operating expenses.
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 Affymetrix (AFFX) and
Sequenom (SQNM), 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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