Message from the CEO

May 2013

CEO Profile
Patrick J. Balthrop, President and CEO. Click here for bio.

We began 2013 with another solid quarter, achieving total revenue of $53.2 million. Our gross margins improved to 71% and reflect a product mix shift towards higher margin items such as royalties and our proprietary assays. Our first quarter assay growth reflects continued momentum in our growing infectious disease franchise, as well as strong growth from our LDT assay portfolio. We also achieved several milestones in our biosurveillance and companion diagnostic programs, which contributed to our first quarter performance.
  

First Quarter 2013 Financial and Operating Highlights

Luminex’s financial and operating highlights from the first quarter ended March 31, 2013 include:

  • Consolidated first quarter revenue was $53.2 million, a 9 percent increase over the first quarter of 2012
  • Consolidated gross profit margin was 71 percent for the first quarter of 2013
  • Operating expenses for the first quarter of 2013 were $39.5 million, an increase of $11.4 million over the first quarter of 2012. $7.0 million of this increase can be attributed to a charge associated with the resolution of distribution agreements as part of our transition to direct sales in the molecular diagnostics market.
  • Net income on a non-GAAP basis for the first quarter was $7.9 million or $0.19 per diluted share. On a GAAP basis, net income was ($2.5 million) or ($0.06) per diluted share. [Please see public filings for non-GAAP reconciliation.]
  • Received FDA clearance for the xTAG Gastrointestinal Pathogen Panel (xTAG® GPP™) on the LX200 system in January and on the MAGPIX system in April.
  • Signed a collaboration and license agreement with Merck (NYSE: MRK) to develop a companion diagnostic that will help screen patients for Merck's lead investigational candidate drug study for Alzheimer's disease (AD), and serve as a companion diagnostic test upon reintroduction of the drug.
     

xTAG Gastrointestinal Pathogen Panel

On April 15th, we announced U.S. FDA clearance for our MAGPIX® instrument with xTAG® Gastrointestinal Pathogen Panel (xTAG GPP). This is the first clinical assay to be cleared on MAGPIX. xTAG GPP is the first U.S. IVD cleared test that can simultaneously detect 11 common viral, bacterial, and parasitic causes of infectious gastroenteritis from a single patient sample. We are pleased that we are exceeding our internal GPP target for customer wins to date. A number of these early adopters (almost 50%) have come from labs that are not currently Luminex customers, reflecting a high level of interest in the market for this novel assay.

Expanding Market Opportunities

The Lab Developed Test (LDT) market is large and growing rapidly. We believe Luminex’s proprietary technologies offer molecular labs a unique solution that enables them to develop a new diagnostic test easily and quickly while being able to handle increasing volumes once the assay is commercialized. Based on our findings, an LDT-enabled platform enhances a molecular lab’s overall experience and these labs are less likely to switch technologies—even when another assay receives clearance.
Our LDT segment is gaining momentum in 2013, and all indications point to continued growth opportunities going forward.

Partnering to Fight Alzheimer’s Disease

In March, Luminex signed a collaboration and license agreement with Merck for the development of a companion diagnostic test. This test, which measures proteins identified in patients with mild cognitive impairment, is intended to be used in the patient screening process in Merck’s high-profile Alzheimer’s drug development program and as a companion diagnostic upon launch. We are pleased to be working with Merck in playing a significant role in this critical long-term program and look forward to providing updates in the future.

Update on Strategic Initiatives

We have made significant progress on our largest development program to date, Project ARIES. We have successfully completed the redesign of the hardware as well as the implementation of proprietary software that will simplify overall workflow. Project ARIES represents great potential, and we are pleased with its progress and development.

Lastly, I am pleased to report that our direct sales activities in the molecular diagnostics market, which kicked off in January, are going well and early customer feedback has been positive. In the last year we have invested in our IT infrastructure in preparation for this change and to support rapid business expansion on a direct basis

Looking Ahead

We’ve had another great quarter. Our diversified business model, strategic investments and ever-growing product portfolio put Luminex in a strong position for growth. As we move into 2013, our commitment to developing innovative products for a healthier world is stronger than ever. We look forward to continuing to provide solutions for today’s most challenging clinical and life-science questions.

Sincerely,

Patrick J. Balthrop, Sr.
President and Chief Executive Officer

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