Luminex to acquire Nanosphere for $58 million

AUSTIN, Texas & NORTHBROOK, Ill.—Luminex Corp. and Nanosphere Inc. announced May 16 that they had entered into a definitive agreement under which Luminex will acquire Nanosphere, a player in the molecular microbiology and molecular diagnostic market, for $1.35 per share in an all-cash transaction valued at approximately $58 million.

Luminex calls Nanosphere an “ideal strategic fit” thanks its Verigene platform, broad menu and strong presence in the molecular microbiology market—that last item reportedly providing more than 240 customers that complement Luminex’s customer base.

In addition, bringing Nanosphere into Luminex’s fold is expected to amplify Luminex’s market leadership, given that, as the company reports, “Nanosphere’s Verigene technology leads in the high-growth bloodstream infection segment and complements Luminex’s current infectious disease portfolio. Following the acquisition, only Luminex will be able to offer customers automated molecular platforms for both syndromic and targeted molecular diagnostic testing (Verigene and ARIES).”

Finally, the deal is said to offer attractive economics and shareholder value, as Nanosphere’s forecasted 2016 revenue of between $28 million and $30 million “will immediately accelerate Luminex’s stand-alone projected revenue growth, reflecting Nanosphere’s high double-digit revenue growth and the ability to leverage Luminex’s global molecular diagnostic distribution. Nanosphere’s total revenue for 2015 was $21 million.”

In commenting on the acquisition deal, Zacks Investment Research pointed out the recently announced impressive first-quarter results for Luminex—among them the fact that earnings grew 36.5 percent on a year-over-year basis and assay revenues increased 6.3 percent to $27 million (reportedly reflecting the successful execution of the company’s molecular diagnostic strategy).

Infectious disease assay sales made up about 72 percent of the total assay sales in the quarter and genetic testing assays made up the rest. Meanwhile, the molecular diagnostic business brought in some $28 million in revenues, which was driven by a 20-percent growth in Luminex’s infectious disease test portfolio.

“In this regard, the addition of Nanosphere will contribute revenues in the range of $13-$16 million to this business line, if the deal completes by July 1,” Zacks wrote. “Luminex noted that the transaction will be accretive to its adjusted earnings by the end of full-year 2017.”

“The acquisition of Nanosphere will significantly enhance Luminex’s growth trajectory by expanding our product portfolio, delivering access to new markets and strengthening our pipeline of future products to make us the partner of choice for all molecular labs,” said Homi Shamir, president and CEO of Luminex. “The deal demonstrates prudent execution of our fourth strategic growth pillar: leveraging our financial strength to accelerate growth in our target markets.”

“Luminex will recognize significant strategic benefit moving forward as our customer base and leverage in our expanding menu contribute to accelerated revenue growth,” said Michael McGarrity, president and CEO of Nanosphere. “The resources and reputation for excellence that Luminex carries in the market will greatly benefit our customers and employees.”

TheStreet.com reported the day of the announcement that “So far today, 11.15 million shares of Nanosphere have exchanged hands, significantly higher than its average daily volume of 86,183 shares … Separately, Nanosphere has a ‘sell’ rating and a letter grade of D- at TheStreet Ratings because of the compan’s disappointing return on equity and generally disappointing stock performance.”