Wednesday, December 5, 2007


The other choice I have been thinking about is adding to TECH or buying a new position in either QGEN or LMNX or something else. TECH is a great story but its a stock that has struggled and given the valuation and the relatively slow growth rate (but very consistent) I'm not sure the sluggish stock price is going to change.

QGEN has been a stronger performer in a related field -- they sell sample prep technologies that help automate lab processes when dealing wth nucleic acids (DNA/RNA). QGEN is also branching out into molecular diagnostics or testing based on DNA type stuff. I looked at the huge debt and the large goodwill on the balance sheet of QGEN and decided no thanks -- I realize they are a good franchise but I'm just not willing to bet on them -- if their franchise is so great why do they need to go out and spend a huge amount on buying Digene as a transformational deal that might move them more into diagnostics but will also change them from many products to a big concentration is just one -- HPV testing (cervical cancer).

LMNX provides DNA and protein analysis tools that can handle multiple tests on a single sample. Their business model is to partner or license their tech to others including TECH and QGEN. They have 4700 boxes in the field and they earn revenues for the systems (wholesale price, which is marked up to customer by their partners), for the consummables used in testing and royalties on total sales by their partners. its been a decent story though its never panned out as well as expected. If that's all there was, I might be more interested but ILMN's new Bead Xpress device is a competing instrument -- I have heard demand for the Bead Xpress is pretty strong for a new product so I am wary of buying into a competitor in LMNX. Now the good news for LMNX is that they are selling 600-800 new boxes per year and so far ILMN has sold maybe 40-80 so it will take awhile for ILMN to catch up if they ever do.

Interesting part of LMNX story is these partners -- 50 deals so far with 32 partners actually selling equipment and generating revenues. But only 4 account for about 47% of revenues so the rest of the partnerships haven't gotten too far yet. It takes time to take LMNX's technology and use it to develop new tests and get them into customer hands and change scientist behavior. My understanding is these partners are going to introduce several new products next year, which should accelerate growth. Don't know for sure. LMNX is also developing their own tests and they have some due to be introduced next year so that is another source of growth for 2008 and beyond. need to do some more research before deciding on this one.

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