Investor Alert

New York Markets After Hours

Nov. 23, 2021, 8:50 a.m. EST


Watchlist Relevance

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

or Cancel Already have a watchlist? Log In

(EDGAR Online via COMTEX) -- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Refer to "Note About Forward-Looking Statements" following the Index in front of this Form 10-K and Item 1A "Risk Factors" on pages 11 through 24 of this Annual Report. In the discussion that follows, all dollar amounts are in thousands (both tables and text), except per share data . The purpose of Management's Discussion and Analysis is to provide an understanding of the financial condition, changes in consolidated financial condition and results of operations of Meridian Bioscience, Inc. ("Meridian", the "Company", "We"). This discussion should be read in conjunction with the Consolidated Financial Statements and notes. It should be noted that the terms revenue and/or revenues are utilized throughout the Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") to indicate net revenue and/or net revenues. In addition, throughout the MD&A, we refer to certain product tradenames and trademarks, which are protected under applicable intellectual property laws and are our property. Solely for convenience, these tradenames and trademarks are referred to without the (R) or (TM) symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent of the law, our rights to these tradenames and trademarks.

- 26 - Table of Contents

        During the latter half of fiscal 2020 and throughout fiscal 2021, the
        pandemic has had both positive and negative effects on our business.
        Our Life Science segment's products have been well positioned to respond to in
        vitro device ("IVD") manufacturers' needs for reagents for molecular, rapid
        antigen and serology tests. Consequently, our Life Science segment grew its
        revenues over 100% in fiscal 2020 and delivered record operating income and
        margin, demonstrating what this segment could achieve at a much larger scale.
        This higher-than-historical level of growth in the Life Science segment
        continued in fiscal 2021, with full year revenues, operating income and
        operating margin increasing 43%, 67% and nine percentage points, respectively.
        Our Diagnostics segment, on the other hand, has been negatively impacted by the
        health systems' increased focus on
        testing over traditional infectious disease testing. The impacts of the
        pandemic are most dramatically evident in the 34% year-over-year decline in
        revenues from respiratory illness assays in fiscal 2021, following flat
        year-over-year revenue levels being experienced in fiscal 2020.
        Despite these recent
        pandemic related trends, due to the many uncertainties surrounding the
        pandemic, we can provide no assurances with respect to our views of the
        longevity, severity or impacts to our consolidated financial condition of the
        Employee Safety
        While our employee base in the U.S. has returned to working
        at our facilities, we have recently implemented a hybrid work-from-home program
        for certain personnel, and we continue to utilize a work-from-home process as
        needed on a
        basis outside the U.S. for those employees whose
        presence has been deemed to be
        We have also implemented enhanced cleaning and sanitizing procedures and
        provided additional personal hygiene supplies at all our sites. We have
        implemented policies for employees to adhere to Centers for Disease Control and
        Prevention ("CDC") guidelines on social distancing, and similar guidelines by
        authorities outside the U.S. To date, we have been able to manufacture and
        distribute products globally, and all our sites have continued to operate with
        little, if any, impact on shipments to customers to date. As the
        pandemic continues, along with continuing governmental restrictions which vary
        by locale and jurisdiction, there is an increased risk of employee absenteeism,
        which could materially impact our operations at one or more sites. To date, the
        steps we have taken, including our work-from-home processes, have not materially
        impacted the Company's financial reporting systems, internal controls over
        financial reporting or disclosure controls.
        Supply Chains
        Supply chains supporting our products have generally remained intact, providing
        access to sufficient inventory of the key materials needed for manufacturing. To
        date, delays and allocations for raw materials have been limited and have not
        had a material impact on our results of operations. From time to time, we
        identify alternative suppliers to address the risk of a current supplier's
        inability to deliver materials in volumes sufficient to meet our manufacturing
        needs; or we may choose to purchase certain materials in bulk volumes where we
        have supply chain scarcity concerns. It remains possible that we may experience
        some sort of interruption to our supply chains, and such an interruption could
        materially affect our ability to timely manufacture and distribute our products
        and unfavorably impact our results of operations. See LeadCare product recall
        discussion beginning on page 29.

- 27 - Table of Contents

        pandemic. For example, the relative lack of a respiratory illness season in
        2020-2021 has significantly impacted the availability of influenza samples,
        thereby affecting the pace of development of our molecular respiratory panel for
        the Revogene system. These matters continue to impact our timing for filing
        applications for product clearances with the U.S. Food and Drug Administration
        ("FDA"), as well as related timing of FDA clearances of such filings.
        Additionally, the ongoing
        pandemic has slowed and could continue to slow down our efforts to expand our
        product portfolio through acquisitions and distribution opportunities, impacting
        the speed with which we are able to bring additional products to market.
        Product Demand
        Our Life Science segment manufactures, markets and sells a number of molecular
        and immunological reagents to IVD customers, including those who are making both
        molecular and immunoassay
        tests. Since late in the second quarter of fiscal 2020, we have generally
        experienced unprecedented demand for certain of our molecular reagents (e.g.,
        ribonucleic acid ("RNA") master mixes and nucleotides), including a resurgence
        in such demand during our fiscal 2021 fourth quarter. While we are expecting a
        continuation of this trend for the foreseeable future, this expectation will
        certainly be impacted by infection rates and the responses to such levels of
        infection varying by country based on their individual
        case statistics, infection rates and vaccine programs. We believe that our
        reagent products for
        have applications in many alternative,
        channels (e.g., airports, schools, etc.). Our products are used in over 200
        regulatory agency approved
        related assays around the world.
        related reagent revenues totaled approximately $111,900 and $71,500 for the
        years ended September 30, 2021 and 2020, respectively.
        Our Diagnostics segment manufactures, markets and sells a number of molecular,
        immunoassay, blood chemistry and urea breath tests
        for various infectious diseases and blood-lead levels. Sales volumes for a
        number of these assays have been adversely affected by the
        pandemic over the past year and half, as such assays are often used in
        care settings. However, we have seen indications of a return to more normal
        pre-pandemic levels, including with respect to our respiratory illness assays
        during the fourth quarter of 2021. The
        pandemic also has depressed instrument orders and placements for our BreathID,
        Curian and Revogene platforms. Order activity for our Revogene platform was
        affected by the delay in obtaining emergency use authorization ("EUA") for our
        assay, as we believe customers have taken a "wait and see" approach throughout
        our entire EUA application process, which culminated in receipt of the EUA on
        November 9, 2021. This follows our voluntary withdrawal of the application on
        February 23, 2021 and its resubmission on June 25, 2021. Despite the situation
        encountered with our EUA application for the
        assay, we have proceeded with the process of increasing our capacity to produce
        these tests, as well as other tests on the Revogene system, at our facilities in
        Quebec and Cincinnati. Specifically, we are: (i) adding a second production line
        at our Quebec manufacturing facility; and (ii) installing two additional
        production lines in a leased facility near our corporate headquarters in
        Cincinnati. With approximately $10,900 expended in the year ended September 30,
        2021, it is expected that these expansion efforts will be completed during
        calendar 2021 at a total cost of approximately $19,600, which is expected to be
        partially offset by the $5,500 National Institutes of Health Rapid Acceleration
        of Diagnostics ("RADx") initiative grant entered into on February 1, 2021,
        $1,500 of which had been received as of September 30, 2021 (see Note 14,
        "National Institutes of Health Contracts"
        of the Consolidated Financial Statements).
        Impact of Brexit
        The United Kingdom ("U.K.") left the European Union ("EU") on January 31, 2020.
        While all EU rules and laws continued to apply to the U.K. through the
        transition period, which ended December 31, 2020, the U.K. and the EU reached a
        free trade agreement on December 24, 2020, which was ratified on April 28, 2021
        and went into effect on May 1, 2021. The agreement includes regulatory and
        customs cooperation mechanisms, as well as provisions supporting open and fair
        competition. Under the trade agreement, the U.K. is free to set its own trade
        policy and can negotiate with other countries that do not currently have free
        trade deals with the EU. Although the full impact of the trade agreement is
        uncertain, it is possible that the recent changes to the trading relationship
        between the U.K. and the EU due to the trade agreement could result in increased
        cost of goods imported into and exported from the U.K., which may decrease the
        profitability of our operations. Additional currency volatility could drive a
        weaker British pound, which could increase the cost of goods imported into the
        U.K. and may decrease the profitability of our operations. A weaker British
        pound versus the U.S. dollar may also cause local currency results of our
        operations to be translated into fewer U.S. dollars during a reporting period.
        Given the lack of comparable precedent, it is unclear what financial, trade,
        regulatory and legal implications the trade agreement will have on our business;
        however, Brexit and its related effects could potentially have an adverse impact
        on our consolidated financial position and results of operations.

- 28 - Table of Contents

- 29 - Table of Contents

        pandemic. Our Diagnostics segment generated an $11,900 operating loss for the
        fourth quarter of fiscal 2021, a $7,700 larger operating loss than the fourth
        quarter of fiscal 2020, largely due to the aforementioned $5,600 of LeadCare
        product recall expenses and $4,596 upward adjustment to the fair value of
        acquisition consideration related to GenePOC.
        With a 16% increase in revenues from molecular reagents products and a 33%
        increase in revenues from immunological reagents products, revenues for our Life
        Science segment increased 22% to $41,903 during the fourth quarter of fiscal
        2021 compared to the fourth quarter of fiscal 2020. On a constant-currency
        basis, revenues for the Life Science segment increased 19%. Life Science segment
        revenues reflect an increase in demand from diagnostic test manufacturers for
        the reagents utilized in
        related tests. Revenue from sales of our core Life Science segment products
        (other than
        related contributions) experienced growth of approximately $1,800, or 11%,
        compared to the fourth quarter of fiscal 2020. This growth resulted in large
        part from obtaining business from
        customers who are now using our products for other
        related purposes, as well as a rebound in volumes of core immunological
        products. Our Life Science segment generated $23,200 of operating income, or a
        margin of 55%, for the fourth quarter of fiscal 2021, an increase of $6,000 from
        the fourth quarter of fiscal 2020.
        Fiscal Year
        Net earnings for fiscal 2021 increased 55% to $71,407, or $1.62 per diluted
        share, from net earnings for fiscal 2020 of $46,186, or $1.07 per diluted share.
        The level of net earnings in fiscal 2021 was affected predominantly by the
        strong increase in revenues and operating income in our Life Science segment,
        stemming primarily from the demand for reagents used in
        related tests.
        Consolidated revenues for fiscal 2021 totaled $317,896, an increase of 25%
        compared to fiscal 2020 (22% increase on a constant-currency basis).

- 30 - Table of Contents

        related PCR tests. Also contributing to the increased revenue levels during
        fiscal 2021 were sales of monoclonal antibody pairs used in
        antigen tests and, to a lesser degree, recombinant antigens used in
        antibody tests. In addition, revenue from sales of our core Life Science segment
        products (other than
        contributions) experienced growth of approximately $16,100, or approximately
        26%. This growth resulted in large part from obtaining business from
        customers who are now using our products for other
        related purposes, as well as a rebound in volumes in core immunological
        products. Our Life Science segment generated $115,300 of operating income in
        fiscal 2021, an increase of $46,400 over fiscal 2020.
        Below are analyses of the Company's revenue, by reportable segment, provided for
        each of the following:
        - By Geographic Region
        - By Product Platform/Type
        Revenue Overview - By Reportable Segment & Geographic Region
        Revenues for the Diagnostics segment, in the normal course of business, may be
        affected from year to year by buying patterns of major distributors and
        reference laboratories, seasonality and severity of seasonal diseases and
        outbreaks (including the
        pandemic), and foreign currency exchange rates. Revenues for the Life Science
        segment, in the normal course of business, may be affected from year to year by
        buying patterns of major IVD manufacturing customers, severity of disease
        outbreaks (including the
        pandemic), and foreign currency exchange rates. The
        pandemic contributed $111,900 of new revenue for our Life Science segment during
        fiscal 2021, and $71,500 during fiscal 2020.
        See Note 2,
        "Revenue Recognition"
        of the Consolidated Financial Statements for detailed revenue disaggregation
        Following is a discussion of the revenues generated by these product
        platforms/types and/or disease states:
        Diagnostics Segment Products
        The Diagnostics segment's overall 5% growth in revenue during fiscal 2021
        primarily results from the combined effects of the following:

Volume growth in the gastrointestinal product family benefitting from:

Ongoing pricing pressure on our H. pylori stool antigen tests, which contributed approximately $2,700 of unfavorable price variance from customers in the U.S.;

- 31 - Table of Contents

Volume declines from sales of blood chemistry products due to the ongoing LeadCare product recall, which commenced in May 2021 ($2,136 decrease in revenue in fiscal 2021, compared to fiscal 2020).

Life Science Segment Products

Unprecedented demand for the Life Science segment's products by diagnostic test manufacturers for use in COVID-19 related tests, resulting in COVID-19-related reagent revenues totaling $111,900 in fiscal 2021, compared to approximately $71,500 in fiscal 2020; and

Revenue from core Life Science products increasing approximately 26% over fiscal 2020, due in large part from obtaining business from COVID-19 . . .

Nov 23, 2021


Is there a problem with this press release? Contact the source provider Comtex at editorial@comtex.com. You can also contact MarketWatch Customer Service via our Customer Center.

(c) 1995-2021 Cybernet Data Systems, Inc. All Rights Reserved

This Story has 0 Comments
Be the first to comment

Story Conversation

Commenting FAQs »

Partner Center

Link to MarketWatch's Slice.