Meridian Misses on Lower Flu Sales - Analyst Blog

Diagnostic test kit maker Meridian Bioscience (VIVO) reported disappointing first quarter fiscal 2011 (ended December 31) results with earnings of 15 cents per share trailing the Zacks Consensus Estimate of 19 cents and the year-ago earnings of 22 cents per share. Profit plummeted 32% year over year to $6 million on account of lower revenues.

Revenues dipped 12% year over year to $37.3 million, missing the Zacks Consensus Estimate of $41 million, impacted by lower flu incidences, which hit flu sales in the quarter. Moreover, the year-ago quarter sales were boosted by high demand for the company's tests due to the swine flu pandemic.

Revenues from the U.S. Diagnostics business clipped 26% to $22.7 million while European Diagnostics division sales fell roughly 6% to $5.9 million. Meridian's Life Science unit had a strong quarter with revenues spurting 60% to $8.7 million, bolstered by the contributions from the acquisition of London-based molecular biology reagents maker Bioline.

While overall sales for the Diagnostics business fell, strategic focus products such as H. pylori tests (up 11%) and foodborne tests (up 10%) performed well in the first quarter. Shipments of foodborne tests to labs surged roughly 50% in the quarter. Revenues from the company's C. difficile test illumigene offset the declines in its legacy immunoassay tests.

Meridian exited the quarter with cash and short-term investments of $41.5 million, down 38% year over year. It remains a zero debt company. The company's board has declared a cash dividend of 19 cents per share for the first quarter, payable on February 10, 2011, to shareholders of record as on January 31, 2011.

The Cincinnati-based company has reiterated its outlook for fiscal 2011 (ending September 30, 2011). Meridian continues to envision net sales for the year in the range of $165 million to $170 million with earnings per share expected between 77 cents and 82 cents. The current Zacks Consensus Estimates for revenues and earnings are $165 million and 79 cents, respectively.  

Meridian specializes in developing diagnostic test kits for multiple serious and infectious diseases. The company's $23.3 million acquisition of Bioline in July 2010 is expected to be accretive to its earnings and cash flows in fiscal 2011 and spark growth through an expanded product range and geographic expansion. Meridian is expecting a rebound in 2011 from a beleaguered fiscal 2010, which was hit by a dreary influenza season, stiff competition in its C. difficile diagnostic business and a soft economy.

Meridian's Diagnostics business faces strong competition from Abbott Laboratories (ABT), Becton, Dickinson and Company (BDX), Thermo Fisher (TMO) and Siemens (SI). The company hopes sales in fiscal 2011 will be boosted by illumigene and its diagnostic test kits for detecting bacteria like C. difficile and H. pylori. The illumigene molecular test platform, which represents Meridian's response to growing competition, is expected to be its principal growth engine for the coming years.

 
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