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CINCINNATI, Nov. 22, 2022 /PRNewswire/ -- Meridian Bioscience, Inc. (NASDAQ: VIVO) today announced financial results for the fourth quarter and fiscal year ended September 30, 2022.

Fourth Quarter 2022 Highlights (Comparison to Fourth Quarter Fiscal 2021):

• Consolidated net revenues totaled $65.7 million, a decrease of 14% year-over-year
• Diagnostics segment net revenues increased 14% year-over-year to $39.2 million
• Life Science segment delivered net revenues of $26.5 million, a decrease of 37%
• Submitted 510(k) for Curian^® Shiga Toxin assay

Full Fiscal Year 2022 Highlights (Comparison to Full Year Fiscal 2021):

• Consolidated net revenues of $333.0 million, up 5% year-over-year
• Diagnostics segment net revenues increased 22% year-over-year to $155.9 million
• Life Science segment delivered net revenues of $177.1 million, a decrease of 7%
• Established new Life Science recombinant protein R&D facility in New Jersey with assets acquired from EUPROTEIN, Inc.
• Diagnostics segment launched two new products: Curian^® Campy and Revogene^® SARS-CoV-2 EUA
• Life Science segment launched 17 new molecular products, which completed a full line of sample-specific master mixes for qPCR and LAMP with sensitivity suitable for oncology applications
• Entered into agreement to be acquired by a Korean Consortium for $34.00 per share, which is expected to close before the end of calendar year 2022

Fourth Quarter Fiscal 2022 Results (Comparison to Fourth Quarter Fiscal 2021)

Consolidated net revenues for the fourth quarter of fiscal 2022 decreased 14% to $65.7 million, compared to $76.2 million last year.  Diagnostics segment net revenues increased 14% year-over-year, while Life Science segment net revenues decreased 37%.  Growth in the Diagnostics segment was driven by our non-molecular assay products which increased 22%.  Key contributors to the non-molecular assay year-over-year increase include organic growth in our BreathID^® product line, the addition of the BreathTek^® product line acquired in July 2021 and the increase in sales of LeadCare^® products that were not shipping for a portion of the fourth quarter of fiscal 2021 due to a product recall.  The Life Science segment decline was driven by lower overall demand, primarily from reductions in COVID-19 testing, though more so for molecular reagents (53% decrease) than immunological reagents (8% decrease).

Reported consolidated operating income for the fourth quarter of fiscal 2022 was $4.6 million (7% margin), compared to $8.5 million (11% margin) in the fourth quarter of fiscal 2021.  The decrease in consolidated operating income primarily results from the decreased level of net revenues and gross margins within the Life Science segment, which resulted from the overall decline in COVID-19 related net revenues and the significant shift in product mix from the high margin molecular reagents to lower margin immunological reagents (approximately 46% molecular in fiscal 2022 versus approximately 63% in 2021).  The effect of these factors was partially offset by the decrease in overall operating expense, most notably due to the $5.6 million of product recall costs in fiscal 2021.  On an adjusted basis, consolidated operating income was $9.1 million, reflecting a margin of 14%, down from the prior year quarter's $13.3 million and 17% margin (see non-GAAP financial measure reconciliation below), reflecting the factors noted above.

Full Fiscal Year 2022 Results (Comparison to Full Year Fiscal 2021)

Consolidated net revenues for the fiscal year ended September 30, 2022 increased 5% to $333.0 million, compared to $317.9 million in fiscal 2021.  Diagnostics segment net revenues were up 22%, while Life Science segment net revenues were down 7%.  Our Diagnostics segment experienced a 5% decrease in net revenues from our molecular products, and net revenues from our non-molecular assay products increased 27%, significantly impacted by the current year contributions of the BreathTek product line acquired in July 2021, as well as organic growth of our BreathID products.  The Life Science segment experienced a significant shift in net revenues product mix from molecular reagents (30% decrease) to immunological products (43% increase).  This shift resulted from lower overall demand for our molecular reagents in fiscal 2022, particularly the second half of the year, relative to the strong demand experienced in fiscal 2021 driven largely by reductions in COVID-19 testing, as well as the shift from molecular testing to rapid antigen testing.

Reported consolidated operating income for the fiscal year ended September 30, 2022 was $54.4 million (16% margin), compared to $93.0 million (29% margin) in fiscal 2021.  The decrease in consolidated operating income reflects the impact of decreased level of net revenues and gross margins within the Life Science segment, which resulted from the overall decline in COVID-19 related net revenues and the significant shift in product mix mentioned above (approximately 52% molecular in fiscal 2022 versus approximately 69% in 2021), and increased operating expenses.  The increase in operating expenses primarily results from:  (i) a $10.0 million estimated expense related to the possible resolution of the previously disclosed and ongoing U.S. Department of Justice legal matter; (ii) higher acquisition and transaction related expenses in connection with the definitive merger agreement signed in July 2022; (iii) increased selling and marketing costs in both the Diagnostics and Life Science segments, due, in part, to filling certain open positions and easing of COVID-19 related travel and meeting restrictions; and (iv) increased general and administrative costs due, in part, to increased incentive compensation expenses and increased intangible amortization resulting from the July 2021 BreathTek acquisition.  The effect of these factors was partially offset by a decrease in product recall expenses during fiscal 2022, following the recording of a $5.6 million LeadCare product recall reserve recorded in fiscal 2021.  On an adjusted basis, consolidated operating income was $76.0 million, reflecting a margin of 23%, down from the prior year quarter's $95.3 million and 30% margin (see non-GAAP financial measure reconciliation below), reflecting the factors noted above.

Jack Kenny, Chief Executive Officer, commented, "Meridian delivered strong financial performance for the third straight year, yet again exceeding our expectations going into the year.  Our Diagnostics and Life Science segments both performed well, generating positive Operating Income, and I am excited for the future prospects of both businesses."

Financial Condition

In fiscal year 2022, the Company generated Cash from Operations of $82.4 million, a 23% increase from $66.9 million in fiscal 2021.  This contributed to a cash and cash equivalents balance of $81.5 million at September 30, 2022.  The Company's obligations under its commercial bank credit facility totaled $25.0 million as of September 30, 2022, leaving $175.0 million of available borrowing capacity under the facility. 

Andy Kitzmiller, Chief Financial Officer, commented, "Meridian continued its track record of significant cash generation, even on lower operating profit, through its focus on the efficiency of the cash conversion cycle throughout the year.  Our strong balance sheet and operating fundamentals position the Company well as we navigate the current macroeconomic uncertainty and establish a new baseline for the Life Science segment in the endemic phase of the COVID-19 pandemic."

Subsequent Event

On October 26, 2022, Meridian acquired select assets from Estel Biosciences, Inc., as part of Meridian's continued investment in its immunological research and development capabilities.  Among other assets, the Company acquired intellectual property that will be incorporated into the Life Science operations in North Brunswick, New Jersey and Memphis, Tennessee for the design and manufacture of recombinant proteins using an insect cell expression system.

Update on the Pending Transaction, Fiscal 2023 Guidance, and Conference Call

As announced on July 7, 2022, the Company entered into a definitive merger agreement (the "Merger Agreement") whereby a newly formed affiliate vehicle of a Consortium, consisting of SD Biosensor, Inc. ("SDB") (KOSE: A137310) and SJL Partners LLC ("SJL") (collectively, the "Consortium"), will acquire Meridian (the "Merger").  The closing of the transaction is subject to receipt of required regulatory approvals, the absence of specified material adverse outcomes of the Company's previously disclosed and ongoing investigation by the U.S. Department of Justice, and other customary closing conditions.  

On October 10, 2022, Meridian held a special meeting of its shareholders, at which the Company's shareholders approved the transaction.  As of November 22, 2022, Meridian or the appropriate parties to the Merger Agreement have obtained approval or clearances, as applicable, for all relevant antitrust and foreign direct investment filings, including the filing related to the Committee on Foreign Investment in the United States ("CFIUS") which was obtained on November 21, 2022.  Meridian has not yet reached a resolution with the DOJ with respect to the DOJ legal matter; Meridian continues to actively work with the DOJ to find a resolution to the DOJ legal matter.

As of November 22, 2022, Meridian continues to expect to complete the Merger before the end of calendar year 2022.

Due to the pending transaction, Meridian is no longer holding conference calls to discuss its quarterly financial results and has issued no financial guidance for fiscal year 2023.

Segment Data

The following table sets forth the revenue and segment data for the interim and annual periods in fiscal 2022 and fiscal 2021 (in thousands).

(Unaudited)

Three Months Ended

Twelve Months Ended

September 30,

September 30,

2022

2021

2022

2021

Related companies: Meridian Bioscience, Inc.

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