Edited Transcript of VIVO earnings conference call or presentation 30-Apr-19 2:00pm GMT

Thomson Reuters StreetEvents - finance.yahoo.com Posted 6 years ago
. It's a differentiated product. So as I said, as we had modeled it before, we also are cognizant of look at the molecular results we had in the quarter. We had a significant decline. First thing that we have to do is we have to stop customers that couldn't hold on anymore and convert them over. And so that's really going to be the first mission here. So we envision end of '19 and in early '20, going to those customers protecting them. You'll see some stabilization, but you still have some bleed out for people that left before we've done this deal. So that's why we hear panel modeling's still a decline and stabilization into fiscal '20 and then we start to see growth again in fiscal '21 as we've stabilized the base and then as we work towards starting to have new assays in addition to this coming out on the platform. We'll work to provide more color over time, but we're still in the early days on some of that here." data-reactid="207">Now the one test that GenePOC that's CE Marked and that the working towards getting FDA approval is carbapenemase. And so that will be a new test for us and GenePOC, if you will, as that comes together. And so that remains to be seen that opportunity, but clearly, that's a product that there are not too many of those out in the market. It's a differentiated product. So as I said, as we had modeled it before, we also are cognizant of look at the molecular results we had in the quarter. We had a significant decline. First thing that we have to do is we have to stop customers that couldn't hold on anymore and convert them over. And so that's really going to be the first mission here. So we envision end of '19 and in early '20, going to those customers protecting them. You'll see some stabilization, but you still have some bleed out for people that left before we've done this deal. So that's why we hear panel modeling's still a decline and stabilization into fiscal '20 and then we start to see growth again in fiscal '21 as we've stabilized the base and then as we work towards starting to have new assays in addition to this coming out on the platform. We'll work to provide more color over time, but we're still in the early days on some of that here.

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Mark Anthony Massaro, Canaccord Genuity Limited, Research Division - Senior Analyst [30]

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Okay. That's helpful. And then just a clarification question. When you preannounced in April, you had lowered the full year guidance down to $0.60 to $0.65 of earnings. Just for clarification, does that include the $0.10 to $0.12 dilution of this GenePOC deal today?

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John P. Kenny, Meridian Bioscience, Inc. - CEO, Executive VP of Diagnostics Business Unit & Director [31]

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It does not.

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Mark Anthony Massaro, Canaccord Genuity Limited, Research Division - Senior Analyst [32]

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It does not?

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John P. Kenny, Meridian Bioscience, Inc. - CEO, Executive VP of Diagnostics Business Unit & Director [33]

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No.

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Mark Anthony Massaro, Canaccord Genuity Limited, Research Division - Senior Analyst [34]

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Okay. So we can just assume another $0.10 to $0.12 decrease relative to the $0.60 to $0.65?

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John P. Kenny, Meridian Bioscience, Inc. - CEO, Executive VP of Diagnostics Business Unit & Director [35]

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That's correct, yes.

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Mark Anthony Massaro, Canaccord Genuity Limited, Research Division - Senior Analyst [36]

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Okay. And then longer term, I know you talked about R&D picking up. Obviously, that would be logical, given that GenePOC is an fairly early-stage company. Do you guys have any pro forma operating margin targets? Maybe you don't have that yet, but as we think about building the model out in the next couple of years, your R&D goes up pretty significantly -- that should likely weigh on operating margins. I'm just trying to get a sense on roughly where you think that shakes out in a couple of years.

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Eric S. Rasmussen, Meridian Bioscience, Inc. - Executive VP & CFO [37]

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Yes. I mean it is kind of early days. I do think we're going to have -- we will be -- again, obviously, when you add that kind of R&D expense that's going to have -- it's going to have an impact on the near-term margins. So it'll -- I think we haven't really -- I think in terms of the overall contribution of profits, I think you said in EBITDA, we're looking for it'd be sort of a positive EBITDA contribution from where we are today, including all those additional expenses of R&D into fiscal 2021. So I mean that gives you some kind of sense of sort of relayering these additional expenses and then when we -- what kind of margins we'd be thinking about looking at, at that point.

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Mark Anthony Massaro, Canaccord Genuity Limited, Research Division - Senior Analyst [38]

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Okay. And then as we think about building mini panels, I would agree that this is where the market is heading and sort of already has been heading there for some time whether it's large panel or smaller panels. But looking at GenePOC's website, for instance, you have STD panels, GI, HAI, respiratory. Can you give us a sense on where the early development will likely be in terms of converting the C. diff, Group A into panels? Can you give us a sense of the roadmap as to what the initial focus will be? And then maybe what the longer-term focus might look like?

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John P. Kenny, Meridian Bioscience, Inc. - CEO, Executive VP of Diagnostics Business Unit & Director [39]

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So I think you'll see an initial focus that really does go to panels related to gastro and to respiratory. Those will be some of the earlier things that you're going to see. Again, so it will tie directly into the overall strategy that we had. So the beauty of this technology is that it does have that capability up to 12-plexing is a pretty significant -- gives a good flexibility to build these panels out appropriately for the right medical use and also from a reimbursement standpoint for our customers. So as we said, it will really be respiratory and gastro. Gastro and respiratory in that order, I would say, are the first couple of things that you'll see.

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Operator [40]

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And your next first question is from the line of Brian Weinstein with William Blair.

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Brian David Weinstein, William Blair & Company L.L.C., Research Division - Partner & Healthcare Analyst [41]

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Just one quick follow-up for me maybe on the competitive environment. As you guys were analyzing the deal, maybe provide a little bit more detail on how you thought this played into the larger scheme here? I think as Mark just said, there is a -- some competitors out there going into this kind of area of 12 analytes on the multiplex side. So maybe just some detail there?

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John P. Kenny, Meridian Bioscience, Inc. - CEO, Executive VP of Diagnostics Business Unit & Director [42]

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So I'll start, and Eric, you can wrap around me. Again, our strategy that we have kind of been communicating over last 6 to 9 months really was around -- we're not trying to try to go head-to-head and trying to have menu comparisons against the largest diagnostic companies, the Walmarts of diagnostics. What we really want to do is be more of a boutique diagnostic firm, if you will, that's really focused and provides expertise in a couple of areas. The areas that we felt that we have a good position going in that we can provide even a stronger position going forward were the gastrointestinal and the pediatric point of care with our lead care product offering.

So from a strategic standpoint, we believe that there's a significant advantage for us in gastrointestinal because IDNs or integrated health systems that are out there are looking to -- they have a variety of different customer settings where people show up to the health system. They may come in to the 500-bed main hospital, they could come to the 50-bed hospital or to the urgent care facility that's connected to the health system. That difference of where people show up means that they have different testing needs. And having the capability of having deep broad menus in gastrointestinal testing with both molecular tests available and immuno -- rapid immuno tests will mean that our IDNs can offer comprehensive solutions to their customers in the gastrointestinal testing area.

So we believe with the strong position that Meridian has had in that area, the strong rapid immunoassay in our Curian product, which will help us to be even further by connecting in with the LAF systems with a small Curian platform as well. That along with an effective molecular strategy, which is what GenePOC really does for us can improve our overall position. And so we do believe that we can coexist with some of those largest companies in providing expertise in gastrointestinal testing. And then of course, you do need to provide respiratory testing for tests like flu and other types of panels that are pretty common.

The second piece of that, again, was the pediatric point of care. Point-of-care testing is a crowded market. However, in the pediatric point-of-care area, it's rather limited. And the lead care has a very strong position with over 7,000 pediatrician offices that are using lead care as part of their practice. We believe that there's an opportunity there with our next generation of where we're going there to bring a system that has lead care testing capabilities as well as other tests that are commonly requested in the pediatrician office. So really what we're looking for, Andrew, is to become that primary partner that coexists with some of these large diagnostic companies that helps these health systems or IDNs from a gastrointestinal perspective and a pediatric point-of-care perspective.

The GenePOC acquisition is a strong fit into that strategy because of the ability to have a cost-effective, small-footprint, state-of-the-art molecular platform that can multiplex. That will enable us to be able to put those molecular systems out at the small facilities. Many of the molecular competitors that we have would have a hard time placing molecular systems at the smaller sites because of the cost effectiveness of those going into those locations. So it really comes down to having an effective molecular solution within our GI strategy and that's what the revogene platform did for us. And that's why we are so interested in GenePOC from an acquisitive standpoint.

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Eric S. Rasmussen, Meridian Bioscience, Inc. - Executive VP & CFO [43]

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And Andrew, I would just add that, that competitive environment did play into sort of our evaluation of buy versus build in terms of a next-phase platform and it was really, are you -- can you afford to take more time, can you spend $30 million -- 3 years and hope that you can find that to divide -- build that platform yourself and then have an offering, a menu available on that platform. And we felt that part of that competitive environment and part of the -- that was part of our -- that went into our thinking and this was the right approach.

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Operator [44]

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And at this time, there are no further questions. Do you have any closing comments?

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John P. Kenny, Meridian Bioscience, Inc. - CEO, Executive VP of Diagnostics Business Unit & Director [45]

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No. We appreciate you joining the call. I apologize for the challenges with getting some of these press releases out and we will work to make sure that they get out to the market here as quickly as we can. Thank you very much.

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Operator [46]

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Ladies and gentlemen, thank you for joining today's call. You may now disconnect.