☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Title of each class | Trading Symbol | Name of each exchange on which registered | ||
Common Shares, No Par Value | VIVO | The NASDAQ Stock Market LLC | ||
(NASDAQ Global Select Market) |
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-acceleratedfiler | ☐ | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ |
MERIDIAN BIOSCIENCE, INC.
INDEX TO ANNUAL REPORT
ON FORM
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Item 1 | 5 | |||||||
Item 1A | ||||||||
Item 1B | ||||||||
25 | ||||||||
Item 2 | Properties | 25 | ||||||
Item 3 | Legal Proceedings | 26 | ||||||
Item 4 | Mine Safety Disclosures | 27 | ||||||
Item 5 | ||||||||
Item 6 | ||||||||
Item 7 | ||||||||
Item 7A | ||||||||
Item 8 | ||||||||
Item 9 | 74 | |||||||
Item 9A | 74 | |||||||
Item 9B | 75 | |||||||
Item 9C | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 75 | ||||||
Item 10 | 75 | |||||||
Item 11 | 75 | |||||||
Item 12 | ||||||||
Item 13 | ||||||||
Item 14 | ||||||||
Item 15 | ||||||||
Item 16 |
NOTE ABOUT FORWARD-LOOKING STATEMENTS
This report includes estimates, projections, statements relating to our business plans, objectives, and expected operating results that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may appear throughout this report, including the following sections: “Business” (Part I, Item 1 of this Form
Unless the context requires otherwise, references in this Annual Report on
In the discussion that follows, all dollar amounts and share amounts are in thousands (both tables and text), except per share data.
This Form
WEBSITE AND SOCIAL MEDIA DISCLOSURE
We use our website (
MARKET AND INDUSTRY INFORMATION
Market data used throughout this Form
All of the market data used in this Form
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PART I.
ITEM 1.
BUSINESS
Overview
Meridian is a fully-integrated life science company with principal businesses in: (i) the development, manufacture, sale and distribution of diagnostic testing systems and kits, primarily for certain gastrointestinal and respiratory infectious diseases, and elevated blood lead levels; and (ii) the manufacture and distribution of bulk antigens, antibodies, immunoassay blocking reagents, specialized Polymerase Chain Reaction (“PCR”) master mixes, and bioresearch reagents used by other diagnostic test manufacturers and researchers in immunological and molecular tests for human, animal, plant and environmental applications.
Our website is
Pending Merger
On July 7, 2022, the Company entered into an Agreement and Plan of Merger (as it may be amended, supplemented or otherwise modified from time to time, the “Merger Agreement”) with SD Biosensor, Inc., a corporation with limited liability organized under the laws of the Republic of Korea (“SDB”), Columbus Holding Company, a Delaware corporation (“Parent”), and Madeira Acquisition Corp., an Ohio corporation and a direct wholly owned subsidiary of Parent (“Merger Sub”). Meridian is informed that SJL Partners, LLC (“SJL”) is currently the sole shareholder of Parent, and SDB together with SJL will be the sole shareholders of Parent as of the closing of the Merger. Pursuant to the Merger Agreement, Merger Sub will merge with and into Meridian (the “Merger”), with Meridian surviving the Merger as a direct wholly owned subsidiary of Parent. Consummation of the Merger is subject to customary closing conditions, including, without limitation: (i) the absence of certain legal impediments; and (ii) the condition that no Specified Outcome, as such term is defined in the Merger Agreement, related to the DOJ LeadCare legal matter (which is described in the section entitled “Legal Matter Relating to LeadCare Product Line” of Item 3. “Legal Proceedings”) has occurred or is reasonably likely to occur.
On November 21, 2022, the parties received clearance from the Committee on Foreign Investment in the United States with respect to the Merger and the transactions contemplated by the Merger Agreement.
The foregoing description of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Merger Agreement, which is attached as an exhibit to our Current Report on Form 8-K filed with the SEC on July 7, 2022.
Reportable Segments
Our reportable segments are Diagnostics and Life Science, both of which are headquartered in Cincinnati, Ohio. We describe these reportable segments in this “Business” section and in other locations in this report:
Type of Segment Information | Location within Form 10-K | |
Physical locations and activities | Item 2. “Properties” | |
Item | ||
Financial information | Item 8. “Note 15 of Consolidated Financial Statements” |
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Diagnostics Segment
Products and Markets
Prior to the onset of the
Our clinical diagnostic products provide accuracy, simplicity and speed; enable early diagnosis and treatment of acute medical conditions; and provide for better patient outcomes at reduced costs. We target diagnostics for disease states that: (i) are conditions where rapid diagnosis impacts patient outcomes; (ii) have opportunistic demographic and disease profiles; (iii) are underserved by current diagnostic products; and/or (iv) have difficult sample handling requirements (e.g., stool). This approach has allowed us to establish meaningful market share in our target disease states, gastrointestinal and respiratory illnesses, and tests for elevated lead levels in blood.
Our product portfolio includes just underapproximately 200 diagnostic tests and transport media, and is marketed to acute care hospitals, reference laboratories, outpatient clinics and physician office laboratories in over 70 countries around the world. Our testing platforms include: Real-time PCR Amplification (Revogene brand); Isothermal DNA Amplification (Alethia brand); Lateral Flow Immunoassay using fluorescent chemistry (Curian brand); Rapid Immunoassay (Immuno
Our diagnostic assay research and development programs are focused on menu expansion for our Curian and Revogene instrument platforms, with disease targets in the gastrointestinal and respiratory areas, as well as next generation blood-chemistry testing. Currently pending clearance at the U.S. Food and Drug Administration (“FDA”) is a 510(k) application for theour Curian CampylobacterEHEC Shiga Toxin assay. Our current new product development pipeline includes gastrointestinal and respiratory multi-plex assays on our Revogene instrument platform, and EHEC Shiga Toxin and
The April 2020 acquisition of Exalenz Bioscience Ltd. (“Exalenz”) and the BreathID system, along with the July 2021 acquisition of the BreathTek business, strengthened our position in
Market Trends
Despite the effects of the
The growing global pressures to contain total health care costs have accelerated the increased use of diagnostic testing. Integrated Delivery Networks (“IDNs”) in our U.S. market have the goal of increasing the efficiency of health care delivery, reducing spending and improving clinical outcomes. We believe our product portfolio positions us competitively with IDNs and health care systems that are transitioning from
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We also continue to see aggregation of buying power in our U.S. market via multi-hospital group purchasing organizations (“GPOs”) and IDNs, consolidation among reference laboratories, hospital laboratories being operated by large reference laboratories, and acquisition of physician practices by hospitals, health systems and
Cost containment pressures have also affected health care systems outside the U.S., particularly in Europe, where the health care systems are generally
Sales, Marketing and Distribution
Our Diagnostics segment relies on direct sales personnel and independent distribution networks. We have a direct sales force in fourtwo countries, covering the United States (“U.S.”) and certain major markets in the EMEA region (i.e., in Europe, the Middle East and Africa). We also use independent distributors either in a complementary manner with our direct sales force (e.g., the U.S.) or solely to supply our products to
Competition
Our major competitors in molecular diagnostics are Cepheid (a Danaher business) and Becton Dickinson, both of which have systems with multiple-assay menus. We also face competition in molecular diagnostics, but to a lesser degree, from companies such as Abbott (former Alere business) and Quidel.
For blood lead testing, we believe we have the only
Research and Development
Our Diagnostics segment’s research and development personnel are organized into three
Manufacturing
Our diagnostics products are manufactured at four principal sites in Billerica, Massachusetts (blood-chemistry); Cincinnati, Ohio (immunoassays and molecular tests); Modi’in, Israel, (urea breath tests for
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Intellectual Property, Patents and Licenses
We own or license U.S. and foreign patents, most of which are for select products manufactured by our Diagnostics segment. These patents are used in our manufacturing processes for select products (e.g., method patents) or may relate to the design of the test device technology format (e.g., design patents). In the absence of patent protection, we may be vulnerable to competitors who successfully replicate our production and manufacturing technologies and processes. Our employees are required to sign confidentiality and
The patents applicable to our Alethia products, which represented 4%3%, 7%4% and 12%7% of consolidated net revenues for fiscal 2022, 2021 and 2020, and 2019, respectively, have been and continue to bewere licensed from a third party, Eiken Chemical Co., Ltd., under a
The patents for the Revogene platform and related products acquired as part of the GenePOC business are either wholly owned or licensed from two third parties, Laval University and The Regents of California, under an exclusive license agreement. These patents are issued in the U.S., European Union (“EU”) and other countries. The term of our exclusive license agreement and the related patents currently runs through June 15, 2034, after which we will be free to practice the patents without any restriction or royalty obligation. In September 2021, the U.S. Patent and Trademark Office granted to Meridian Bioscience Canada, Inc. (a wholly owned subsidiary) and Laval University a patent for our current Revogene test device and its microfluidic use in our Revogene instrument.
The patents for the BreathID system and related urea breath test for
The patents for our stool antigen
Government Regulation
Our diagnostic products are regulated by the FDA as “devices” pursuant to the Federal Food, Drug, and Cosmetic Act (“FDCA”). Under the FDCA, medical devices are classified into one of three classes (i.e., Class I, II or III). While exempt Class I and Class II products do not require FDA review, non-exempt Class I and Class II devices are not expressly approved by the FDA, but, instead, are “cleared” for marketing.marketing (i.e., these products require FDA review prior to marketing clearance). Class III devices generally must receive
Each of the diagnostic products currently marketed by Meridian in the U.S. has been cleared, approved or authorized for use by the FDA or are exempt from such requirements. The majority of such products have been cleared by the FDA pursuant to its 510(k) clearancepremarket review process, withwhereas our BreathTek product havinghas been approved under the FDA’s PMA process. In the case of our Revogene
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Sales of our diagnostic products in foreign countries are subject to foreign government regulation, which is similar to that of the FDA. Our Diagnostics segment facilities are certified to ISO 13485.
Following a five-year transition period, sales of our diagnostic products in the EU will beare subject to new regulations under the In Vitro Diagnostics Regulation of 2017 (“IVDR”) beginning in May 2022. IVDR replaces the previous IVD Regulation (98/79/EC). In October 2021, the European Commission submitted a proposal to the European Parliament that would move back the May 2022 implementation date for diagnostic tests that are currently CE Marked to dates ranging from May 20252022 (for Class A products) to May 2028,2027 (for Class B products), depending on the risk classification of the diagnostic test. We have completed an assessment of needed remediation activities to comply with IVDR and also determined that several products will not be sellable under IVDR. The net revenues associated with these products are not expected to be material. New diagnostic products launched after May 2022 are required to comply with IVDR.
Life Science Segment
Products and Markets
Our Life Science segment develops, manufactures, sells and distributes bulk antigens, antibodies, immunoassay blocking reagents, specialized PCR master mixes, isothermal reagents, enzymes, nucleotides, and bioresearch reagents used predominantly by in vitro device (“IVD”) manufacturing companies, and to a lesser degree, by researchers and
Our Life Science segment products are marketed to IVD manufacturing customers as a source of raw materials for their human clinical diagnostics tests, or as an outsourced step in their manufacturing processes. Selectively, we seek and maintain multi-year supply arrangements to provide stability in volumes and pricing. Independent distributors market our molecular biology products to academic/research customers. TheseOur products are used in detecting DNA and RNA in human, animal, plant and environmental applications.
Market Trends
Major IVD manufacturing customers often have global footprints, where we are supplying reagents to specific manufacturing sites around the world. IVD manufacturers in specific countries of the Asia-Pacific region (e.g., China) are increasing their efforts in the development and manufacturing of infectious disease tests. We intend to use the breadth of our product portfolio, particularly molecular reagents, to continue to increase the penetration of our products in IVD manufacturing customers’ tests, regardless of customer class (large multi-national companies or regional companies).
Competition
The market for bulk biomedical reagents is highly competitive with respect to product quality, price, customer service and reputation. Our competitors, such as Thermo Fisher, often have greater financial, research and development, sales and marketing, and manufacturing resources. Customers also may choose to manufacture their biomedical reagents
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Research and Development
Our research and development activities for the Life Science segment focus on molecular reagents for use in PCR and isothermal chemistries in detecting both DNA and RNA. Our new product development programs are progressing through sample-specific (e.g., blood, saliva, urine, stool, and plant) mixes in both
Manufacturing and Government Regulation
Our Life Science segment facilities are ISO 13485 certified, and where appropriate, our Life Science segment facilities comply with Regulation EC 1069.
International Markets
International markets are an important source of net revenues and future growth opportunities for both of our reportable segments. For both reportable segments combined, net revenues from customers located outside of the U.S. and its territories approximated $170,000 or 51% of consolidated 2022 net revenues, $173,000 or 55% of consolidated 2021 net revenues, and $122,000 or 48% of consolidated 2020 net revenues, and $74,000 or 37% of consolidated 2019 net revenues. Since the outbreak of the
Fluctuations in foreign currency exchange rates in fiscal 20212022 compared to fiscal 20202021 had an approximate $5,200 unfavorable impact on consolidated 2022 net revenues; $1,700 within the Diagnostics segment and $3,500 within the Life Science segment. This compares to year-to-year currency exchange rates having an approximate $9,200 favorable impact on consolidated 2021 net revenues;revenues in 2021; $1,300 within the Diagnostics segment and $7,900 within the Life Science segment. This compares to
Environmental
We are in compliance with applicable portions of the federal and state hazardous waste regulations and have never been a party to any environmental proceeding.
Human Capital
As of September 30, 2021,2022, our Diagnostics segment had approximately 560515 employees in teneight countries, our Life Science segment had approximately 200210 employees in sevensix countries, and Corporate and Shared Services had fiveapproximately 45 employees, all in the U.S. Approximately 55%57% of our employees are women. In addition, of our U.S. based employees, which represents approximately 60%65% of our total worldwide workforce, approximately 25% are ethnically diverse.
Below is additional demographic information about our current employee base as of September 30, 2021.2022.
Meridian Employees | 2022 | |||
Salaried workforce | 529 | |||
Managers and above | 161 | |||
Part-time employees | 27 | |||
Average age | 43 | |||
Average length of service in years | 7 | |||
Employee turnover rate (voluntary) | 25 | % | ||
Fiscal 2022 net revenues per employee (in thousands) | $ | 432 |
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Meridian Employees | 2021 | |||
Salaried workforce | 543 | |||
Managers and above | 159 | |||
Part-time employees | 27 | |||
Average age | 43 | |||
Average length of service in years | 7 | |||
Employee turnover rate (voluntary) | 19 | % | ||
Fiscal 2021 net revenues per employee (in thousands) | $ | 415 |
Equal Employment Opportunity Table (by number of employees) U.S. Employee Diversity as of September 30, 2021 | ||||||||||||||||||||||||||||||
Job category | Gender | White | Black/African American | Hispanic/Latino | Asian | American Indian/Alaskan Native | Two or more races | Total | ||||||||||||||||||||||
Executive/senior level officials and managers | Male | 12 | — | — | — | — | — | 12 | ||||||||||||||||||||||
Female | 3 | — | 1 | — | — | — | 4 | |||||||||||||||||||||||
First/mid-level officials and managers | Male | 41 | 4 | 2 | 3 | — | — | 50 | ||||||||||||||||||||||
Female | 36 | 4 | — | 4 | — | 1 | 45 | |||||||||||||||||||||||
Professionals | Male | 60 | 4 | 4 | 5 | — | 1 | 74 | ||||||||||||||||||||||
Female | 71 | 9 | 5 | 9 | — | 2 | 96 | |||||||||||||||||||||||
All other | Male | 59 | 11 | 8 | 5 | — | 1 | 84 | ||||||||||||||||||||||
Female | 83 | 18 | 7 | 8 | — | 2 | 118 | |||||||||||||||||||||||
Total | Male | 172 | 19 | 14 | 13 | — | 2 | 220 | ||||||||||||||||||||||
Female | 193 | 31 | 13 | 21 | — | 5 | 263 |
Equal Employment Opportunity Table (by number of employees) U.S. Employee Diversity as of September 30, 2022 | ||||||||||||||||||||||||||||||
Job category | Gender | White | Black/African American | Hispanic/Latino | Asian | American Indian/Alaskan Native | Two or more races | Total | ||||||||||||||||||||||
Executive/senior level officials and managers | Male | 10 | — | — | 1 | — | — | 11 | ||||||||||||||||||||||
Female | 2 | — | 1 | — | — | — | 3 | |||||||||||||||||||||||
First/mid-level officials and managers | Male | 47 | 5 | 2 | 2 | — | — | 56 | ||||||||||||||||||||||
Female | 40 | 3 | — | 4 | — | — | 47 | |||||||||||||||||||||||
Professionals | Male | 51 | 6 | 3 | 4 | — | 2 | 66 | ||||||||||||||||||||||
Female | 65 | 10 | 6 | 10 | — | 3 | 94 | |||||||||||||||||||||||
All other | Male | 74 | 7 | 4 | 9 | — | — | 94 | ||||||||||||||||||||||
Female | 84 | 14 | 7 | 13 | — | 2 | 120 | |||||||||||||||||||||||
Total | Male | 182 | 18 | 9 | 16 | — | 2 | 227 | ||||||||||||||||||||||
Female | 191 | 27 | 14 | 27 | — | 5 | 264 |
We believe that developing a diverse, equitable and inclusive culture is critical to continuing to attract and retain the top talent necessary to deliver on our growth strategy. As such, we continue to invest in the creation of a work environment where our employees can feel inspired to deliver their workplace best every day. We continue to expand our Human Resources Information System (“HRIS”) and other systems to track key human capital metrics, including workforce demographics, diversity, turnover, engagement, and training data.
Diversity, Equity and Inclusion
In 2020, we initiated the “One Meridian Inclusion Diversity and Equity Team,” which is comprised of a group of employees around the world and led by Dr. Lourdes Weltzien, Executive Vice President, Life Science. This team has developed aScience, and Melissa McCarey, Vice President, Global Human Resources. Consistent with its mission statement, and promotesthis team is providing topical programs throughout the year, in an effort to promote awareness so we can encourage and support an environment in which all employees feel included and empowered to achieve their best.
Compensation and Benefits
We strive to provide pay, benefits, and services that are competitive to market and create incentives to attract and retain employees globally. Our compensation packages include market-competitive pay, cash bonuses, health care and retirement benefits, paid time off, and family leave, among others, depending upon locale. We are focused on pay equity globally and are striving to close the gap in pay among similar roles and responsibilities in certain locations within our organization, after accounting for legitimate business factors that can explain differences, such as performance, time at grade level, and tenure. We intend to conduct market surveys every two years to assess market compensation levels from a total compensation perspective. We also continue to advance transparency in our pay and representation data by complying with all applicable statutory filing requirements.
Communication and Engagement
We strongly believe that Meridian’s success depends on employees understanding how their work contributes to the Company’s overall strategy. To this end, we utilize a variety of channels to facilitate open and direct communication, including: (i) One Meridian Company-wide intranet; (ii) quarterly CEO update videos; (iii) open forums or town hall meetings with executives; (iv) regular ongoing update communications; and (v) employee engagement surveys.
Health, Wellness and Safety
We are committed to the safety of our employees and communities, fromand safety in our operations, toour product development toactivities and our supplier partnerships. Our ultimate goal is to achieve zero serious injuries through continued investment in, and focus on, our core safety programs and injury-reduction initiatives. We provide access to a variety of innovative, flexible, and convenient health and wellness tools.
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ITEM 1A.
RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the following factors, which could materially affect our business, financial condition, cash flows and/or future results. Any one of these factors could cause our actual results to vary materially from recent results or from anticipated future results. The risks described below are not the only risks facing our company. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, also may materially adversely affect our business, financial condition and/or operating results.
Risk Factors Summary
Risks Related to Our Strategy
If the Merger contemplated by the Merger Agreement does not occur, it could have a material adverse effect on our business, results of operations, financial condition and stock price.
Our financial condition, results of operations and cash flows could be adversely affected by outbreaks of disease, such as the ongoing and evolvingCOVID-19 pandemic.
Net revenues for our Diagnostics segment may be impacted by our reliance upon large customers in North America, seasonal factors and sporadic outbreaks, and changing diagnostic market conditions.
Net revenues for our Life Science segment may be impacted by customer concentrations and buying patterns.
Intense competition could adversely affect our profitability and operating results.
• | We expect to continue facing increased competition resulting from the expiration of our H. pylori patents. |
Risks Related to our Intellectual Property
We may be unable to protect or obtain adequate patent protection for intellectual property that we utilize or intend to utilize.
Product infringement claims by other companies could result in costly disputes and could limit our ability to sell our products.
Risks Related to our Operations
We may be unable to develop new products or acquire products on favorable terms.
We may be unable to successfully integrate operations or to achieve expected cost savings from acquisitions we make.
The effective tax rate of the Company may be negatively impacted by changes in the mix of earnings as well as future changes to tax laws in global jurisdictions in which we operate.
Significant interruptions in production at our principal manufacturing facilities and/or third-party manufacturing facilities could adversely affect our business and operating results.
We depend on sole-source suppliers for certain critical raw materials, components and finished products. A supply interruption could adversely affect our business.
Our ability to meet future customer demand for selected products is dependent upon our ability to successfully manage our manufacturing capacity and supply chains.
Increased prices for, poor quality of, or extended inability to source raw materials or services used in our products, and supply chain disruptions, could adversely affect profitability.
Risks Related to Legal, Regulatory and International Matters
We are subject to comprehensive regulation, and our ability to earn profits may be restricted by these regulations.
If we or our third-party vendors fail to comply with FDA regulations relating to the manufacturing of our products or any component part, we may be subject to fines, injunctions and penalties, and our ability to commercially distribute and sell our products may be negatively impacted.
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We incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies in the U.S., and failure to comply with these laws could harm our business and the price of our common stock.
We could be adversely affected by health care reform legislation.
Efforts to reduce the U.S. federal deficit could adversely affect our results of operations.
Global market, political, environmental, and economic conditions, including those related to the financial markets, could have a material adverse effect on our operating results, financial condition, and liquidity.
We depend on international net revenues, and our operating results may be adversely impacted by foreign currency, regulatory or other developments affecting international markets.
New tariffs and other trade measures could adversely affect our operating results.
If product liability lawsuits are successfully brought against us, we may incur substantial liabilities and may have to limit or cease sales of our products.
Risks Related to Our Common Stock
The market price of our common stock may be volatile and fluctuate significantly, which could result in substantial losses for stockholders and subject us to litigation.
Our business could be negatively impacted as a result of shareholder activism, an unsolicited takeover proposal or a proxy contest.
The authority of our board to issue preferred stock and the effects of certain provisions of Ohio corporation law may discourage takeover bids.
General Risk Factors
One or more cybersecurity incidents may adversely impact our financial condition, results of operations andand/or reputation.
Our business could be negatively affected if we are unable to attract, hire and retain key personnel.
Our bank credit agreement imposes restrictions with respect to our operations, which could adversely impact our business.
Risks Related to Our Strategy
If the Merger contemplated by the Merger Agreement does not occur, it could have a material adverse effect on our business, results of operations, financial condition and stock price.
On July 7, 2022, we entered into the Merger Agreement noted above within the “Pending Merger” section of Item 1. “Business.” Completion of the proposed Merger is subject to the satisfaction of various conditions. There is no assurance that all of the various conditions will be satisfied, or that the Merger will be completed within the expected timeframe, or at all. The proposed Merger gives rise to inherent risks that include:
the amount of the cash to be paid under the Merger Agreement is fixed and will not be adjusted for changes in our business, assets, liabilities, prospects, outlook, financial condition or results of operations or in the event of any change in the market price of, analyst estimates of, or projections relating to, our common stock;
legal or regulatory proceedings, or other matters that affect the timing or ability to complete the transaction as contemplated;
the possibility of disruption to our business, including increased costs and diversion of management time and resources;
difficulties maintaining business and operational relationships, including relationships with clients, vendors, suppliers, distributors, resellers and other business partners;
the inability to attract and retain key personnel pending consummation of the proposed Merger;
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potential stockholder litigation relating to the Merger could prevent or delay the Merger or otherwise negatively impact our business and operations;
the inability to pursue alternative business opportunities or make changes to our business pending the completion of the proposed Merger;
developments beyond our control including, but not limited to, changes in domestic or global economic conditions that may affect the timing or success of the proposed Merger; and
the risk that if the proposed Merger is not completed, the market price of our common stock could decline, investor confidence could decline, stockholder litigation could be brought against us, relationships with clients, suppliers and other business partners may be adversely impacted, we may be unable to retain key personnel, and profitability may be adversely impacted due to costs incurred in connection with the proposed Merger and general disruption to our business.
Our financial condition, results of operations and cash flows could be adversely affected by outbreaks of disease, such as the ongoing and evolving
Any outbreak of contagious diseases, such as
decreased volume of testing and related sales of certain of our Diagnostics segment products as a result of disruptions to health care providers and limitations on the ability of providers to administer tests;
disruptions or restrictions on the ability of the Company’s, our collaborators’, or our suppliers’ personnel to travel, and temporary closures of our facilities, or the facilities of our collaborators or suppliers;
limitations on employee resources that would otherwise be focused on the development of our products, the processing of our diagnostic tests, and/or the conduct of our clinical trials, because of illness of employees or their families, or requirements imposed on employees to avoid contact with large groups of people; and
delays in necessary interactions with local regulators, ethics committees, and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees.
In addition, the continued spread of
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Net revenues for our Diagnostics segment may be impacted by our reliance upon large customers in North America, seasonal factors and sporadic outbreaks, and changing diagnostic market conditions.
Key Distributors
Our Diagnostics segment’s net revenues from sales through three customers, including two key distributors, were approximately 33%29%, 32%33% and 31%32% of the Diagnostics segment’s total net revenues for 2022, 2021 2020 and 2019,2020, respectively, or approximately 13%, 15%13% and 21%15%, respectively, of each year’s consolidated net revenues. The loss of any one of these customers could negatively impact our net revenues and results of operations unless suitable alternatives were timely found or in the case of distributor customers, lost sales to one distributor were absorbed by another distributor. Finding a suitable alternative on satisfactory terms may pose challenges in our industry’s competitive environment. As an alternative, we could expand our efforts to distribute and market our products directly. This alternative, however, would require substantial investment in additional sales, marketing and logistics resources, including hiring additional sales and customer service personnel, which would significantly increase our future selling, general and administrative expenses.
In addition, buying patterns of these customers may fluctuate from quarter to quarter, potentially leading to uneven concentration levels on a quarterly basis.
Seasonal Factors and Sporadic Outbreaks
Our principal business is the sale of a broad range of diagnostic test kits for common gastrointestinal and respiratory infectious diseases, and elevated blood lead levels. Certain infectious diseases may be seasonal in nature, while others may be associated with sporadic outbreaks, such as foodborne illnesses or pandemics such as an influenza outbreak or the
Changing Diagnostic Market Conditions
Changes in the U.S. health care delivery system have resulted in consolidation among reference laboratories, hospital laboratories being operated by large reference laboratories, and the formation of multi-hospital alliances, reducing the number of institutional customers for diagnostic test products. Consolidation in the U.S. health care industry has also led to the creation of group purchasing organizations (“GPOs”)GPOs and IDNs that aggregate buying power for hospital groups and put pressure on our selling prices. Due to such consolidation, we may not be able to enter into and/or sustain contractual or other marketing or distribution arrangements on a satisfactory commercial basis with institutional customers, GPOs and/or IDNs, which could adversely affect our results of operations.
Net revenues for our Life Science segment may be impacted by customer concentrations and buying patterns.
Our Life Science segment’s net revenues from three diagnostic manufacturing customers were 22%31%, 30%20% and 27%24% of the Life Science segment’s total net revenues for 2022, 2021 2020 and 2019,2020, respectively. Sales to these three diagnostic manufacturing customers comprised 13%17%, 16%12% and 9%13% of consolidated net revenues for 2022, 2021 2020 and 2019,2020, respectively. In addition, in excess of 10% of the Life Science segment’s total net revenues has historically been concentrated among a number of other significant customers. Any significant alteration of buying patterns from these customers resulting from the decline in
Intense competition could adversely affect our profitability and operating results.
The markets for our products and services are characterized by substantial competition and rapid change. Hundreds of companies around the world supply diagnostic tests and immunoassay and molecular reagents. These companies range from multinational health care entities, for which diagnostics is one line of business, to small
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We expect to continue to facefacing increased competition resulting from the expiration of our H. pylori patents.
The patents for our stool antigen
Risks Related to Our Intellectual Property
We may be unable to protect or obtain adequate patent protection for intellectual property that we utilize or intend to utilize.
In developing and manufacturing our products, we employ a variety of proprietary and patented technologies. In addition, we have licensed, and expect to continue to license, various complementary technologies and methods from academic institutions and public and private companies. We cannot provide assurance that the technologies that we own or license provide protection from competitive threats or from challenges to our intellectual property. In addition, we cannot provide assurances that we will be successful in obtaining and retaining licenses, or proprietary or patented technologies, in the future.
Product infringement claims by other companies could result in costly disputes and could limit our ability to sell our products.
Litigation over intellectual property rights is prevalent in the life science and diagnostic industries. As the market for diagnostics continues to grow and the number of participants in the market increases, we may increasingly be subject to patent infringement claims. It is possible that a third party may claim infringement against us. If found to infringe, we may attempt to obtain a license to such intellectual property; however, we may be unable to do so on favorable terms, or at all. Additionally, if our products are found to infringe on third-party intellectual property, we may be required to pay damages for past infringement and lose the ability to sell certain products, causing our revenues to decrease. Any substantial loss resulting from such a claim could have a material adverse effect on our profitability, and the damage to our reputation in the industry could have a material adverse effect on our future results of operations and liquidity, including net revenues and gross profit.
Risks Related to Our Operations
We may be unable to develop new products or acquire products on favorable terms.
The medical diagnostic and life science industries are characterized by ongoing technological developments and changing customer requirements. As such, our results of operations and continued growth depend, in part, on our ability in a timely manner to develop or acquire rights to, and successfully introduce into the marketplace, enhancements of existing products and services, or new products and services that incorporate technological advances, meet customer requirements, and/or respond to products developed by our competition. We cannot provide any assurance that we will be successful in developing or acquiring such rights to products and services on a timely basis, or that such products and services will adequately address the changing needs of the marketplace, either of which could adversely affect our results of operations.
In addition, we must regularly allocate considerable resources to research and development of new or acquired products, services and technologies, and protecting intellectual property. The research and development process generally takes a significant amount of time from research to product launch. This process is conducted in various stages. During each stage, there is a risk that we will not achieve our goals on a timely basis, or at all, and we may have to abandon a project in which we have invested substantial resources, any of which could adversely affect our results of operations.
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We may be unable to successfully integrate operations or to achieve expected cost savings from acquisitions we make.
One of our growth strategies is the acquisition of companies and/or products. Although additional acquisitions of companies and products may enhance the opportunity to increase net earnings over time, such acquisitions could result in greater administrative burdens, increased exposure to the uncertainties inherent in marketing new products, financial risks of additional operating costs, disrupted operations, challenges in employee retention, and increased risk of asset impairments if future net revenues and cash flows are deficient. The principal benefits expected to result from any acquisitions we make will not be achieved fully unless we are able to successfully integrate the operations of the acquired entities with our operations and realize the anticipated synergies, cost savings and growth opportunities from integrating these businesses into our existing businesses. We cannot provide assurance that we will be able to identify and complete additional acquisitions on terms we consider favorable or that, if completed, will be successfully integrated into our operations. Furthermore, we cannot predict the outcome of goodwill impairment testing and the impact of goodwill impairments on the Company’s net earnings and results of operations.
The effective tax rate of the Company may be negatively impacted by changes in the mix of earnings as well as future changes to tax laws in global jurisdictions in which we operate.
We are subject to income taxes in the U.S. and various other global jurisdictions. Our effective tax rate could be adversely affected by changes in the mix of earnings by jurisdiction and the valuation of deferred tax assets and liabilities. Recently, the current U.S. presidential administration committed to tax reform, and if enacted, the impact could be material to our tax provision and value of deferred tax assets and liabilities. We recognize deferred tax assets and liabilities based on the differences between the consolidated financial statement carrying amounts and the tax basis of assets and liabilities. Significant judgment is required in determining our provision for income taxes. We regularly review our deferred tax assets for recoverability and establish a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. If we are unable to generate sufficient future taxable income, if there is a material change in the actual effective tax rates, or if there is a change to the time period within which the underlying temporary differences become taxable or deductible, we could be required to increase our valuation allowance against our deferred tax assets, which could result in a material increase in our effective tax rate.
Changes in tax laws or tax rulings could have a material impact on our effective tax rate. Many countries in the EU, as well as several other countries and organizations such as the Organization for Economic Cooperation and Development, are actively considering changes to existing tax laws. Certain proposals could include recommendations that could increase our tax obligations in those countries where we do business. Any changes in the taxation of our activities in such jurisdictions may result in a material increase in our effective tax rate.
Significant interruptions in production at our principal manufacturing facilities and/or third-party manufacturing facilities would adversely affect our business and operating results.
Products and services manufactured at facilities we own or lease comprisedcomprise a majority of our net revenues. Our global supply of these products and services is dependent on the uninterrupted and efficient operation of these facilities. In addition, we currently rely on a small number of third-party manufacturers to produce certain of our diagnostic products and product components. The operations of our facilities or these third-party manufacturing facilities could be adversely affected by power failures, or natural or other disasters such as earthquakes, floods, tornadoes or terrorist threats. Although we carry insurance to protect against certain business interruptions at our facilities, there can be no assurance that such coverage will be adequate or that such coverage will continue to remain available on acceptable terms, if at all. Any significant interruption in the Company’s or a third-party supplier’s manufacturing capabilities, including interruptions that have resultedresulting from product recall activities like those currently beingthat experienced in our Billerica facility (see “Lead Testing Matters” beginning on page 2932 within MD&A) could materially and adversely affect our results of operations.
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We depend on sole-source suppliers for certain critical raw materials, components and finished products. A supply interruption could adversely affect our business.
Raw Materials and Components
Our diagnostic products are made from a wide variety of raw materials that are biological or chemical in nature, and that generally are available from multiple sources of supply. We sole-source certain raw materials and components, which makes it time consuming and costly to switch raw materials and components in
We utilize third-party manufacturers for certain of our instrumentation. One third party manufactures our proprietary Alethia Incubator/Reader (instrument), a component of our Alethia molecular system, and an additional third party manufactures our Curian instrument. These instruments are manufactured exclusively for Meridian according to our specifications. While other manufacturers for these types of instruments are available, we source each instrument solely from one manufacturer to limit the costs involved in clearing the system for marketing in the U.S. If these third-party manufacturers fail to supply us with instruments, we will need to secure another manufacturer, and it may take as long as 12 months to transfer instrument manufacturing. An interruption in the manufacturing of these instruments could have a material adverse effect on our results of operations.
Additionally, one third party manufactures a certain reagent for use with our Alethia assays. While alternative suppliers exist, we elect to utilize this third party exclusively in order to maintain consistency in our materials, which is critical in complying with FDA regulatory requirements. An interruption in the manufacturing of these reagents could have a material adverse effect on our results of operations.
Finished Products
We outsource the manufacturing for certain finished diagnostic products to third parties. A disruption in the supply of these finished products could have a material adverse effect on our business until we find another supplier or bring manufacturing
Activities undertaken by Meridian to reduce the risk of these sole-supplier arrangements include maintaining adequate inventory levels, supplier qualification procedures, supplier audits, site visits, and frequent communication. Additionally, we have identified potential alternate suppliers.
Our ability to meet future customer demand for selected products is dependent upon our ability to successfully manage our manufacturing capacity and supply chains.
To manage our anticipated future growth effectively, it may become necessary for us to enhance our manufacturing and supply chain capabilities, infrastructure and operations, information technology infrastructure, and financial and accounting systems and controls. Organizational growth and
The Russia / Ukraine war (the “War”) that developed during the second quarter of fiscal year 2022 also could disrupt our supply chains. While to date this War has not caused us to experience any material negative impacts on our business, financial condition, or results of operations, we are unable to estimate the extent to which, if at all, the war could hurt our supply chains. The evolving nature of the War, related international sanctions, other potential government actions, and economic consequences of the War, including incurring higher costs to source materials due to inflation or otherwise, are factors that could disrupt supply chains throughout the world, including potentially the supply chains on which our business relies. If the War either directly or indirectly disrupts our supply chains and we are unable to mitigate such disruption, the War could have a material adverse effect on our future consolidated financial condition and results of operations.
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Increased prices for, poor quality of, or extended inability to source raw materials or services used in our products, and supply chain disruptions, could adversely affect profitability.
Our profitability is affected by the prices of the raw materials used in the manufacture of our products. These prices fluctuate based on a number of factors beyond our control, including changes in supply and demand, general economic conditions, labor costs, fuel-related delivery costs, competition, import duties, tariffs, currency exchange rates, and, in some cases, government regulation. Significant increases in the prices of raw materials, services and transportation costs, similar to the inflationary increases we have experienced insince the second half of fiscal 2021, that cannot be recovered through increases in the price of our products and/or offset by savings in other areas, could adversely affect our results of operations and cash flows.
We cannot guarantee that the prices we are paying for raw materials today will continue in the future, or that the marketplace will continue to support current prices for our products, or that such prices can be adjusted to fully or partially offset raw material price increases in the future. Any increases in prices resulting from a tightening supply of these or other commodities could adversely affect our profitability. We do not engage in hedging transactions for raw material purchases, but we do enter into some fixed-price supply contracts.
Our dependency upon regular deliveries of supplies and the quality of those supplies upon delivery from particular suppliers means that interruptions, stoppages, or deterioration of quality in such deliveries could adversely affect our operations until arrangements with alternate suppliers could be made. Several of the raw materials used in the manufacture of our products currently are procured from a single source. In some cases, we also outsource certain services to suppliers, including but not limited to, engineering, assembly, shipping, and commissioning services. If a supplier were unable to deliver these materials or services, or if the quality of these materials or services declined, for an extended period of time as a result of financial difficulties, catastrophic events affecting their facilities, or other factors, including recent supply chain disruptions we have experienced, or if we were unable to negotiate acceptable terms for the supply of materials or services with these suppliers, our business could be adversely affected. We may not be able to find acceptable alternatives, and any such alternatives could result in increased costs. Extended inability to source a necessary raw material or service could cause us to cease manufacturing one or more products for a period of time, which could also lead to loss of customers, as well as reputational, competitive, or business harm, which could have a material adverse effect on our business, consolidated financial condition, and results of operations.
Risks Related to Legal, Regulatory and International Matters
We are subject to comprehensive regulation, and our ability to earn profits may be restricted by these regulations.
Medical device diagnostics is a highly regulated industry. We cannot provide assurance that we will be able to obtain necessary governmental clearances or approvals, or timely clearances or approvals, to market future products in the U.S. and other countries. Costs and difficulties in complying with laws and regulations administered by the FDA, the U.S. Department of Agriculture, the U.S. Department of Commerce, the U.S. Drug Enforcement Agency, the Centers for Disease Control and Prevention (“CDC”), or other regulators can result in unanticipated expenses and delays, and interruptions to the sale of new and existing products.
Regulatory approval can be a lengthy, expensive and uncertain process, making the timing and cost of approvals difficult to predict. Failure to comply with these regulations can result in delays in obtaining authorization to sell products, seizure or recall of products, suspension or revocation of authority to manufacture or sell products, and other civil or criminal sanctions.
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If we or our third-party vendors fail to comply with FDA regulations relating to the manufacturing of our products or any component part, we may be subject to fines, injunctions and penalties, and our ability to commercially distribute and sell our products may be negatively impacted.
Our diagnostics manufacturing facilities, and the manufacturing facilities of any of our third-party diagnostic component manufacturers or critical suppliers, are required to comply with the FDA’s Quality System Regulation (“QSR”), which sets forth minimum standards for the procedures, execution and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage, and shipping of the products we sell, and related regulations, including Medical Device Reporting (“MDR”) regulations regarding reporting of certain malfunctions and adverse events potentially associated with our products. The FDA may evaluate our compliance with the QSR, MDR and other regulations, among other ways, through periodic announced or unannounced inspections which could disrupt our operations and interrupt our manufacturing. If in conducting an inspection of our manufacturing facilities, or the manufacturing facilities of any of our third-party component manufacturers or critical suppliers, an FDA investigator observes conditions or practices believed to violate the QSR, the investigator may document their observations on a Form FDA 483 that is issued at the conclusion of the inspection. A manufacturer that receives an FDA 483 may respond in writing and explain any corrective actions taken in response to the inspectional observations. The FDA will typically review the facility’s written response and may
FDA enforcement actions, which include seizure, injunction, criminal prosecution, and civil penalties, could result in total or partial suspension of a facility’s production and/or distribution, product recalls, fines, suspension of the FDA’s review of product applications, and/or the FDA’s issuance of adverse publicity. Thus, an adverse inspection could force a shutdown of our manufacturing operations or a recall of our products. Adverse inspections could also delay FDA approval of our products and could have an adverse effect on our production, net revenues and profitability.
We and any of our third-party vendors may also encounter other problems during manufacturing including failure to follow specific protocols and procedures, equipment malfunction, and environmental factors, any of which could delay or impede our ability to meet demand. The manufacture of our product also subjects us to risks that could harm our business, including problems relating to our facilities and errors in manufacturing components that could negatively affect the efficacy or safety of our products or cause delays in shipment of our products. Any interruption or delay in the manufacture of the product, or any of its components, could impair our ability to meet the demand of our customers and cause them to cancel orders or switch to competitive products, which could, therefore, have a material adverse effect on our business, consolidated financial condition and results of operations.
As described in Item 3. “Legal Proceedings”, on April 17, 2018, the Company’s wholly owned subsidiary Magellan received a subpoena from the U.S. Department of Justice (“DOJ”) regarding its LeadCare product line. The subpoena outlinesoutlined documents to be produced, and the Company is cooperating with the DOJ in this matter. The Company maintains rigorous policies and procedures to promote compliance with applicable regulatory agencies and requirements and is working with the DOJ to promptly respond to the subpoena, including responding to additional information requests that have followed receipt of the subpoena in April 2018. The Company has executed tolling agreements to extend the statute of limitations. In March and April 2021, DOJ issued two subpoenas, both to former employees of Magellan, calling for witnesses to testify before a federal grand jury related to this matter. The March 2021 subpoena was issued to a former employee of Magellan, and the April subpoena was issued to a current employee of Magellan. In September and October 2021, DOJ issued additional subpoenas to individuals seeking testimony and documents in connection with its ongoing investigation. It is the Company’s understanding that multiple witnesses have testified before the federal grand jury and the DOJ’s investigation is ongoing. Discussions continue with the DOJ to explore resolution of the matter. As of September 30, 2022, in accordance with applicable accounting guidance, the Company believes a loss is probable in the DOJ LeadCare legal matter and has accrued $10,000 as an estimate of the cost to resolve the DOJ LeadCare legal matter, which is reflected in litigation and select legal costs within the Consolidated Statement of Operations for the year ended September 30, 2022. The Company cannot predict when the investigation will be resolved or the outcome of the investigation, or its potential impact onand the ultimate resolution of the DOJ LeadCare legal matter may exceed the amount accrued at September 30, 2022 and could be material to the Company. Approximately $2,803, $2,035 and $1,585 of expenseExpense for attorneys’ fees related to this matter totaling $3,510, $2,803 and $2,035 is included within the Consolidated Statements of Operations for the years ended September 30, 2022, 2021 and 2020, and 2019, respectively.
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Magellan submitted 510(k) applications in December 2018, seeking to reinstate venous blood sample-types for its LeadCare II, LeadCare Plus and LeadCare Ultra testing systems. In Februarythe second fiscal quarter of 2019, the FDA informed Magellan that each of these 510(k) applications had been put on Additional Information hold. On July 15, 2019, we provided responses to the FDA’s requests for Additional Information. These 510(k) applications have since expired and are no longer under FDA review. Further, while Magellan’s LeadCare testing systems remain cleared for marketing by the FDA and permitted for use with capillary blood samples, the FDA advised that it has commissioned a third-party study of the Company’s LeadCare testing systems using both venous and capillary blood samples. According to the FDA, the results of the field study will be used in conjunction with other information to determine whether further action by the FDA or the CDC is necessary to protect the public health. The Company intends to fully cooperate with the FDA or CDC on any
During October 2019, the FDA performed a
During June 2021, the FDA performed an inspection of Magellan’s manufacturing facility. As a result of this inspection, the FDA issued one Form 483 observation. On August 3, 2021, FDA sent Magellan a
We incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies in the U.S., and failure to comply with these laws could harm our business and the price of our common stock.
As a public company listed in the U.S., we incur significant legal, accounting and other expenses. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including regulations implemented by the SEC, the Public Company Accounting Oversight Board (“PCAOB”) and the NASDAQ Global Select Market, may increase our legal and financial compliance costs and/or make some activities more time consuming. These laws, regulations and standards are subject to varying interpretations and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If we fail to comply with new laws, regulations and standards, regulatory authorities may initiate legal proceedings against us, and our business may be harmed.
We could be adversely affected by health care reform legislation.
Third-party payers for medical products and services, including state, federal and foreign governments, are increasingly concerned about escalating health care costs and can indirectly affect the pricing or the relative attractiveness of our products by regulating the maximum amount of reimbursement they will provide for diagnostic testing services. Following years of increasing pressure, during 2010 the U.S. government enacted comprehensive health care reform with the enactment of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, which made changes that significantly impact the pharmaceutical and medical device industries. The Protecting Access to Medicare Act of 2014 requires applicable laboratories to report all private payor reimbursement rates and the volumes for each test they perform. The statute requires that Medicare establish reimbursement rates based on the weighted median of private insurance reimbursement rates effective January 1, 2017. The new Medicare rates would be subject to a maximum reduction of 10% a year for the initial three-year period and a maximum of 15% a year for the subsequent three-year period. There is no limit on the amount of potential rate increases. As a result, some of our customers in the U.S. may experience lower Medicare reimbursement rates for our products, which may adversely affect our business, financial condition and results of operations. We are seeing some effect on the reimbursement rates for our products. If reimbursement amounts for diagnostic testing services decrease further in the future, such decreases may reduce the amount that will be reimbursed to hospitals or physicians for such services and consequently, could place constraints on the levels of overall pricing, which could have a material effect on our net revenues and results of operations.
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Additional state and federal health care reform measures may be adopted in the future, any of which could have a material adverse effect on our ability to successfully commercialize our products and on our industry in general. For example, the U.S. government has in the past considered, is currently considering, and may in the future consider, health care policies and proposals intended to curb rising health care costs, including those that could significantly affect both private and public reimbursement for health care services. Further, state and local governments, as well as a number of foreign governments, are also considering or have adopted similar types of policies. Future significant changes in the health care system in the U.S. or elsewhere, and current uncertainty about whether and how changes may be implemented, could have a negative impact on the demand for our products. We are unable to predict whether health care policies, including policies stemming from legislation or regulations affecting our business, may be proposed or enacted in the future, what effect such policies would have on our business, or the effect that ongoing uncertainty about these matters will have on the purchasing decisions of our customers.
Efforts to reduce the U.S. federal deficit could adversely affect our results of operations.
Any reductions in government health care spending or research funding in an effort to reduce the U.S. federal deficit could result in reduced demand for our products or additional pricing pressure. Further, there is ongoing uncertainty regarding the federal budget and federal spending levels, including the possible impacts of a failure to increase the “debt ceiling.” Any U.S. government default on its debt could have broad macroeconomic effects that could, among other things, raise our borrowing costs. Any future shutdown of the federal government or failure to enact annual appropriations could also have a material adverse impact on our consolidated financial condition, and results of operations.
Global market, political, environmental, and economic conditions, including those related to the financial markets, could have a material adverse effect on our operating results, financial condition, and liquidity.
Our business is sensitive to changes in general economic, political and environmental conditions, both inside and outside the U.S. Conditions such as the following, among others, may create additional risk to our results of operations: (i) continuing uncertainties in the eurozone; (ii) the effects of climate change regulation; (iii) the global effects of the ongoing
Instability in the global economy and financial markets can adversely affect our business in several ways, including limiting our customers’ ability to obtain sufficient credit or pay for our products within the terms of sale. Competition could further intensify among the manufacturers and distributors with whom we compete for volume and market share, resulting in lower net revenue due to steeper discounts and product
The U.K. left the 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 condition, and results of operations.
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We depend on international net revenues, and our operating results may be adversely impacted by foreign currency, regulatory or other developments affecting international markets.
We sell products and services into approximately 70 countries. For fiscal 2021,2022, approximately 40%one-third of our consolidated net revenues were transacted in currencies other than the U.S. dollar. We are subject to the risks associated with fluctuations in the exchange rates for the Australian dollar, British pound, Canadian dollar, Chinese yuan, Euro, and New Israeli shekel. In addition, we have manufacturing operations, suppliers, and employees located outside the U.S. Since our growth strategy depends in part on our ability to further penetrate markets outside the U.S., we expect to continue to increase our revenue and presence outside the U.S., including in emerging markets.
Our international business is subject to risks that are often encountered in
interruption in the transportation of materials to us and finished goods to our customers, including conditions where recovery from natural disasters may be delayed due to country-specific infrastructure and resources;
differences in terms of sale, including payment terms;
local product preferences and product requirements;
changes in a country’s or region’s political or economic condition, including with respect to safety and health issues;
trade protection measures and import or export licensing requirements;
unexpected changes in laws or regulatory requirements, including unfavorable changes with respect to tax, trade or sanctions compliance matters;
limitations on ownership and on repatriation of earnings and cash;
difficulty in staffing and managing widespread operations;
differing labor regulations;
difficulties in enforcing contract and property rights under local law;
difficulties in implementing restructuring actions on a timely or comprehensive basis; and
differing protection of intellectual property.
Such risks may be more likely or pronounced in emerging markets, where our operations may be subject to greater uncertainty due to increased volatility associated with the developing nature of their economic, legal, and governmental systems.
If we are unable to successfully manage the risks associated with expanding our global business or to adequately manage operational fluctuations, it could adversely affect our business, consolidated financial condition, or results of operations.
New tariffs and other trade measures could adversely affect our operating results.
The current U.S. administration has expressed strong concerns about imports from countries that it perceives as engaging in unfair trade practices, and it is possible the administration could impose import duties or other restrictions on products, components or raw materials sourced from those countries, which may include countries from which we import components or raw materials. We are currently not aware of any new import duties imposed on our products. Any such new import duties or restrictions could have a material adverse effect on our business, results of operations or financial condition. Moreover, these new tariffs, or other changes in U.S. trade policy, could trigger retaliatory actions by affected countries. Certain foreign governments have instituted or are considering imposing trade sanctions on certain U.S. goods.
Other foreign governments are considering the imposition of sanctions that will deny U.S. companies access to critical raw materials. A “trade war” of this nature or other governmental actions related to tariffs or international trade agreements or policies has the potential to adversely impact demand for our products, our costs, customers, manufacturers, suppliers and/or the economic environments in which we operate and, thus may adversely impact our businesses. In addition, there may be changes to existing trade agreements, like the North American Free Trade Agreement (“NAFTA”) and its anticipated successor agreement, the U.S.-Mexico-Canada Agreement (“USMCA”), which is still subject to approval by the U.S., Mexico and Canada, greater restrictions on free trade generally, and significant increases in tariffs on goods imported into the U.S., particularly tariffs on products manufactured in Mexico, among other possible changes. It remains unclear what the U.S. administration or foreign governments will or will not do with respect to tariffs, NAFTA, USMCA or other international trade agreements and policies. Any changes to NAFTA (or subsequent trade agreements) could impact our operations in countries where we manufacture or sell products, or source components or materials, which could adversely affect our business and results of operations.
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If product liability lawsuits are successfully brought against us, we may incur substantial liabilities and may have to limit or cease sales of our products.
The testing, manufacturing and marketing of medical diagnostic products involves an inherent risk of product liability claims. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit or cease sales of our products. We currently carry product liability insurance at a level we believe is commercially reasonable, although there is no assurance that it will be adequate to cover claims that may arise. In certain customer contracts, we indemnify third parties for certain product liability claims related to our products. These indemnification obligations may cause us to pay significant sums of money for claims that are covered by these indemnifications. In addition, a defect in the design or manufacture of our products could have a material adverse effect on our reputation in the industry and subject us to claims of liability for injury and otherwise. Any substantial underinsured loss resulting from such a claim could have a material adverse effect on our profitability, and the damage to our reputation in the industry could have a material adverse effect on our results of operations.
Risks Related to Our Common Stock
The market price of our common stock may be volatile and fluctuate significantly, which could result in substantial losses for stockholders and subject us to litigation.
The market price of our common stock may be subject to significant fluctuations due to numerous factors, including but not limited to the risks described in this “Risk Factors” section. In addition, the stock market in general, the NASDAQ Global Market and the market for diagnostics companies in particular may experience a loss of investor confidence. A loss of investor confidence may result in extreme price and volume fluctuations in our common stock that are unrelated or disproportionate to the operating performance of our business, financial condition or results of operations. These broad market and industry factors may materially harm the market price of our common stock and expose us to securities class-action litigation. Class-action litigation, even if unsuccessful, could be costly to defend and divert management’s attention and resources, which could further materially harm our consolidated financial condition and results of operations.
Our business could be negatively impacted as a result of shareholder activism, an unsolicited takeover proposal or a proxy contest.
In recent years, proxy contests and other forms of stockholder activism have been directed against numerous public companies. If a proxy contest or an unsolicited takeover proposal is made with respect to us, we could incur significant costs in defending our company, which would have an adverse effect on our financial results. Shareholder activists may also seek to involve themselves in the governance, strategic direction and operations of our company. Such proposals may disrupt our business and divert the attention of our management and employees, and any perceived uncertainties as to our future direction resulting from such a situation could result in the loss of potential business opportunities, be exploited by our competitors, cause concern to our current or potential customers, and make it more difficult to attract and retain qualified personnel and business partners, all of which could adversely affect our business. In addition, actions of activist stockholders may cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.
The authority of our board to issue preferred stock and the effects of certain provisions of Ohio corporation law may discourage takeover bids.
Our board of directors has the authority to issue up to 1,000one million shares of undesignated preferred stock and to determine the rights, preferences, privileges and restrictions, including voting rights, of such shares without any future vote or action by the shareholders. The issuance of preferred stock under certain circumstances could have the effect of delaying or preventing a change in control of our company. Ohio corporation law contains provisions that may discourage takeover bids for our company that have not been negotiated with the board of directors. Such provisions could limit the price that investors might be willing to pay in the future for shares of our common stock. In addition, sales of substantial amounts of shares in the public market could adversely affect the market price of our common stock and our ability to raise additional capital at a price favorable to us.
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General Risk Factors
One or more cybersecurity incidents may adversely impact our financial condition, results of operations and reputation.
Our operations involve the use of multiple systems that process, store and transmit sensitive information about our customers, suppliers, employees, financial position, operating results and strategies. We face global cybersecurity risks and threats on a continual and ongoing basis, which include, but are not limited to, attempts to access systems and information, computer viruses, or
Our business could be negatively affected if we are unable to attract, hire and retain key personnel.
Our future success depends on our continued ability to attract, hire and retain highly qualified personnel, including our executive officers and scientific, technical, sales and marketing employees, and their ability to manage growth successfully. If such key employees were to leave and we were unable to obtain adequate replacements, our results of operations could be adversely affected.
Our bank credit agreement imposes restrictions with respect to our operations, which could adversely impact our business.
Our bank credit agreement contains a number of financial covenants that require us to meet certain financial ratios and tests. If we fail to comply with the obligations in the credit agreement, we would be in default under the credit agreement. If an event of default is not cured or waived, it could result in acceleration of any indebtedness under our credit agreement, which could have a material adverse effect on our business. At September 30, 2021,2022, we had $60,000$25,000 outstanding on a $160,000$200,000 bank revolving credit facility.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
Our corporate offices are located in the Village of Newtown, a suburb of Cincinnati, Ohio. Our Newtown campus includes sites for diagnostic test manufacturing and distribution, immunoassay research and development and administrative functions. Our Newtown campus also includes a new facility where we are expanding and automating our Revogene diagnostic test device manufacturing. We also have diagnostic test manufacturing and distribution sites in Billerica, Massachusetts (blood-chemistry), Modi’in, Israel (BreathID and BreathTek urea breath testing systems), and Quebec City, Quebec, Canada (Revogene diagnostic test device and instrument manufacturing). Our sites in Billerica, Modi’in and Quebec City also include research and development functions. We also operate a Diagnostics sales and distribution center near Milan, Italy, and rent office space in Paris, France and
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Our Life Science operations are conducted in several facilities in Memphis, Tennessee; Boca Raton, Florida; North Brunswick, New Jersey; London, England; Luckenwalde, Germany; Sydney, Australia; and Beijing, China. Manufacturing of molecular reagents occurs in our London and Luckenwalde sites. Manufacturing of immunoassay reagents occurs in our Memphis and Boca Raton sites. Our sitesites in London and North Brunswick also includesinclude our primary research and development function.
ITEM 3.
LEGAL PROCEEDINGS
We are a party to various litigation matters that we believe are in the normal course of business.business, including matters related to the previously discussed pending merger. Aside from the matters discussed below, the ultimate resolution of these matters is not expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows, and no material provision has been made in the Consolidated Financial Statements for these matters.
Legal Matter Relating to LeadCare Product Line
On April 17, 2018, the Company’s wholly owned subsidiary Magellan received a subpoena from the DOJU.S. Department of Justice (“DOJ”) regarding its LeadCare product line. The subpoena outlinesoutlined documents to be produced, and the Company is cooperating with the DOJ in this matter. The Company maintains rigorous policies and procedures to promote compliance with applicable regulatory agencies and requirements and is working with the DOJ to promptly respond to the subpoena, including responding to additional information requests that have followed receipt of the subpoena in April 2018. The Company has executed tolling agreements to extend the statute of limitations. In March and April 2021, DOJ issued two subpoenas, both to former employees of Magellan, calling for witnesses to testify before a federal grand jury related to this matter. The March 2021 subpoena was issued to a former employee of Magellan, and the April subpoena was issued to a current employee of Magellan. In September and October 2021, DOJ issued additional subpoenas to individuals seeking testimony and documents in connection with its ongoing investigation. It is the Company’s understanding that multiple witnesses have testified before the federal grand jury and the DOJ’s investigation is ongoing. Discussions continue with the DOJ to explore resolution of the matter. As of September 30, 2022, in accordance with applicable accounting guidance, the Company believes a loss is probable in the DOJ LeadCare legal matter and has accrued $10,000 as an estimate of the cost to resolve the DOJ LeadCare legal matter, which is reflected in litigation and select legal costs within the Consolidated Statement of Operations for the year ended September 30, 2022. The Company cannot predict when the investigation will be resolved or the outcome of the investigation, or its potential impact onand the ultimate resolution of the DOJ LeadCare legal matter may exceed the amount accrued at September 30, 2022 and could be material to the Company. Approximately $2,803, $2,035 and $1,585 of expenseExpense for attorneys’ fees related to this matter totaling $3,510, $2,803 and $2,035 is included within the Consolidated Statements of Operations for the years ended September 30, 2022, 2021 2020 and 2019,2020, respectively. See “Lead Testing Matters” beginning on page 2932 within MD&A.
Litigation Relating to the Merger
On September 9, 2022, a purported shareholder of the Company filed an action against the Company and the members of the Company’s board of directors in the United States District Court for the Southern District of New York, captioned Warren v. Meridian Bioscience Inc., No. 1:22-cv-07727 (S.D.N.Y.). This was followed by four other substantively similar actions also brought by purported shareholders against the Company and the members of the Company’s board of directors. These were Stein v. Meridian Bioscience Inc., No. 1:22-cv-07814 (S.D.N.Y.), filed on September 13, 2022; Coffman v. Meridian Bioscience Inc., No. 1:22-cv-07984 (S.D.N.Y.), filed on September 19, 2022; Morgan v. Meridian Bioscience Inc., No. 1:22-cv-08057 (S.D.N.Y.), filed on September 21, 2022; and Scott v. Meridian Bioscience Inc., No. 1:22-cv-08114 (S.D.N.Y.), filed on September 22, 2022. Plaintiffs in each case generally alleged that the proxy statements filed by Meridian with the U.S. Securities and Exchange Commission on August 25, 2022 and September 8, 2022 in connection with the Merger misrepresented and/or omitted certain material information and asserted violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934. Among other relief, the plaintiffs in each case sought injunctive relief, including directing Meridian to disclose the allegedly omitted material information, enjoining the completion of the Merger, rescinding the Merger in the event it is consummated, and awarding rescissory damages. While Meridian believed that the actions were without merit, on September 30, 2022, Meridian voluntarily filed a Form 8-K that made certain supplemental disclosures related to the Merger. Thereafter, plaintiffs in all five actions voluntarily dismissed their complaints without prejudice.
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ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
PART II.
ITEM 5.
MARKET FOR REGISTRANT’S COMMON
EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock trades on the NASDAQ Global Select Market under the symbol VIVO.
Holders of our Common Stock
As of September 30, 2021,2022, there were approximately 550490 holders of record and approximately 24,03023,850 beneficial owners of our common shares.
Dividends
During 2019, the Company suspended the payment of itsa quarterly cash dividend which had previously been established at an indicated annual cash dividend rate of $0.50 per share for fiscal 2019. The dividend was suspended as part of the Company’s regular evaluation of its capital allocation, with the action taken in order to deploy cash into new product development activities and to preserve capital resources and liquidity for general corporate purposes. Any declaration and amount of dividends will be determined by the board of directors in its discretion based upon its evaluation of earnings, cash flow requirements, business developments and opportunities, and any other factors the board of directors determines are relevant to its evaluation. At this time, we do not expect to resume paying cash dividends. We paid dividends of $0.25 per common share in 2019.
Stock Total Return Performance
The graph below compares the cumulative
Bio-Rad Laboratories, Inc., Bio-Techne Corporation, bioMerieux S.A., DiaSorin S.p.a., Hologic, Inc., Myriad Genetics, Inc., OraSure Technologies, Inc., Qiagen N.V., QuidelOrtho Corporation, and ten companies, respectively, whose individual companies are listed in footnotes 1 and 2 below. Trinity Biotech Plc.
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock, in the index and in each of the peer groupsgroup (including reinvestment of dividends) on September 30, 2016,2017, and its relative performance is tracked through September 30, 2021.2022.
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ITEM 6.
INTENTIONALLY OMITTED
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 Form1112 through 2425 of this Annual Report.
In the discussion that follows, all dollar amounts are in thousands (both tables and text), except per share data.
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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
Reportable Segments
Our reportable segments are Diagnostics and Life Science. The Diagnostics segment consists of manufacturing operations for infectious disease products in Cincinnati, Ohio; Quebec City, Canada; and Modi’in, Israel; and manufacturing operations for blood chemistry products in Billerica, Massachusetts (near Boston). These diagnostic test products are sold and distributed in the countries comprising North and Latin America (the “Americas”); Europe, Middle East and Africa (“EMEA”); and other countries outside of the Americas and EMEA (rest of the world, or “ROW”). The Life Science segment consists of manufacturing operations in Memphis, Tennessee; Boca Raton, Florida; London, England; and Luckenwalde, Germany, and the sale and distribution of bulk antigens, antibodies, immunoassay blocking reagents, specialized Polymerase Chain Reaction (“PCR”) master mixes, isothermal mixes, enzymes, nucleotides, and bioresearch reagents domestically and abroad, including a sales and business development facility, with outsourced distribution capabilities, in Beijing, China to further pursue growing revenue opportunities in Asia.
Recent Developments
Agreement and Plan of Merger
On July 7, 2022, the Company entered into an Agreement and Plan of Merger (as it may be amended, supplemented or otherwise modified from time to time, the “Merger Agreement”) with SD Biosensor, Inc., a corporation with limited liability organized under the laws of the Republic of Korea (“SDB”), Columbus Holding Company, a Delaware corporation (“Parent”), and Madeira Acquisition Corp., an Ohio corporation and a direct wholly owned subsidiary of Parent (“Merger Sub”). Meridian is informed that SJL Partners, LLC (“SJL”) is currently the sole shareholder of Parent, and SDB together with SJL will be the sole shareholders of Parent as of the closing of the Merger. Pursuant to the Merger Agreement, Merger Sub will merge with and into Meridian (the “Merger”), with Meridian surviving the Merger as a direct wholly owned subsidiary of Parent.
At the effective time of the proposed Merger (the “Effective Time”), each share of common stock, no par value per share, of the Company issued and outstanding as of immediately prior to the Effective Time (other than dissenting shares or shares of the Company’s common stock held by the Company as treasury stock or owned by SDB, Merger Sub or any subsidiary of the Company or SDB) will be cancelled and cease to exist and automatically convert into the right to receive cash in an amount equal to $34.00, without interest (the “Merger Consideration”).
Consummation of the Merger is subject to customary closing conditions, including, without limitation: (i) the absence of certain legal impediments; and (ii) the condition that no Specified Outcome, as such term is defined in the Merger Agreement, related to the DOJ LeadCare legal matter (which is described in the section entitled “Legal Matter Relating to LeadCare Product Line” of Item 3. “Legal Proceedings”) has occurred or is reasonably likely to occur.
On November 21, 2022, the parties received clearance from the Committee on Foreign Investment in the United States with respect to the Merger and the transactions contemplated by the Merger Agreement.
The Merger Agreement contains certain termination rights for the Company and SDB. In addition to the foregoing termination right, and subject to certain limitations: (i) the Company or SDB may terminate the Merger Agreement if the Merger is not consummated by January 6, 2023; and (ii) the Company and SDB may mutually agree to terminate the Merger Agreement.
The foregoing description of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Merger Agreement, which is attached as an exhibit to our Current Report on Form 8-K filed with the SEC on July 7, 2022.
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The Company incurred transaction related costs of approximately $6,800 in the year ended September 30, 2022 related to the Merger, which is recorded in acquisition and transaction related costs in the Consolidated Statements of Operations.
Impact of
Starting in the latter half of fiscal 2020 and throughout fiscal 2021,continuing to the
Our Life Science segment’s products have beenwere well positioned to respond to in vitro device (“IVD”) manufacturers’ needsincreased demand for reagents forused in the manufacture of molecular, rapid antigen and serology tests. Consequently, through the end of the second quarter of fiscal 2022, our Life Science segment grew itsconsistently delivered significantly higher levels of net revenues over 100% in fiscal 2020 and delivered record operating income than those achieved prior to the COVID-19 pandemic, with the peak to date in such levels occurring during the second quarter of fiscal 2022. This revenue peak has been followed by a significant decrease in such net revenue levels during the fiscal 2022 third and margin, demonstrating what this segment could achieve at a much larger scale. This higher-than-historical levelfourth quarters, reflecting the softening in demand for COVID-19 related reagents during the second half of growth in the Life Science segment continued inour 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 generally been negatively impacted by the health systems’ increased focus on
Despite these recent
Employee Safety
While the majority of our employee base in the U.S. has returned to working
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,While we have experienced extended lead times for certain select raw materials, delays and allocations for raw materials have to date 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
Since the second half of fiscal 2021, we have experienced input cost inflation, including materials, labor and transportation costs. Pricing actions and supply chain productivity initiatives have mitigated and are expected to continue to mitigate some of these inflationary pressures, but we may not be successful in fully offsetting these incremental costs, which could have an impact on page 29.the Company’s results of operations and cash flows in the future.
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Product Development and Clinical Trials
Our Diagnostics segment’s new product development programs are progressingcontinuing to progress at a slower pace than normal, due in part asto the prevalence of certain infectious diseases hashaving been much lower than normal during the
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
Our Diagnostics segment manufactures, markets and sells a number of molecular, immunoassay, blood chemistry and urea breath tests
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Lead Testing Matters
On September 1, 2021, the Company’s wholly owned subsidiary Magellan announced the expansion of the Class I voluntary recall of its LeadCare test kits for the detection of lead in blood, which it had initiated in May 2021 after identifying an ongoing issue with the testing controls included in certain manufactured lots of its LeadCare test kits. As a result of the identified issue, impacted test kit lots could potentially underestimate blood lead levels when processing patient blood samples. Although it was initially believed that the root cause of the issue related to the plastic containers used for the treatment reagent, additional studies have indicated that the root cause related to the third-party-sourced cardboard trays that held the treatment reagent containers. Upon correction of the identified supplier issue, shipment of product resumed during the second quarter of fiscal 2022. The Company is workingcontinues to work closely with the FDA in its execution of the recall activities, which includehas included Magellan notifying customers and distributors affected by the recall and providing instructions for the return of impacted test kits. Although evaluation ofOf the recall and the related notification process is ongoing, approximately $5,100 has been estimated and accrued as of September 30, 2021 to cover the currently anticipatedestimated costs of the recall. In total, approximately $5,600recall, it was estimated at September 30, 2022 that the remaining costs of recall-related expense has been includedthe recall exceeded the amount accrued, and as a result, an adjustment was made to the product recall reserve. The effect of this adjustment is reflected in product recall costs (adjustment) within the Consolidated Statement of Operations for the year ended September 30, 2021.2022, and results in approximately $430 of remaining accrued product recall costs reflected in the Consolidated Balance Sheet as of September 30, 2022. Anticipated recall-related costs primarily include temporary labor costs, product replacement and/or refund costs, mailing/shipping costs, attorneys’ fees and other miscellaneous costs.
As described in Item 3. “Legal Proceedings”, on April 17, 2018, the Company’s wholly owned subsidiary Magellan received a subpoena from the U.S. Department of Justice (“DOJ”) regarding its LeadCare product line. The subpoena outlinesoutlined documents to be produced, and the Company is cooperating with the DOJ in this matter. The Company maintains rigorous policies and procedures to promote compliance with applicable regulatory agencies and requirements and is working with the DOJ to promptly respond to the subpoena, including responding to additional information requests that have followed receipt of the subpoena in April 2018. The Company has executed tolling agreements to extend the statute of limitations. In March and April 2021, DOJ issued two subpoenas, both to former employees of Magellan, calling for witnesses to testify before a federal grand jury related to this matter. The March 2021 subpoena was issued to a former employee of Magellan, and the April subpoena was issued to a current employee of Magellan. In September and October 2021, DOJ issued additional subpoenas to individuals seeking testimony and documents in connection with its ongoing investigation. It is the Company’s understanding that multiple witnesses have testified before the federal grand jury and the DOJ’s investigation is ongoing. Discussions continue with the DOJ to explore resolution of the matter. As of September 30, 2022, in accordance with applicable accounting guidance, the Company believes a loss is probable in the DOJ LeadCare legal matter and has accrued $10,000 as an estimate of the cost to resolve the DOJ LeadCare legal matter, which is reflected in litigation and select legal costs within the Consolidated Statement of Operations for the year ended September 30, 2022. The Company cannot predict when the investigation will be resolved or the outcome of the investigation, or its potential impact onand the ultimate resolution of the DOJ LeadCare legal matter may exceed the amount accrued at September 30, 2022 and could be material to the Company. Approximately $2,803, $2,035 and $1,585 of expenseExpense for attorneys’ fees related to this matter totaling $3,510, $2,803 and $2,035 is included within the Consolidated Statements of Operations for the years ended September 30, 2022, 2021 and 2020, and 2019, respectively.
Magellan submitted 510(k) applications in December 2018, seeking to reinstate venous blood sample-types for its LeadCare II, LeadCare Plus and LeadCare Ultra testing systems. In the second fiscal quarter of 2019, the FDA informed Magellan that each of these 510(k) applications had been put on Additional Information hold. On July 15, 2019, we provided responses to the FDA’s requests for Additional Information. These 510(k) applications have since expired and are no longer under FDA review. Further, while Magellan’s LeadCare testing systems remain cleared for marketing by the FDA and permitted for use with capillary blood samples, the FDA advised that it has commissioned a third-party study of the Company’s LeadCare testing systems using both venous and capillary blood samples. According to the FDA, the results of the field study will be used in conjunction with other information to determine whether further action by the FDA or the CDC is necessary to protect the public health. The Company intends to fully cooperate with the FDA or CDC on any
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During October 2019, the FDA performed a
During June 2021, the FDA performed an inspection of Magellan’s manufacturing facility. As a result of this inspection, the FDA issued one Form 483 observation. On August 3, 2021, FDA sent Magellan a
Results of Operations
Fourth Quarter
Net earnings for the fourth quarter of fiscal 2021 increased 3%2022 decreased 14% to $6,657,$5,705, or $0.15$0.13 per diluted share, from net earnings for the fourth quarter of fiscal 20202021 of $6,493,$6,657, or $0.15 per diluted share. The level of net earnings in the fourth quarter of fiscal 2022 results primarily from the decline in net revenues and operating income in our Life Science segment, stemming from the continued softening in demand for COVID-19 related reagents during the quarter. As it relates to our Life Science segment net revenues, a significant number of our Life Science segment customers now use our molecular reagents in multiple tests, including non-COVID-19 related tests. This development makes it increasingly difficult to accurately estimate the portion of molecular reagent sales related specifically to COVID-19. As a result, we are no longer reporting the portion of Life Science segment net revenues related to COVID-19. Such net revenues were identified and reported throughout fiscal 2021 and totaled approximately $23,300 in the fourth quarter of fiscal 2021. By contrast, the fourth quarter of fiscal 2021 was adversely affected by approximately $5,600, or $0.10 per diluted share, of LeadCare product recall expenses and a $4,596, or $0.08 per diluted share, upward adjustment to the fair value of acquisition consideration related to the acquisition of the business of GenePOC, Inc. (“GenePOC”) (i.e., incremental expense), offsetting the impact of higher net revenues and resulting gross profit. Other key events occurring in the fourth quarter of 2021 include the acquisition of the BreathTek business in July 2021 and the August 2021 settlement of the contingent acquisition consideration related to GenePOC (see Note 4,
Consolidated Financial Statements, respectively).
Net revenues from the Diagnostics segment for the fourth quarter of fiscal 20212022 increased 15%14% to $34,301,$39,187, compared to the fourth quarter of fiscal 2020 (also 15% increase on a constant-currency basis),2021, comprised of a 22% increase in non-molecular assay products, partially offset by a 27% decrease in molecular assay products and a 14% increase in
With a 16% increase53% decrease in net revenues from molecular reagents products and a 33% increasean 8% decrease in net revenues from immunological reagents products, net revenues for our Life Science segment increased 22%decreased 37% to $41,903$26,488 during the fourth quarter of fiscal 20212022 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
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Fiscal Year
Net earnings for fiscal 2021 increased 55%2022 decreased 41% to $71,407,$42,459, or $1.62$0.96 per diluted share, from net earnings for fiscal 20202021 of $46,186,$71,407, or $1.07$1.62 per diluted share. The level of net earnings in fiscal 2021 was affected predominantly by2022 reflects primarily: (i) the strongoverall increase in revenuesoperating expenses described in the Operating Expenses section below; and operating income(ii) the decrease in ourgross profit margins resulting from immunological reagent products representing a higher percentage of both Life Science segment stemming primarily fromand total consolidated net revenues in the demand for reagents usedfiscal 2022 period, compared to higher margin molecular reagent products in
Consolidated net revenues for fiscal 20212022 totaled $317,896,$333,018, an increase of 25%5% compared to fiscal 2020 (22% increase on a constant-currency basis).
Diagnostics segment net revenues increased 5%22% to $127,760$155,903 in fiscal 2021 (4% increase on a constant-currency basis),2022, comprised of a 13%27% increase in non-molecular assay products including the addition of sales of the BreathTek product, which was acquired July 31, 2021, partially offset by a 5% decrease in molecular assay products and a 10% increase in
With a 30% decrease in acquisition costs resulting from the Exalenz transaction in fiscal 2020.
REVENUE OVERVIEW
Below are analyses of the Company’s revenue,net revenues, 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
See Note 2,
Following is a discussion of the net revenues generated by these product platforms/types and/or disease states:
Diagnostics Segment Products
The Diagnostics segment’s overall 5%22% growth in revenuenet revenues during fiscal 20212022 primarily results from the combined effects of the following:
Volume growth in the gastrointestinal product family, benefitting from: (i)including the benefit of a full year of revenue from sales of BreathID instruments and tests, acquired in the April 2020 Exalenz acquisition; and (ii) two months of revenuenet revenues from sales of the BreathTek product, acquired in late July 2021;2021 (total increase in gastrointestinal product revenue of 27% in fiscal 2022, including approximately $23,100 of net revenues from BreathTek);
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Volume declines fromgrowth in sales of respiratory illness products, comprised of tests for Group A Strep, Mycoplasma pneumonia, Influenza, and Pertussis, among others, reflecting an increase in the decreased focus on testing for these illnesses throughoutcompared to fiscal 2021 in the midst of the COVID-19 pandemic (total increase in respiratory illness products of 51% in fiscal 2022);
Volume declines from sales of blood chemistry products due to the ongoing LeadCare product recall, which commenced in May 2021, ($2,136with shipment of product resuming in the second quarter of fiscal 2022 (approximately $1,200 decrease in revenuenet revenues in fiscal 2021,2022, compared to fiscal 2020).2021); and
• | Ongoing pricing pressure on our H. pylori stool antigen tests, which contributed approximately $2,200 of unfavorable price variance from customers in the U.S. |
Life Science Segment Products
During fiscal 2022, net revenues since fiscal 2019, including the 43% year-over-year growth in revenue during fiscal 2021, primarily results from the combined effects of the following:
Fiscal 2020
Increased 34% in fiscal 2020;total; 17% for molecular reagents and
Fiscal 2019
Increased 175% in large part from obtaining business from
Foreign Currency
Fluctuations in foreign currency exchange rates in fiscal 20212022 compared to fiscal 20202021 had an approximate $5,200 unfavorable impact on fiscal 2022 consolidated net revenues; $1,700 within the Diagnostics segment and $3,500 within the Life Science segment. This compares to year-to-year currency exchange rates having an approximate $9,200 favorable impact on fiscal 2021 consolidated net revenues;revenues in fiscal 2021; $1,300 within the Diagnostics segment and $7,900 within the Life Science segment. This compares to
Significant Customers
Revenue concentrations related to certain customers within our Diagnostics and Life Science segments are set forth in Note 15,
Gross Profit:
2021 | 2020 | 2021 vs. 2020 Inc (Dec) | ||||||||||
Gross Profit | $ | 201,148 | $ | 156,248 | 29 | % | ||||||
Gross Profit Margin | 63 | % | 62 | % | 1 point |
2022 | 2021 | 2022 vs. 2021 Inc (Dec) | ||||||||||
Gross Profit | $ | 188,356 | $ | 201,148 | (6 | )% | ||||||
Gross Profit Margin | 57 | % | 63 | % | -6 points |
Overall gross profit margins during both fiscal 2021 and 20202022 have been favorablyunfavorably impacted by greater contributionsa decline in net revenues from our Life Science segment’s molecular reagent products, which are some of our highest margin products. During fiscal 2021, which included the peak2022, approximately 28% of the
Additionally, overall gross profit margins in fiscal 20212022 have been unfavorably impacted in our Diagnostics segment by production capacity
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Operating Expenses—Segment Detail and Corporate
Research & Development | Selling & Marketing | General & Administrative | Other (1) | Total Operating Expenses | ||||||||||||||||
Fiscal 2021: | ||||||||||||||||||||
Diagnostics | $ | 21,406 | $ | 21,430 | $ | 24,055 | $ | 5,079 | $ | 71,970 | ||||||||||
Life Science | 2,505 | 5,350 | 13,501 | — | 21,356 | |||||||||||||||
Corporate | — | — | 11,985 | 2,803 | 14,788 | |||||||||||||||
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Total 2021 Expenses | $ | 23,911 | $ | 26,780 | $ | 49,541 | $ | 7,882 | $ | 108,114 | ||||||||||
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Fiscal 2022: | ||||||||||||||||||||
Diagnostics | $ | 21,424 | $ | 24,268 | $ | 28,563 | $ | 759 | $ | 75,014 | ||||||||||
Life Science | 2,911 | 7,005 | 14,176 | 152 | 24,244 | |||||||||||||||
Corporate | — | — | 14,409 | 20,298 | 34,707 | |||||||||||||||
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Total 2022 Expenses | $ | 24,335 | $ | 31,273 | $ | 57,148 | $ | 21,209 | $ | 133,965 | ||||||||||
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(1) | Product recall expenses are included within the Diagnostics segment’s fiscal 2021 other expenses, while the Diagnostics segment’s fiscal 2022 other expenses include an adjustment to the accrual for such product recall costs. |
Operating expenses in fiscal 2022 increased $25,851 to $133,965. Major components of this increase were as follows:
Increased Selling & Marketing costs in both the Diagnostics and Life Science segments, primarily reflecting the effects of filling certain open positions and the easing of certain travel and meeting restrictions imposed during the prior years in connection with the COVID-19 pandemic;
Increased General & Administrative costs, primarily reflecting the combined effects of: (i) increased purchase accounting amortization expense; and (ii) additional investment in incentive compensation tied to the Company’s financial performance;
A $6,548 increase in acquisition and transaction related costs, primarily within Corporate and related to the previously discussed pending merger (see “Agreement and Plan of Merger” above); and
A $10,707 increase in litigation and select legal costs, reflected within Corporate and primarily related to the previously discussed LeadCare legal matter (see “Lead Testing Matters” above).
Offsetting these increases was a $5,946 total net decrease in product recall costs within our Diagnostics segment, primarily related to the LeadCare product recall initiated in fiscal 2021.
Operating Income
Operating income decreased 42% in fiscal 2022, following a 52% increase in fiscal 2021, as a result of the factors discussed above.
Other Expense
Other expense, net primarily includes: (i) interest costs on the Company’s long-term borrowings and contingent grant obligations due to the Israel Innovation Authority; (ii) grant income under the RADx initiative (fiscal 2021; see Note 14, “National Institutes of Health Contracts” of the Consolidated Financial Statements); (iii) a $935 gain on the termination of interest rate swap contracts (fiscal 2022); and (iv) net currency gains and losses. Interest costs related to the revolving credit facility with a commercial bank were $1,057 and $1,420 in fiscal 2022 and 2021, respectively. The varying levels of interest costs on the revolving credit facility reflect the following approximate levels of average debt outstanding, as detailed in Note 10, “Bank Credit Arrangements” of the Consolidated Financial Statements: (i) fiscal 2022-$39,233; and (ii) fiscal 2021-$56,505.
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Income Taxes
The effective rate for income taxes was 22% and 21% for fiscal 2022 and 2021, respectively. The increase in effective tax rates primarily results from the anticipated non-deductibility of the previously discussed DOJ LeadCare legal matter (see “Lead Testing Matters” above), partially offset by various tax effects associated with the Company’s currently unremitted earnings of international subsidiaries.
Impact of Inflation
To the extent feasible, we have consistently followed the practice of reviewing our prices to consider the impacts of inflation on salaries and fringe benefits for employees, the cost of purchased materials and services, and transportation costs. Inflation and changing prices did not have a material adverse impact on our gross margin, net revenues or operating income in fiscal 2022 or fiscal 2021.
Liquidity and Capital Resources:
Liquidity
Our cash flow and financing requirements are determined by analyses of operating and capital spending budgets and debt service. We have historically maintained a credit facility to augment working capital requirements and to respond quickly to acquisition opportunities.
We have an investment policy that guides the holdings of our investment portfolio, which presently consists of bank savings accounts and institutional money market funds. Our objectives in managing the investment portfolio are to: (i) preserve capital; (ii) provide sufficient liquidity to meet working capital requirements and fund strategic objectives such as acquisitions; and (iii) capture a market rate of return commensurate with market conditions and our policy’s investment eligibility criteria. As we look forward, we will continue to manage the holdings of our investment portfolio with preservation of capital being the primary objective.
We intend to continue to fund our working capital requirements from current cash flows from operating activities and cash on hand, and such sources are anticipated to be adequate to fund working capital requirements, capital expenditures and debt service during the next twelve months. However, if needed, we also have an additional source of liquidity through the amount remaining available on our $200,000 bank revolving credit facility, which totaled $175,000 as of September 30, 2022. The Company also maintains a shelf registration statement on file with the SEC. Our liquidity needs may change if overall economic conditions worsen and/or liquidity and credit within the financial markets tightens for an extended period, and such conditions impact the collectability of our customer accounts receivable, impact credit terms with our vendors, or disrupt the supply of raw materials and services.
As of September 30, 2022, our cash and cash equivalents balance was $81,453, an increase of $31,682 compared to September 30, 2021. This net increase primarily results from the combined net effects of: (i) generating $82,361 of cash flow from operations, an increase of 23% over fiscal 2021; (ii) using cash to pay down $35,000 on the revolving credit facility; (iii) using cash to acquire property, plant and equipment ($7,365 net of RADx grant monies received); and (iv) acquiring EUPROTEIN, Inc. ($3,750) (see Note 4, “Business Combinations” of the Consolidated Financial Statements). In addition, the net balance of cash and cash equivalents was reduced by approximately $5,300 as of September 30, 2022, as a result of the movement in foreign currency exchange rates, specifically the British pound and Euro, since September 30, 2021.
Considering these factors, our balance of cash and cash equivalents on hand exceeded our total debt (defined as bank debt, government grant obligations and obligations related to acquisitions) by approximately $49,700 at September 30, 2022.
Capital Resources
As described in Note 10, “Bank Credit Arrangements” of the Consolidated Financial Statements, the Company maintains a $200,000 credit facility, which is secured by substantially all our U.S. assets and includes certain restrictive financial covenants. As of September 30, 2022, the Company was in compliance with all covenants. The Company also maintains a shelf registration statement on file with the SEC.
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Our capital expenditures totaled $8,615 for fiscal 2022, $1,250 of which was offset by receipts under the RADx grant initiative (see Note 14, “National Institutes of Health Contracts” of the Consolidated Financial Statements), and which largely related to expanding manufacturing capacity. During fiscal 2023, our capital expenditures are estimated to total approximately $10,000, comprised of approximately $6,500 and $3,500 in the Diagnostics and Life Science segments, respectively. Such expenditures may be funded with cash and cash equivalents on hand, operating cash flows, and/or availability under the $200,000 revolving credit facility discussed above.
Contractual Obligations:
Among the Company’s contractual obligations as of September 30, 2022 were the following (reflected along with the Note to the Consolidated Financial Statements in which the obligation is detailed):
(i) | operating leases (Note 9, “Leasing Arrangements”) |
(ii) | the revolving credit facility (Note 10, “Bank Credit Arrangements”) |
(iii) | uncertain income tax positions (Note 11, “Income Taxes”) |
(iv) | contingent government grant obligations (Note 13, “Contingent Obligations and Non-Current Liabilities”) |
The Company’s additional contractual obligations and their related due dates were as follows as of September 30, 2022:
Total | Less than 1 Year | 1-3 Years | 4-5 Years | More than 5 Years | ||||||||||||||||
Purchase obligations (1) | $ | 41,291 | $ | 40,182 | $ | 1,104 | $ | 5 | $ | — | ||||||||||
Acquisition price holdback (2) | 1,500 | 1,000 | 500 | — | — | |||||||||||||||
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Total | $ | 42,791 | $ | 41,182 | $ | 1,604 | $ | 5 | $ | — | ||||||||||
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(1) | Purchase obligations relate primarily to outstanding purchase orders for machinery and equipment, inventory, including instruments, service items, and research and development activities. These contractual commitments are not in excess of expected production requirements over the next twelve months. |
(2) | Pursuant to the purchase agreements related to the April 30, 2022 and July 31, 2021 acquisitions of EUPROTEIN Inc. and BreathTek, respectively, Meridian’s remaining consideration to be paid is comprised solely of purchase price holdbacks totaling $500 for EUPROTEIN Inc. and $1,000 for BreathTek. |
Other Commitments and Off-Balance Sheet Arrangements:
License Agreements
Meridian has entered into various license agreements that require payment of royalties based on a specified percentage of sales of related products, with such percentages generally ranging from approximately 3% to 10%. During fiscal 2022, royalty expense totaled approximately $2,300, with 40% and 60% of such expense relating to our Diagnostics and Life Science segments, respectively. This compares to a total of approximately $5,200 of royalty expense in fiscal 2021, with 25% and 75% relating to our Diagnostics and Life Science segments, respectively. Meridian expects that payments under these agreements will amount to approximately $700 in fiscal 2023, with the decrease from fiscal 2022 largely resulting from the last of the licensed patents applicable to the Alethia product line having expired during fiscal 2022.
Off-Balance Sheet Arrangements
We utilize foreign currency exchange forward contracts to limit exposure to volatility in foreign currency gains and losses related to financial assets denominated in other than the holding subsidiary’s functional currency. These contracts are generally settled within a 30-day time frame and are not formally designated or accounted for as accounting hedges. We also utilize interest rate swap agreements to limit exposure to volatility in the LIBOR interest rate in connection with the revolving credit facility. The interest rate swap agreements are designated and accounted for as accounting hedges (see Note 3, “Fair Value Measurements” of the Consolidated Financial Statements). Aside from these instruments, we do not utilize special-purpose financing vehicles or have any material undisclosed off-balance sheet arrangements.
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Market Risk Exposure:
Foreign Currency Risk
We have market risk exposure related to foreign currency transactions from our operations outside the U.S., as well as certain suppliers to our domestic businesses located outside the U.S. The foreign currencies where we have market risk exposure are the Australian dollar, British pound, Canadian dollar, Chinese yuan, Euro, and New Israeli shekel. Assessing foreign currency exposures is a component of our overall ongoing risk management process, with such currency risks managed as we deem appropriate.
Concentration of Customers/Products Risk
Our Diagnostics segment’s net revenues from sales to three customers were 29% and 33% of the Diagnostics segment’s total net revenues for fiscal 2022 and 2021, respectively, or 13% of consolidated net revenues in each fiscal year. Additionally, our three major Diagnostics segment product families – gastrointestinal, respiratory illnesses and blood chemistry – accounted for 82% and 80% of our Diagnostics segment’s net revenues during fiscal 2022 and 2021, respectively, or 39% and 32% of each year’s consolidated net revenues.
Our Life Science segment’s net revenues from sales to three diagnostics manufacturing customers were 31% and 20% of the Life Science segment’s total net revenues for fiscal 2022 and 2021, respectively, or 17% and 12% of consolidated net revenues in each fiscal year.
Critical Accounting Policies:
The Consolidated Financial Statements included in this Form 10-K have been prepared in accordance with U.S. generally accepted accounting principles. Such accounting principles require management to make judgments about estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. Listed below are the accounting policies management believes to be critical to understanding the Consolidated Financial Statements, along with reference to location of the policy discussion within the Consolidated Financial Statements. The listed policies are considered critical due to the fact that application of such polices requires the use of significant estimates and assumptions, and the carrying values of related assets and liabilities are material.
Accounting Policy | Location Within Consolidated Financial Statements | Examples of Key Estimate Assumptions | ||
DOJ LeadCare Legal Matter | Note 5 | Estimate of loss contingency | ||
Revenue Recognition | Note 1(i) | Distributor price adjustments and fee accruals | ||
Income Taxes | Note 1(l) and Note 11 | Uncertain positions and state apportionment factors |
Recent Accounting Pronouncements:
A description of accounting pronouncements recently adopted by the Company, as well as accounting pronouncements issued but not yet adopted by the Company, are set forth in Note 1(s), “Summary of Significant Accounting Policies- Recent Accounting Pronouncements” of the Consolidated Financial Statements.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Capital Resources and Market Risk Exposure above within Item 7, beginning on page 37.
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Research & Development | Selling & Marketing | General & Administrative | Other (1)(2) | Total Operating Expenses | ||||||||||||||||
Fiscal 2020: | ||||||||||||||||||||
Diagnostics | $ | 21,454 | $ | 21,172 | $ | 23,233 | $ | (1,916 | ) | $ | 63,943 | |||||||||
Life Science | 2,275 | 5,314 | 11,755 | 200 | 19,544 | |||||||||||||||
Corporate | — | — | 9,357 | 2,080 | 11,437 | |||||||||||||||
Total 2020 Expenses | $ | 23,729 | $ | 26,486 | $ | 44,345 | $ | 364 | $ | 94,924 | ||||||||||
Fiscal 2021: | ||||||||||||||||||||
Diagnostics | $ | 21,406 | $ | 21,430 | $ | 24,915 | $ | 5,079 | $ | 72,830 | ||||||||||
Life Science | 2,505 | 5,350 | 13,265 | — | 21,120 | |||||||||||||||
Corporate | — | — | 11,361 | 2,803 | 14,164 | |||||||||||||||
Total 2021 Expenses | $ | 23,911 | $ | 26,780 | $ | 49,541 | $ | 7,882 | $ | 108,114 | ||||||||||
/s/ Jack Kenny | ||||
Jack Kenny | Andrew S. Kitzmiller | |||
Chief Executive Officer | Executive Vice President and | |||
November 22, 2022 | Chief Financial Officer | |||
November 22, 2022 |
LeadCare legal matter | ||
Description of the Matters | As discussed in Note 5, at September 30, 2022, the Company has accrued $10.0 million as an estimate of the cost to settle the LeadCare legal matter with the U.S. Department of Justice (“DOJ”). As background, the Company’s wholly owned subsidiary Magellan Biosciences, Inc. (Magellan) received a subpoena from the DOJ regarding its LeadCare product |
Auditing management’s accounting for and disclosure of the estimated loss contingency from the LeadCare legal matter is especially challenging as evaluating the probability and amount of loss is subjective and requires judgment due in part to the uncertain nature of when the LeadCare legal matter will be resolved or the outcome of the investigation, and the ultimate resolution of the LeadCare legal matter. | ||
How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the identification, evaluation and disclosure of loss contingencies, including the Company’s assessment and measurement of the estimate of the probable cost and liability. To test the assessment of the probability of incurrence of a loss and the estimated loss, to the extent it was reasonably estimable, we performed audit procedures that included, |
For the Year Ended September 30, | 2022 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Revenues | $ | 333,018 | $ | 317,896 | $ | 253,667 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cost of Sales | 144,662 | 116,748 | 97,419 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gross Profit | 188,356 | 201,148 | 156,248 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Expenses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Research and development | 24,335 | 23,911 | 23,729 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Selling and marketing | 31,273 | 26,780 | 26,486 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
General and administrative | 57,148 | 49,541 | 44,345 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Product recall costs (adjustment) | (350 | ) | 5,596 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition and transaction related costs | 6,940 | 392 | 3,890 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Litigation and select legal costs | 13,510 | 2,803 | 2,080 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring costs | 1,109 | — | 687 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in fair value of acquisition consideration and settlement | — | (909 | ) | (6,293 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Operating Expenses | 133,965 | 108,114 | 94,924 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
- MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING The Internal Control – Integrated Framework, The Company’s independent registered public accounting firm has issued an attestation report on the
- To the Shareholders and the Board of Directors of Meridian Bioscience, Inc. Opinion on the We have audited the We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of September 30, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated November 22, 2022, expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
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/s/ Ernst & Young LLP We have served as the Company’s auditor since 2020. Cincinnati, Ohio November 22, 2022 - 43 - Meridian We have Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as 2020.
- To the Shareholders and the Board of Directors of Meridian Bioscience, Inc. Opinion on Internal Control Over Financial Reporting We have audited Meridian Bioscience, Inc.’s (the Company) internal control over financial reporting as of September 30, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2022, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 30, 2022 and 2021, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for years then ended, and the related notes and consolidated financial statement schedule listed in the Index to Annual Report on Form 10-K at Item 15 and our report dated November 22, 2022, expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting (“Management’s Report”). Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Cincinnati, Ohio November 22, 2022 - 45 - CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Meridian Bioscience, Inc. and Subsidiaries
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