NEW YORK (GenomeWeb) – Following Meridian Bioscience's preliminary fiscal second quarter revenues that fell short of the analysts' average estimate, investment bank Canaccord Genuity today downgraded the company's shares to a Sell rating from a previous Hold rating.
Meridian Bioscience had announced on Tuesday that its preliminary fiscal second quarter revenues are expected to be down nearly 12 percent year over year driven by a decline in revenues in its diagnostics segment.
Canaccord also cut its price target on Meridian Bioscience's shares to $11 from $17.
Canaccord analyst Mark Massaro said in a note that beyond the revenues miss and expected ongoing weakness in its molecular diagnostics business, the firm disclosed additional challenges, including rising competition in its life sciences segment in China.
Further, the US Food and Drug Administration recently told the firm that its 510(k) application to reinstate its venous blood sample-type have been put on "Additional Information" hold. Massaro said he believes that the regulatory hold adds further risk to Meridian Bioscience's lead-testing business, which accounts for 13 percent of its revenue.
Massaro noted that FDA has commissioned a third-party study of Magellan’s LeadCare testing systems using both venous and capillary blood samples, and the results will be used to determine the reinstatement of Magellan’s claims for venous blood. Meridian Bioscience acquired Magellan Biosciences in 2016.
Meridian Bioscience's molecular diagnostics revenues for fiscal Q2 are expected to decline by about 30 percent year over year, driven by ongoing competition, mainly from Danaher's Cepheid business, Massaro said. Its respiratory revenues were down about 20 percent year over year because of a tough comparison with flu revenues in the prior-year quarter, and the firm suffered from "ongoing price decay in H. pylori."
The firm will need to spend more to return the company to top-line growth, and Canaccord is concerned about forward-year operating margins and earnings, Massaro said.
In morning trading on the Nasdaq, shares of Meridian Bioscience were down more than 5 percent at $13.43.