NEW YORK (GenomeWeb) – Meridian Bioscience today reported its first quarter revenues fell 1 percent, due in part to continued weakness in its core diagnostics business.
For the three months ended Dec. 31, 2016, revenues fell to $46.8 million from $47.2 million a year ago, well below Wall Street analysts' average estimate of $51.2 million.
Revenues from the firm's diagnostics business fell 4 percent to $33.8 million from $35.3 million a year earlier. This was somewhat offset by a 9 percent increase in revenues from Meridian's life science business, which rose to $13.0 million from $11.9 million in the year-ago period.
In particular, revenues from the firm's Illumigene molecular diagnostics platform grew 3 percent, despite declines in H. pylori, C. difficle, and foodborne illness testing sales. The increase was driven in part by traction for the Illumigene Malaria test in Europe, the Middle East, and Africa. The Magellan Diagnostics business, which Meridian acquired in March of 2016, also saw revenues rise 32 percent year over year.
"The first quarter of fiscal 2017 represents a contrast of strong performance from our life science and Magellan diagnostics business units, with significant weakness coming from our core diagnostics business in the US," Meridian Chairman and CEO John Kraeutler said in a statement. "Our Americas diagnostics business experienced revenue declines in all major product categories, in part due to customer buying patterns and general weakness overall."
Kraeutler noted that the company implemented measures in late 2016 — including changes to senior management — that should help its Americas core diagnostics business return to growth in 2017. However, he noted that the recovery of that unit was progressing more slowly than anticipated. "As a result, first quarter earnings were depressed as the core diagnostics unit generates the largest contribution to our profits," Kraeutler said.
Net earnings for the quarter fell to $6.3 million, or $.15 per share, from $8.9 million, or $.21 per share in the year-ago quarter, missing analyst estimates for EPS of $.20.
The firm's R&D spending during the quarter remained flat at $3.4 million, while its SG&A expenses rose 9 percent to $15.9 million from $14.6 million year over year.
Meridian finished the quarter with $49.3 million in cash and cash equivalents.
The company also lowered its guidance for fiscal 2017. It had previously issued guidance for revenues of $205 million to $210 million, and earnings per share of $.81 to $.85 for the year. However, the company today noted that it now expects revenues of $193 million to $199 million and EPS of $.64 to $.69. This is below analysts' estimates for revenues of $206.1 million and EPS of $.82.
Meridian further said that its board has reduced the annual indicated dividend rate to $.50 per share from $.80 per share. The firm declared a cash dividend of $.13 per share for the first quarter, payable on Feb. 16.
Following the release of the earnings, Piper Jaffray analyst William Quirk noted that while the dividend rate cut was the right step to increase Meridian's cash flow, long-term investors in the company's stock may begin to diversify away from it. Quirk, who rates Meridian at Underweight, also said that while the company's management believes its diagnostics business will return to growth, "we are modeling modest declines for the business during 2017 and 2018 due to potential competition."
Meridian's shares were down more than 22 percent to $12.75 in morning trading on the Nasdaq.