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Edited Transcript of VIVO earnings conference call or presentation 7-Feb-20 3:00pm GMT

Q1 2020 Meridian Bioscience Inc Earnings Call

CINCINNATI Feb 11, 2020 (Thomson StreetEvents) -- Edited Transcript of Meridian Bioscience Inc earnings conference call or presentation Friday, February 7, 2020 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Bryan Baldasare

Meridian Bioscience, Inc. - Executive VP, CAO, CFO & Secretary

* John P. Kenny

Meridian Bioscience, Inc. - President, CEO, Executive VP of Diagnostics Business Unit & Director

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Conference Call Participants

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* Andrew Frederick Brackmann

William Blair & Company L.L.C., Research Division - Associate

* William Robert Quirk

Piper Sandler & Co., Research Division - MD and Senior Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the Meridian Bioscience Fiscal First Quarter 2020 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I would now like to hand the conference over to your speaker today, Bryan Baldasare, Executive Vice President and Chief Financial Officer. Thank you. Please go ahead.

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Bryan Baldasare, Meridian Bioscience, Inc. - Executive VP, CAO, CFO & Secretary [2]

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Good morning, and welcome to Meridian's 2020 First Quarter Conference Call. By now you should have access to a copy of the earnings press release that was published earlier this morning. If you have not received a copy, please go to the Investor Relations section of our website to access a copy of the press release and this morning's presentation.

Before we begin today, let me remind you that the company's remarks include forward-looking statements. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond the company's control, including risks and uncertainties described from time to time in the company's SEC filings. The company's results may differ materially from those projected. The company undertakes no obligation to publicly update any forward-looking statements.

Additionally, throughout this presentation, we refer to non-GAAP financial measures, specifically operating expenses, operating income, operating margin, net earnings and earnings per share, each on an adjusted basis. A reconciliation of these non-GAAP financial measures with the most directly comparable GAAP measures is included in our press release, which is available on our website.

Now let me turn this over to Jack.

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John P. Kenny, Meridian Bioscience, Inc. - President, CEO, Executive VP of Diagnostics Business Unit & Director [3]

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Thanks, Brian. I'm going to be starting on Page 4 of the presentation for those who may have a copy of it.

Before we jump into the financial results, I would like to highlight a few of Meridian's major accomplishments during the first quarter of fiscal 2020. Let's start with diagnostics. In Q1, we continued to take significant steps forward in the execution of our diagnostic strategy. Thanks in large part to improvements within our commercial team's execution, we have made great progress in turning around our Diagnostics business. This can be seen through the achievement of our highest level of Diagnostic revenues since the first quarter of fiscal 2019. In particular, customer acceptance of the revogene product line has gone very well, with our install base reaching 114 systems. Customer enthusiasm about this new platform has led several to adopt additional assays when converting over to the revogene system.

As we went into fiscal 2020, we executed a new organization and organizational change for our commercial team to drive increased focus of our sales efforts in the point-of-care marketplace. Early indicators of improved commercial execution in our point-of-care area has led to a strong Q1 for our LeadCare II system in consumables delivering double-digit growth. We continue to refine our commercial efforts in this area and look to a strong performance overall in fiscal 2020 for our blood chemistry products.

Now let's turn our attention to our Life Science business. Revenues for our Life Science business declined during the quarter, reflecting lower ordering patterns with our top IVD manufacturing customers. While these revenue levels were disappointing, we continue to believe strongly in our strategy of being the partner of choice for immunoassay and molecular reagents and expect improved performance in the remaining quarters of the year. We did achieve approximately $1.8 million of revenue from China, representing a 70% increase over last year's first quarter. We see strong customer demand for our products in China across the Life Science product portfolio, including supplying molecular master mixes to help Chinese IVD manufacturing customers deliver coronavirus tests.

Now I'm going to turn it back to Bryan to walk through the 2020 Q1 financial results.

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Bryan Baldasare, Meridian Bioscience, Inc. - Executive VP, CAO, CFO & Secretary [4]

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Thank you, Jack. Let's move right into our first quarter results on Slide 5. As we reported earlier today, consolidated revenues for the first quarter of fiscal 2020 were $47.4 million as compared to $51.5 million in the first quarter of fiscal 2019. This represented an 8% decrease or about a 7% decline, excluding the impact of foreign currency exchange rate changes.

On a segment basis, our Diagnostics business revenues were down about 5%, and our Life Science business revenues were down about 15% for the quarter. Our Diagnostics segment revenues were actually somewhat better than we were expecting, and were particularly strong in point-of-care blood chemistry, which were up 16%. Our gastrointestinal and respiratory categories delivered revenues for the quarter, generally in line with our expectations. Our Life Science revenues were affected by lower ordering patterns with our top IVD manufacturing customers. We do expect these ordering patterns to turn around for the remainder of the year.

Gross profit margin declined over 300 basis points during the quarter, with both our Diagnostics and Life Science segments experiencing lower margins. Similar to our recent quarters for our Diagnostics segment, product pricing, particularly for our H. pylori products, had an unfavorable impact on margin. And for our Life Science segment, product mix between immunoassay reagent products and molecular reagent products as well as the lower overall level of sales had an unfavorable impact on margin. Expectedly, gross profit margin for our Diagnostics segment was also affected by manufacturing ramp-up activities in our Québec facility where revogene molecular diagnostic instruments and test devices are made.

On an adjusted, or non-GAAP basis, first quarter operating income was $7.2 million and a margin of approximately 15%. Adjusted operating expenses include approximately $1 million in higher new product development spending in the Diagnostics segment as well as approximately $900,000 in purchase accounting amortization from the acquisition of the GenePOC business in the third quarter of fiscal 2019. We were able to absorb these cost increases through savings from last year's reorganization and streamlining efforts.

Also on an adjusted basis, net earnings were $4.2 million and diluted EPS was $0.10. On a GAAP basis, operating income was $5.4 million, including a change in the fair value of GenePOC acquisition earn-out obligation, restructuring cost and selective legal costs of approximately $1.8 million in this quarter, compared to selective legal costs of approximately $600,000 in last year's quarterly results. Also on a GAAP basis, net earnings were $2.8 million and diluted EPS was $0.07.

Now let's turn to the next slide, which highlights our operating segment results for the quarter, starting with Diagnostics. As previously mentioned, Diagnostics revenues declined 5% to $34.8 million, but were actually somewhat better than we were expecting. Our acquisition of the revogene molecular system has helped us significantly reduce our customer account losses within our molecular product portfolio, which showed a 5% decline after being down over 20% for the full year in fiscal 2019. Revenues for our gastrointestinal product category include the effects of contract pricing changes with our largest national reference laboratory customers for H. pylori products as well as continued competitive pressures in other products in this category. For our respiratory product category, we experienced lighter sales volumes for our influenza product for the first part of the 2019/'20 respiratory season. Revenues for our blood chemistry products grew by double digits during the quarter as we are seeing the positive effects of the new sales strategy implemented late last year.

Diagnostics operating income was $5.7 million on an adjusted basis and a margin of 16.5%. This level of income and margin compared to 2019 were affected by expectedly higher research and development spending of $1 million; purchase accounting amortization of $900,000 related to the acquisition of the GenePOC business in the third quarter of fiscal 2019; the effects of lower pricing for H. pylori products in our reference lab channel; and volume declines in our higher-margin molecular products as well as cost of manufacturing (technical difficulty) in our Québec facility where revogene molecular diagnostic instruments and test devices are made.

Now on to Life Science. Life Science revenues were down 15% in the quarter to $12.6 million or down 14% on a constant currency basis. As previously mentioned, revenue contributions from our top IVD customers reflected lower ordering patterns during the quarter. We do expect such ordering patterns to turn around for the remainder of the year. Customer order activity in China was strong during the quarter and in line with our expectations. Revenues for our molecular reagents during the quarter were also affected by lower pricing from the transition of our academic business to independent distributors. Life Science adjusted operating income decreased 38% in the quarter to nearly $3.2 million as a result of the lower revenue level. Adjusted operating margins for Life Science in the quarter were 25%, down over 900 basis points from 1 year ago.

Next, moving to Slide 7. We were pleased not only with the Diagnostics segment's revenue performance for the quarter, but also the stabilization trend going back to the second quarter of fiscal 2019. We view the $33 million revenue level as a low point from which we are aiming to return the Diagnostics segment to consistent and sustainable revenue growth.

Next, I would like to move on to our guidance for fiscal 2020 presented on Slide 8. Simply stated, we are reaffirming our 2020 fiscal year guidance and stand by our commitment of major investment in new product development for the Diagnostics segment. As a reminder, given the nature of our selective legal spending, we are not providing GAAP-based guidance for operating margin or earnings per share on a diluted basis.

Now let me turn it back over to Jack.

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John P. Kenny, Meridian Bioscience, Inc. - President, CEO, Executive VP of Diagnostics Business Unit & Director [5]

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Thanks, Brian. In light of the recent news regarding coronavirus, we thought it would be a great opportunity to discuss how our Life Science business is participating in the response to this global crisis.

Let's move now to Page 10. With the recent outbreak of coronavirus starting in January, we have seen a dramatic increase in the demand for our products that support the development of diagnostic tests for coronavirus. Meridian's Lyo-Ready RT-qPCR master mix is a product that we introduced in fiscal '19 to our molecular customers. This master mix is designed to help companies developing RNA-based molecular test, an example being coronavirus. This master mix when combined with specific primers, in this case for coronavirus, is designed to be lyophilized. Lyophilization of the product enables the manufacturer to deliver a high-quality test in a very stable and reliable format. The customer running the test can then add the patient sample into the lyophilized mixture in the PCR tube and immediately run the test on a PCR instrument. The strong performance of our master mix as well as it being lyophilization-ready has led to strong demand for this product for customers looking to rapidly develop PCR test to help combat the coronavirus crisis.

Let's move on to Slide #11. The Lyo-Ready RT-qPCR master mix is one of a large number of products that we offer within our Life Science product portfolio. Meridian's broad offerings of antigens and antibodies used to develop immunoassay products, along with our molecular reagents, are available for all types of diagnostic testing needs, including human, veterinary, environmental, food and fraud prevention diagnostics. This business has strong recurring revenue streams, and Meridian is well positioned in this market overall.

Now let's turn our attention to our Diagnostics business and spend a few minutes updating you on some of the business segments, key initiatives and activities. Moving on to Slide #13. As we have previously discussed, the GenePOC acquisition was an important element of our diagnostic strategy that we are implementing. The ability to convert our at-risk alethia install base with the revogene platform is a critical area of focus. Our commercial team has been working diligently for the 6-plus months since our acquisition to protect and grow our molecular business. As Bryan mentioned, we saw a dramatic stabilization of our molecular business in Q1, with only a 5% reduction in the business versus the previous year. Our install base continues to grow and now stands at well over 100 systems. We have strong funnels for system placements and are targeting around 20 new systems per month.

The strong customer demand has created some pressure to increase our manufacturing capacity, and the team in Québec is making great progress increasing our capacity for both instruments and consumables. The team at Québec worked diligently over the summer and fall to increase production capacity. Consumable production has steadily ramped up in order to meet the demand and we continue to make positive progress on the instrument manufacturing with the midterm goal of capacity to build 500-plus instruments per year.

While the majority of our placements, greater than 90%, have been upgrades to our alethia system, we have seen greater-than-anticipated willingness of customers to move additional assays onto the revogene system when converting from alethia. Approximately 15% of the business that we have contracted on revogene is new business for Meridian. This is a combination of new customers and customers converting from alethia that have committed to adding new tests onto the system. We remain excited about both the customer response to the revogene product as well as the capabilities of the team in Québec to deliver as we ramp up the business.

Turning now to Page 14. In our strategic plan, we committed to increasing investment into our Diagnostics business. In conjunction with the announcement of the acquisition of the revogene molecular diagnostic system last spring, we also eliminated our shareholder dividend. This was done to enable us to further invest in strengthening our Diagnostics business. We have increased our investment across the business and saw a 32% increase comparing Q1 2020 versus Q1 of 2019. We anticipate further increases in spend over the remainder of the fiscal year as we move more products into clinical trials. In fiscal '20, we have multiple active development programs across all 3 of our platforms, Curian, PediaStat and revogene, and we anticipate R&D spending to be as high as 19% of Diagnostics revenues.

Moving on to Slide #15. On the previous slide, I spoke to our increased investment into R&D in the near term. This slide, which we have shared previously, highlights the products we have actively moving through our new product development process and working towards the clinical trial phase. The clinical trial phase leads to increased investment and is a critical late step towards bringing new products to market. Our GI panel on the revogene platform and our C. difficile test on the Curian platform are moving into the clinical trial stage here in Q2. The RI panel clinical trial is taking place over this year's and next year's respiratory seasons to enable us to get the necessary specimens for our planned FDA submission. We continue to make good progress on our development efforts across all of our product areas, which will play a key role in the long-term health of our business.

We anticipate -- excuse me, we appreciate the opportunity to share our results in Q1 of 2020. We are on track with the execution of our plans as we work to turn around this business, knowing that our best days of Meridian are still to come.

With that said, I would like to now open up the call for any questions that our listeners may have.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from Bill Quirk from Piper Sandler.

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William Robert Quirk, Piper Sandler & Co., Research Division - MD and Senior Research Analyst [2]

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So a number of questions here, if you'll permit me. So first off, let's start with -- let's kind of transition here from maybe bad to good. I appreciate that respiratory isn't a huge strategic focus of the company, given the pipeline development. But how, given the ongoing flu season, was that negative in the quarter?

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John P. Kenny, Meridian Bioscience, Inc. - President, CEO, Executive VP of Diagnostics Business Unit & Director [3]

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So I'll start, and Bryan can wrap around this, Bill. Last year, if you remember, 2 years ago was an incredibly strong flu season, right? A once-every-decade type of flu season. Last year's flu season, we had significant ordering patterns from our distributors, their algorithms and their inventory stuff, they stocked up a bunch of inventory in Q1. And so we saw higher orders of, for example, the flu products from our distributors last year in Q1 and virtually no sales in Q2 and beyond. This year's ordering patterns from our distributors was what I would describe as a more normal ordering pattern for us. And so we did see a decline in our respiratory. As Bryan would tell you, respiratory -- the flu is not a huge product for us, but still, we did see a decline versus the previous year. But we think as the full year ends up, that it will end up probably being likely positive throughout the year.

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Bryan Baldasare, Meridian Bioscience, Inc. - Executive VP, CAO, CFO & Secretary [4]

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Bill, just 2 more things on that point. I think you'll see more even revenue patterns quarter-to-quarter for us this year as it relates to our flu product because of the distribution order patterns from 2019.

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William Robert Quirk, Piper Sandler & Co., Research Division - MD and Senior Research Analyst [5]

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Okay. Got it. I appreciate that. And then Bryan, maybe one for you. Tax rate going forward, how should we be thinking about that?

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Bryan Baldasare, Meridian Bioscience, Inc. - Executive VP, CAO, CFO & Secretary [6]

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In the 23% to 24% range. You did, I'm sure, notice a blip during our first quarter. It was something specific to the annual equity awards that we do, a pretty technical accounting thing, I guess, I would characterize it as. But it should normalize itself throughout the rest of the year.

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William Robert Quirk, Piper Sandler & Co., Research Division - MD and Senior Research Analyst [7]

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But is it reasonable to assume that we're going to see that every year in the first quarter, though, just for longer-term modeling purposes?

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Bryan Baldasare, Meridian Bioscience, Inc. - Executive VP, CAO, CFO & Secretary [8]

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So it all depends on the grant date fair value of our equity awards versus what our stock price is when they vest.

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John P. Kenny, Meridian Bioscience, Inc. - President, CEO, Executive VP of Diagnostics Business Unit & Director [9]

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So our answer is, we hope not. It could go the other way.

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William Robert Quirk, Piper Sandler & Co., Research Division - MD and Senior Research Analyst [10]

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Okay. Got it. Okay. Understood. And then maybe kind of flipping over to some of the more positive elements in the quarter. Jack, can you talk a little bit about the sustainability of the blood chemistry growth? That was a really nice positive surprise here as we look through the overall revenue tap.

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John P. Kenny, Meridian Bioscience, Inc. - President, CEO, Executive VP of Diagnostics Business Unit & Director [11]

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So I alluded to it in my comments, we made some organizational changes, as I said, late summer last year. And what I would describe is some fundamental things that we wanted to enhance. We pulled the group together in the late summer, really diving -- doing a deep-dive as to why we weren't seeing the growth that we anticipated on the blood chemistry side. I would describe some of the things that we're doing is fundamentals, as simple as we were continuing to close a lot of new blood chemistry products, like a lot of new customers were still getting new systems. But we had a hole in the bottom of the bucket where some customers, let's say, a provider moves on and goes to another practice, and they stop using the product. We had to get back to basics and really focus on ensuring that we're keeping very close to our customers.

So a refocus of our inside sales team to work in collaboration with our regional point-of-care specialists was probably the big change that we made. We had a very strong Q1. There was also a lighter Q1 versus last year. So we don't necessarily see that same trend through the remainder of the year of that 16% growth. But we do have good confidence that we will have a much stronger year in blood chemistry this year. We have never stopped the amount of placements. We continue to do in the neighborhood of 1,200 new placements per year. The big difference is that we aren't having some of the folks that maybe stop doing testing and keeping that from the growth that we could have. So we've done a better job of kind of keeping the leaky part of the bucket fixed, if you will, in that business, which will continue on with that discipline as we move forward.

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William Robert Quirk, Piper Sandler & Co., Research Division - MD and Senior Research Analyst [12]

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Okay. Sounds good. And then maybe pivoting here to the molecular side of the business. So 2 questions. First is the comment about targeting 20 revogenes. I appreciate that you're [placing] substantially higher than that here in the first couple of quarters. And I guess, the relaunch, as it were, under Meridian. So I guess, why should this slow down? Or are there a number of multisystem orders in here that kind of skewed the numbers higher early or effectively? Or if that's not the case, I guess, why should it slow down to 20? And then secondly, can you talk, Jack, a little bit bigger picture about the evolving conversation that you're having with these molecular customers? I mean, clearly, there's some nice buy-in on revogene relative to alethia.

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John P. Kenny, Meridian Bioscience, Inc. - President, CEO, Executive VP of Diagnostics Business Unit & Director [13]

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So I'll start with the 20 per month. So Bill, we got out of the gate pretty quick. We had a lot of loyal customers that really like working with us, but that were tired of working with the alethia system, quite frankly, the manual nature of that. And so we had some very positive initial response, and we continue to get that from our existing customers. But you have a couple of factors that come into play. There are some GPO contracts that come into play that if you're not on a GPO contract, it does slow the contracting process down. We also have -- we're getting into situations now where we're getting into more competitive environments where we're trying to win competitive business versus just converting our existing installed base. So those are part of the reasons why we think the 20 per month range is a solid target. And in full disclosure, we also had to ramp up our ability to produce instruments. And so we're trying to make sure that we have the capacity to build the number of instruments that we need to do. We have had a bit of a backlog where customers have got orders in that we have to work our way through with our customers. So it's really the combination of those 2 things that we work towards. We do believe we can get into that environment of 500-plus systems per year capability instrument wise. But we are still ramping up our manufacturing side on the instrument side to get there.

So no negative views. It's been very positive from our customers, but it's a highly competitive environment. Our sales team has had very good initial response and it's a little bit of GPOs and some of the contracting does take a little longer. Some of the facilities -- we got a lot of closes in some of our large physician offices and some of our customers that are less complex from a contracting standpoint. Now we're getting into places where the contracts can take several months to work their way through the systems in these health systems. So we're still very positive on it, but we think that it's probably more likely in that range on an ongoing basis. And we look forward to trying to accelerate it, but that's what we think we have confidence in going forward at this time.

As far as the evolving conversation, we still have a relatively limited -- we have a limited menu on this platform. And so our discussions with customers now -- the plus in molecular is that no company has the -- a breadth of menu. So customers are used to having multiple platforms to meet their testing needs. So we're spending a fair amount of our time really on some of those core assays, the Group A Strep, Group B Strep and C. diff and a little bit in regards to where we're going in the future with regards to the panel testing that we do. Customers are very excited about the multiplex panels, and clearly, getting our GI panel submitted to the FDA, which we're working hard to do later this year. That will be a big opportunity where we can start playing more offense. So we really see stabilize our install base over the coming next 9 to 12 months. And we think that the ability to play offense really begins about a year from now on our molecular business, when we hope to start seeing some of the new products starting to come to market. So hopefully, that helps, Bill.

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Operator [14]

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(Operator Instructions) Your next question comes from Andrew Brackmann from William Blair.

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Andrew Frederick Brackmann, William Blair & Company L.L.C., Research Division - Associate [15]

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Just wanted to start on the Life Science business and order pattern delays that you caught out there. Anything else that you can add on that? Why do you think it's more timing than anything broader related to end market slowdown, competition or shifts in share? And then, I guess, related to that, what gives you the confidence that it's going to come back this year?

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John P. Kenny, Meridian Bioscience, Inc. - President, CEO, Executive VP of Diagnostics Business Unit & Director [16]

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So if we look at our largest customers, Andrew, they have patterns where they'll have 2 or 3 big quarters, they'll have a lighter quarter. It just depends if in their production, they order 2 batches of a certain test or not during that quarter or if they don't order any in that quarter. We had an unusual situation where 2 or 3 of our large ones all fell into a lighter quarter pattern. So virtually, the negative amount that we had in our business versus last year is entirely based on 2 or 3 customers that essentially were off in a quarter. We have seen quarters like that. We haven't necessarily seen 2 or 3 of them have it at the same time. So we certainly were not excited that, that occurred. But as we dove into the business, very comfortable that we haven't lost the assays at those customers, they still continue to run with us. And in discussions with those customers, the volumes for those customers are not declining. The market does have a little bit of tailwind to it. So the diagnostic companies that are building tests are not making less down the road, they ultimately over time do grow a little bit. So we do have confidence of a normalization. Hard to predict when these orders will occur at these large places. The hard part for us is, some of our biggest orders with the biggest customers can be $700,000, $800,000, even approaching $1 million. So that can make a big swing in a quarter to the positive or the negative. But in this case, it was 2 or 3 that all hit with that later quarter at the same time.

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Andrew Frederick Brackmann, William Blair & Company L.L.C., Research Division - Associate [17]

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Okay. That's helpful. And then just sticking on the Life Science business here for a minute. I appreciate the commentary on the coronavirus. Now you guys are playing in that. Anything else that you can provide just sort of from a financial standpoint, what the impact might be from what you're seeing right now?

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John P. Kenny, Meridian Bioscience, Inc. - President, CEO, Executive VP of Diagnostics Business Unit & Director [18]

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So Andrew, we're not entirely clear on the full financial implications of what the coronavirus is going to mean. We have had a number of customers, a double-digit number of customers that are developing tests in China. And so that is a good sign. But we don't know how that testing is going to go. From our perspective, we do not see it changing our guidance. We are still holding our guidance range. So I think the message here is it's going to be positive for us, but it's not going to be a life-changing type of positive situation. We do see some lift. I think the more exciting thing in my mind is that this is a key component that's used in development of all molecular tests and these customers that we can go with and help them with coronavirus make other molecular tests. So that creates an opportunity for us to sell this product into other molecular tests that they have down the road. And so that's really what our sales team will be working towards of, "Hey, we've helped you on this opportunity with coronavirus to quickly respond." Hopefully, they're happy with the performance, which we anticipate they will be. Can we use that as an opportunity to open the door for future business in China and in other places with regards to molecular testing?

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Andrew Frederick Brackmann, William Blair & Company L.L.C., Research Division - Associate [19]

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Got it. And then just on the Diagnostics side of the business, a lot of my questions on the revogene launch sort of been answered. But as we think about Curian and the PediaStat systems coming online sort of later this year, can you help us maybe frame a little bit of the market opportunity here? What's your sort of initial expectations for those products as we exit '20 and go into 2021?

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John P. Kenny, Meridian Bioscience, Inc. - President, CEO, Executive VP of Diagnostics Business Unit & Director [20]

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So I think that the Curian impact to fiscal '20, it's not going to be significant. The fiscal '20, the first product that we intend to bring to market is the Curian itself and the H. pylori stool antigen test on there. I would describe that as more of a defensive move of an improvement to the test and improvement for our customers. But it won't necessarily pick us up a significant amount of new business. Will we win some new accounts? Sure, but we don't necessarily see that as a significant positive growth opportunity for us.

But the important part of getting Curian out there is that as we get into fiscal '21, we will start bringing some new products to market. I would describe the tests we're bringing onto the system for Curian as about 50% of them or 50% to 70% of them are protection types of moves and the other products, in particular, C. difficile is one that we believe that we can play offense with. And we believe that, that, in '21, will start to provide a multimillion-dollar opportunity over time. We think that's a good-sized market that we think that we can participate more effectively in. So that's how I would describe Curian. It's an element of protection. We have a large piece of our business that is in the rapid immunoassay testing area. And it was important for us to invest for our customers to improve long term what we can offer there. And so there's a bit of stabilization and then some level of offense with C. difficile being the first test for significant offense.

When we get to the PediaStat, the PediaStat is really not a '20 opportunity as well. It's more of a '21-and-beyond type of opportunity. We have a very large install base with our Lead testing, which a fair amount of that we would anticipate would convert over time to PediaStat, but the beauty of PediaStat would be that those other pediatricians' offices are running other tests, tests like hematocrit, as an example, bilirubin, total cholesterol, those types of tests are also tests that a pediatrician would like to be able to run and to standardize that on to one platform, we think, is an opportunity. So we really see PediaStat as a '21 and '22 and beyond. So consistent with what we've said before, Andrew, '20 -- fiscal 2020 is a year of stabilization for us and fiscal '21 is when we think we can really start playing more offense, and that offense comes from our panels coming on the molecular, from C. difficile coming on Curian, and then ultimately, we -- the investment in R&D will start continue to develop and bring new products to market. So '20, '21 -- '21 and '22 and beyond, we start to look like a different diagnostics company. So this is not a quick fix. I think that's consistent with all of our discussions that we've had before, but we're on track with it. We're making the investments that we need to make, and we feel that we're in a good position to move forward as we head into fiscal -- remainder of '20 and into '21.

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Operator [21]

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There are no further questions at this time. I turn the call back over to Jack Kenny for closing remarks.

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John P. Kenny, Meridian Bioscience, Inc. - President, CEO, Executive VP of Diagnostics Business Unit & Director [22]

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Well, once again, we appreciate you for taking the time to come listen to our performance in Q1. We appreciate our shareholders, and we firmly believe that we are on a path moving this company in the positive direction. We hope that you can see that as well, and we look forward to talking to you in the near future. Have a good day.

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Operator [23]

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Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.