In a July 27 research note, analyst Yi Chen reported that H.C. Wainwright & Co. initiated coverage on Meridian Bioscience Inc. (VIVO:NASDAQ) with a Buy rating and a $34 per share target price. The biotech's current share price is about $24.31.
The "fully integrated" company, as described by Chen, has two primary business segments: Life Science and Diagnostics.
Life Science, which accounted for 32% of revenue as of Sept. 30, 2019, manufactures and distributes bulk antigens, antibodies, polymerase chain reaction (PCR) reagents, nucleotides and other bioresearch reagents.
Diagnostics, comprising 68% of revenue at Sept. 30, 2019, develops and markets diagnostic platforms and test kits for elevated blood lead levels and gastrointestinal and respiratory infectious diseases.
Chen highlighted that Meridian's combination of life science and diagnostics "is poised to win during and after the pandemic." Since the start of COVID-19, revenue from its Life Science component has "surged," the analyst noted, due to the company providing, to its in vitro diagnostic customers, reagents for PCR tests and recombinant antigens for antibody tests for detecting SARS-CoV-2. At least 35 of Meridian's customers have had COVID-19 tests on the market.
Further, the Cincinnati-based company recently debuted a high-sensitivity SARS-CoV-2 nucleocapsid antibody pair to be used in developing rapid antigen assays. This product rounds out its COVID-19 testing offerings, Chen wrote.
"Given that Meridian is one of a few commercial suppliers with scale and quality, that the pandemic is escalating in the U.S. and other parts of the world and that customers cannot switch suppliers for commercialized assays easily, we believe the company should continue to experience robust growth in the Life Science segment in fiscal year (FY) 2020 and FY21," commented Chen.
Unrelated to COVID-19, Meridian is "working on a proprietary panel on its Revogene diagnostic platform, which does away with the need to RNA extraction," Chen indicated. The removal of this step could result in a faster and cheaper testing option. The company could submit a 501(k) application for the panel, which could include testing for influenza A, influenza B and respiratory syncytial virus, in spring 2021.
Chen pointed out that Meridian has proven over the past 10-plus years that its operations are both profitable and sustainable and they are expected to continue on that trajectory in the near future at least.
The company's growth has been internal and acquisition based, the latter due to management's "pragmatic and opportunistic approach" to pursuing strategic deals. Chen cited the GenePOC and Exalenz deals as examples of transactions that expanded Meridian's product portfolio.
H.C. Wainwright forecasts Meridian's revenue in FY20 to be $232.7 million and in FY21 to be $269 million, both figures in the middle of the biotech's guidance and equating to 15% growth each year.
As for the performance of each segment, the financial institution expects Life Science to experience topline growth of 74% in FY20 due to COVID-19 but Diagnostics to primarily drive overall growth long term. "The increasing interactions with Life Science customers in the near term could facilitate relationship building for long-term opportunities in the Diagnostics segment," added Chen.[NLINSERT]
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Disclosures from H.C. Wainwright & Co., Meridian Bioscience Inc., Company Update, July 27, 2020
Investment Banking Services include, but are not limited to, acting as a manager/co-manager in the underwriting or placement of securities, acting as financial advisor, and/or providing corporate finance or capital markets-related services to a company or one of its affiliates or subsidiaries within the past 12 months.
I, Yi Chen, Ph.D. CFA, Raghuram Selvaraju, Ph.D. and Blair Cohen, certify that 1) all of the views expressed in this report accurately reflect my personal views about any and all subject securities or issuers discussed; and 2) no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report; and 3) neither myself nor any members of my household is an officer, director or advisory board member of these companies.
None of the research analysts or the research analyst's household has a financial interest in the securities of Meridian Bioscience, Inc., Applied DNA Sciences, Inc., BioNTech SE and Co-Diagnostics, Inc. (including, without limitation, any option, right, warrant, future, long or short position).
As of June 30, 2020 neither the Firm nor its affiliates beneficially own 1% or more of any class of common equity securities of Meridian Bioscience, Inc., Applied DNA Sciences, Inc., BioNTech SE and Co-Diagnostics, Inc.
Neither the research analyst nor the Firm has any material conflict of interest in of which the research analyst knows or has reason to know at the time of publication of this research report.
The research analyst principally responsible for preparation of the report does not receive compensation that is based upon any specific investment banking services or transaction but is compensated based on factors including total revenue and profitability of the Firm, a substantial portion of which is derived from investment banking services.
The firm or its affiliates received compensation from Co-Diagnostics, Inc. for non-investment banking services in the previous 12 months.
The Firm or its affiliates did not receive compensation from Meridian Bioscience, Inc., Applied DNA Sciences, Inc. and BioNTech SE for investment banking services within twelve months before, but will seek compensation from the companies mentioned in this report for investment banking services within three months following publication of the research report.
The Firm or its affiliates did receive compensation from Co-Diagnostics, Inc. for investment banking services within twelve months before, and will seek compensation from the companies mentioned in this report for investment banking services within three months following publication of the research report.
H.C. Wainwright & Co., LLC managed or co-managed a public offering of securities for Co-Diagnostics, Inc. during the past 12 months.
The Firm does not make a market in Meridian Bioscience, Inc., Applied DNA Sciences, Inc., BioNTech SE and Co-Diagnostics, Inc. as of the date of this research report.