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Bull of the Day: Meridian Bioscience (VIVO)

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Meridian Bioscience (VIVO - Free Report) is a $900 million provider of diagnostic test kits for gastrointestinal and respiratory infectious diseases. The company is expected to grow sales 18% this year to $300 million. And as EPS estimates rise to $1.19 after COVID uncertainty, it's back to a Zacks #1 Rank.

VIVO delivered a beat-and-raise September quarter (its Q4-FY20) in November, then in December announced submission of its application for Emergency Use Authorization (EUA) to the FDA for the company's SARS-CoV-2 molecular diagnostic test on the Revogene platform. The company also received $1 million in NIH funding for its diagnostic test launch.

Meridian Guides Higher

On January 7, the company announced that it expects Q1-FY21 revenue to be approximately $92 million, compared to $47.4 million in the year ago quarter, reflecting an increase of approximately 94%. This growth is being driven by COVID-19 product related sales in the Life Science segment where revenue is expected to be approximately $62 million for the quarter, over 15% higher than current consensus.

Commenting on the news, Piper Sandler analyst Steven Mah reiterated an Overweight rating and $26 price target on VIVO shares after the company reported preliminary Q1 revenue well above Street expectations.

The analyst expects that COVID-19 testing will be durable, even with effective vaccines, as the country expands large-scale population testing to safely reopen the economy. Mah also believes Meridian's shift to re-investing in internal R&D and acquisitions has positioned them well for long-term growth.

Since I love to research, invest in and talk about all kinds of medical science companies, be sure to catch my recent coverage of the CRISPR stocks like Editas Medicine (EDIT - Free Report) and CRISPR Therapeutics (CRSP - Free Report) -- and the investor who beat everyone else at accumulating large positions in them...

Cathie Put the Wood to Wall Street: TSLA, SQ, ROKU, CRSP, BIDU

Meridian Under the Microscope

Meridian Bioscience develops, manufactures, distributes, and sells diagnostic test kits primarily for gastrointestinal and respiratory infectious diseases, and elevated blood lead levels worldwide. The company operates through Diagnostics and Life Science segments. They describe their mission as helping providers make better diagnostic decisions with a focus on gastrointestinal, neonatal, pediatrics, and respiratory conditions.

The Diagnostics segment offers testing platforms, including real-time PCR (polymerase chain reaction) amplification under the Revogene brand; isothermal DNA amplification under the Alethia brand; lateral flow immunoassay using fluorescent chemistry under the Curian brand; rapid immunoassay under the ImmunoCard and ImmunoCard STAT! brands; enzyme-linked immunoassays under the PREMIER brand; anodic stripping voltammetry under the LeadCare and PediaStat brands; and urea breath testing for H. pylori under the BreathID brand.

Diagnostic Players Find New Life Under COVID

I have written often in the past few months of specialized diagnostic companies like Quidel (QDEL - Free Report) and Hologic (HOLX - Free Report) as they build new revenue streams from SARS-CoV-2 testing. These revenue streams are likely sustainable as the virus mutates and requires modified tests.

And I recently bought shares of VIVO for the Zacks Healthcare Innovators portfolio because I liked the growth outlook for this small player in a rapidly expanding market for rapid diagnostics -- including coronavirus testing which will continue to be part of our lives for years to come, even with vaccines.

While Meridian Bioscience is a David among diagnostic Goliaths, its long and fascinating history surprised me. From the company website...

In 1977, Bill Motto founded Meridian Bioscience on a $500 investment in his Cincinnati home’s basement. Meridian’s first product was distributing a rapid fungal test developed by the University of Kentucky. While calling on his hospital and research customers, Bill noticed there was no easy, clean way to transport patient samples. He developed the innovative Para-Pak stool transport system to meet this need.

As the product line grew, so did Meridian’s research and development, leading to a breakthrough in 1982 with a 10-minute rapid test for strep throat. Before the Meridian test, doctors would have to wait for two to three days for a culture result. Innovation continued as the company brought several cutting edge diagnostic technologies to market, including a DNA testing platform and first-of-their-kind tests for C. difficile, E. coli, H. pylori amongst others.

Bottom line on VIVO: I always pay attention to small companies growing their sales rapidly as they could become acquisition targets by larger biopharma or MedTech players. Buying VIVO near $20 offers excellent risk/reward, with or without an M&A suitor.

Disclosure: I own shares of QDEL, HOLX, and VIVO for the Zacks Healthcare Innovators portfolio.

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