Q4 2020 Meridian Bioscience Inc Earnings Call

Ladies and gentlemen, this is the operator todays conference is scheduled to begin momentarily until that time your lines will again be placed on musical. Thank you for your patience.

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I would now like to hand, the conference over to your Speaker today, Charlie was vice President of Investor Relations.

Thank you. Please go ahead.

Thank you Wendy good morning, and welcome to Meridian fiscal 2024th quarter earnings call.

With me are John Kenny Chief Executive Officer, and Brian bulbs, their Chief Financial Officer.

Note that or else you see filings earnings release and slides to accompany this call are available on our web site and Investor Day Meridian Bioscience Dot com.

And we'll post a copy of these prepared remarks after the call.

With regard short calendar, Jack and Brian will be participating and the Canaccord Genuity Med Tech and Diagnostics Forum next Thursday, the Piper Sandler 32nd annual Health Care Conference in early December and the singular research your virtual conference and mid December.

A detailed and those are fun events will be posted to our website as they are finalized.

Finally, our Q1 fiscal 2021 earnings call is currently scheduled for Friday February 5th 2021.

Before we begin today, let me remind you that the presentation and the company's remarks include forward looking statements forward looking statements are subject to numerous risks and uncertainties and many of which are beyond the company's control, including risks and uncertainties described from time to time and the Companys SEC filings. The company's results may differ materially from those per day.

Acted and note in particular that these forward looking statements may be affected by risks related to the COVID-19 pandemic.

And makes these statements as of today November 13th 2020, and undertakes no obligation to publicly update them. Additionally throughout this presentation, we refer to non-GAAP financial measures specifically operating expenses operating income operating margin net earnings and net earnings per diluted share each on an adjusted basis.

A reconciliation of these non-GAAP financial measures with the most directly comparable GAAP measures and other weighted discussion are included in our earnings release non.

Now I would like to turn the call over to John.

Thanks, Charlie without any doubt fiscal 2000, twentys and quite a wild ride, we began the year with expectations and accelerating investment and our new product development pipeline with our sights set on the diagnostic segment finally, turning the corner and expecting modest growth and a life science segment.

Through March that plan for diagnostics was playing out better than expected with the segment delivering a positive growth quarter. The first time and five quarters and ahead of schedule.

As we all know March saw the shift from COVID-19, being an epidemic and to a pandemic greatly altering all of our lives for the foreseeable future and turning every company's plans on and Chad.

Well, we did not want to lose sight and the Dan and his pandemic has done across the globe, both individuals and businesses I do want to celebrate the heroic response of our team to support the diagnostic industry as well as health care professionals in such a tournament need in early January we noticed the growing concern and China from this new Corona virus punting are life science team to take action.

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On January 27th we issued a press release, highlighting the application of our life already Q PCR Master mix and COVID-19 molecular assay.

From their demand grew rapidly for our molecular mess and mixes and our teams increased meridians manufacturing capacity to meet the demand through bringing new equipment I'm lying process efficiency enhancements and share dedication of time and effort.

While demand was high for our existing products, our R&D teams new their work was not done.

The situation is not nude and the team having been first the first respond to the Zika outbreak in 2016, and the African swine fever outbreak in 2018.

Over the subsequent eight months, we brought 19, new products to market, each playing and distinct role and expanding the testing approaches that needed to be deployed globally.

These new products, including high performance antibodies and managing for rapid lateral flow testing and Surajit assays, and our inhibitor tolerant mix and facilitated and development of molecular assays that did not require already extraction kits, which were in short supply.

This continued innovation has positioned already and what the most comprehensive offering of key components for any cold and 19 diagnostic testing and the industry.

Not only does our life science division strive to be the first to market with its innovations, but also second to none and quality and performance. According to comparative data from reputable regulatory agencies around the world are key components are included in some of the top performing tasks and both molecular and Surajit Kobe and 18 testing our.

Outstanding performance has led to inclusion of meridian products and over 100 approved cope and 18 S age as of today, we have dozens of new samples per COVID-19, and and they still being tested by potential customers.

These tests are being deployed across the globe and North America, Europe, the middle East and Asia, including both China and India.

Beyond scope and making our life Science Division has one of the most comprehensive portfolios of antigen antibody and molecular reagents for and Beecher diagnostic from the market.

And this fiscal year. We also released a novel Eric tribal Master mix that facilitates shipping dry test kits without the need for expenses Lapsation. This.

This mixes for DNA based assay and and then already version is under development to be launched this quarter.

Just this past month, we launched a master make specifically designed for liquid biopsy diagnostics, you should expect to see more targeted products from us and the future as we look to support our customers pushing the bounce and diagnostic test performance, we're already seeing the impact of new and strengthen relationships built during this pandemic, resulting in our products inclusion and several non cobot and.

Assays and.

The diagnostic side, the journey has been a bit different with a mix and struggles and successes in Q2, the segment posted year over year growth and the first time and five quarters milestone and the multiyear turnaround for that business. The pandemic quickly stalled that growth stay at home orders reduced testing for anything other than critical care and respiratory illnesses, we did not let that stand.

On the way and advancing our strategic plan closing the acquisition of excellence, bringing urea Brett testing for H. pylori diagnostics portfolio and launching the curian instrument and H.P.S.A. assay.

The team and Quebec also adapted the development plan for our respiratory panel and ravaging to include Sars Koby too.

I'm happy to announce that we have completed the development of the Standalone coordinating assay and today, we informed the FDA ever intend to submit an application for either way in the United States.

We also entered into an agreement with the partner to bring a rapid antigen test and market, which is now being sold and Europe and Latin America under the CE, Mark and it's working towards FDA approval here in the United States.

Well Q3 was slow and the sales front the team adapting to the situation conducting online training sessions and move forward move towards virtual sales calls that were paid off with interest and new placements of our instruments picking up and the fourth quarter that was particularly true for the revenue gene, which has now surpassed 200 installations ending the year at 231.

In person access at customer sites remains limited and focus continues to be until the 19th testing. Nonetheless, the quarter did see the first wins for Campbell placements, both breadth I'd and Curian validating our strategic approach H. pylori.

Clinical trials had been a mixed bag Q3 brought everything to a halt and heading into Q4, we are optimistic things would return to normal well. Some trials did get back to full swing others got off to a slow restart, especially those and the G.I. syndromic area driven by a lack of qualified participants decreased disease prevalence and availability of predicate devices and have been.

De prioritize their peers in favor of cold and 19 assay production I will discuss our pipeline in more detail later and the call.

It's a truly been and monumental year for both of our businesses in our company and executing the strategic plan and I will hand, the call over to Brian to talk about our financial results for the quarter and the year.

Thank you Jack.

Pleasure to recap what was a record year and financial performance for the company. We finished fiscal year 20, with consolidated revenues of 254 million up 26% year over year.

Life science drove that growth and the contribution of 133 million and walking 106% growth over fiscal year 19, COVID-19 related sales force.

72 million that growth was partially offset by diagnostics declined and 11% to 121 million importantly, though diagnostics revenue in Q4 was up 38% over Q3, reflecting a rebound and our core assays outside of the respiratory category consolidated gross margin was 62 per site.

And consolidated operating income on an adjusted basis was 62 million a margin of 24 per site. This was a blend of two per cent for diagnostics and 52% for life Science GAAP diluted EPS was one dollar seven up 88% over fiscal and making all of these metrics exceeded our original guidance.

In November of last year as low as our revised guidance set and August if you want to dig deeper into the drivers for the year. Please refer to our press release, and our 10-K, which will be filed by November 25th.

Now, let's focus on the fourth quarter and.

Total net revenues were 64 million up 26% from 51 million and the fourth quarter of fiscal 2019, excluding the impact of foreign currency exchange rate changes revenues were up 25% gross profit margin was 60 per site in the quarter up from 57% and the fourth quarter and last year the store.

He remains the same with this increase driven by strong improvements and life science gross margin, partially offset by decline and diagnostics gross margin, which I will discuss further in the segment review on.

On an adjusted or non-GAAP basis.

Fourth quarter operating income was 12 million, what day margin of 19% and improvement from 15% last year.

Adjusted operating expenses were 26 million up 5 million year over year also on an adjusted basis net earnings were 8 million and diluted EPS was 19 cents.

The year over year increase and operating expenses was driven by cash and equity incentive compensation, reflecting better performance relative to plan anchor.

Incremental spending and R&D, primarily on new product development programs, including clinical trials and the operating cost and the Exelis acquisition.

On a GAAP basis operating income was 9 million with operating expenses of 29 million. In addition to the aforementioned operating expense drivers GAAP operating expenses were impacted by a 1.1 million increase and contingent consideration and related to the acquisition of G box.

700000 increase in select and legal expenses, partially offset by a reduction and restructuring costs of 1.1 million GAAP.

GAAP net earnings were 6 million and GAAP diluted EPS was 15 cents now lets unpack those results by looking at the details of our two operating segments. We saw great progress and diagnostics with revenues of 30 million up 38% from Q3, why we recognize that this is still down about 11% year over year.

We're pleased with the strong momentum and rebound from Q3 that we are seeing as expected the year over year decline is primarily attributable to continued softness in demand, resulting from the flow returned to pre pandemic conditions most of our products saw better than expected demand and the quarter, but notably non COVID-19 respiratory and.

And there are lagging and recovery.

While this better than expected recovery is promising we are still experiencing headwinds to demand and those products and we expect to continue into fiscal year 21.

Gross profit margin for the segment was 53% and improvement from 52% and Q3 down from 58% and the same quarter last year. The year over year decrease was driven by lower sales volumes and also affected by the continued pricing pressure on our high and higher margin H. pylori still antigen products, which we have mentioned in prior quarter.

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Diagnostics suffered an operating off and on adjusted basis of 3 million similar to last quarter and this is the result of our continued investment and new product development and commercial excellence programs. Despite the lower sales levels. Our diagnostics new product pipeline is included in our Q4 2020 investor presentation posted on our website.

Diagnostics adjusted operating expenses for the quarter were up 3 million year over year, driven by planned increases and spending on new product development programs, including clinical trials and cost absorbed from the acquisition of excellence, including intangible asset amortization.

Progress on clinical trials and related product development ramped up and the core but ultimately resulted in lower spending and.

Yeah.

Our life Science segment recognized revenues of 34 million and an increase of 97% year over year, we estimate that increased revenue related to the pandemic was 18 million with 80 per cent coming from molecular products and 20% coming from immuno products the sequential quarter over quarter decline was as expected.

And as you can see demand for our COVID-19 products remains robust gross.

Gross profit margin exceeded 65% in the quarter up from 55% in Q4 last year. This continues to be driven by economies of scale for our molecular products.

Adjusted operating income was 17 million a margin of 50% demonstrating the leverage this business brings what operating and such a large scale.

Turning to the balance sheet as of September 30, we had 54 million and cash and a borrowing capacity of 91 million under our line of credit during the quarter, we repaid 30 million on our revolving credit facility, bringing our net repayments for the year to 7 million after consideration of 50 million and borrowings early.

During the year free excellence acquisition.

We view our file our financial condition as strong evidenced by a current ratio that exceeds three to one and a debt to equity ratio of 42%.

Turning to guidance.

We are expecting another banner year at Meridian for fiscal 21, what diagnostics revenue is rebounding and life science demand remains strong while.

Our forecast and is still challenging and given the ever changing state and the pandemic. We plan to continue our approach from last year, and providing guidance, including some of the key underlying assumptions.

We expect revenue of between 290, and 310 million and 18% increase over fiscal 20 at the mid point that includes between 140 and $150 million diagnostics revenue and between 150 and $160 million of life Science revenue.

We see the core diagnostics revenue stabilizing as the year progresses, returning to pre pandemic levels and the back half of the year. Additionally, we expect to see COVID-19 assays, making a contribution to diagnostics beginning in the second fiscal quarter. Those dynamics combined I don't want to deliver growth over fiscal 20, but also.

Growth over fiscal 19. This assumes that there are no further lockdowns, resulting in lower health care utilization or elective procedures.

Life Science demand remains robust and we expected to continue through fiscal 21 with between 80 and $85 million for COVID-19 key components, albeit with some of the same quarter to quarter volatility we saw in fiscal 2000 and.

But to also see some contribution from reagents included and new non cobot, 19, assays, particularly respiratory panels coming out of our deeper customer relationships and.

Adjusted operating margin EPS is expected to be between 23, and a half percentage and 24.5% roughly in line with fiscal 20. This is a result of a few key things first we continue to invest and future growth opportunities diagnostics R&D is expected to be around 18% of diagnostics revenue as we complete the.

Clinical trials delayed and fiscal 20 and start new trials.

Additionally, we are investing and life science infrastructure across sales R&D and manufacturing to support the new scale the business.

Second we are absorbing the cost structure acquired with excellence and finally, we have the annualization of head count increases from fiscal year 20, and some return of normal travel.

Our expected tax rate of 23% to 24% reflects a greater portion of earnings coming from the United States as the diagnostics business rebound this.

This ultimately leads to expect and adjusted EPS between $1.14 and $1.28 based on a fully diluted share count of 44.3 million shares.

This guidance reflects our current line of sight and their order patterns and assumes that we do not encounter any significant reductions and manufacturing capacities resolve the pandemic, causing either partial or full site closures for an extended period of time or adversely affecting our supply chain and for raw materials and now I'll hand the call.

Call back over to Jack.

Thanks, Brian as you can see fiscal 21 is shaping up to be another fantastic year for Meridian day.

Nasty should position to deliver strong growth not just as compared to depressed fiscal 20, the growth over fiscal 19, our key strategic focus areas will be advancing new product development. The launch of anyway approved COVID-19 test completing the integration of excellence expanding ravaging price production capacity and executing on a number of operating efficiency.

Initiatives, we plan to complete the clinical trials and the camp for the Curian Campylobacter and C. diff assay and begin clinical trials for revenue and ri and G.I. panels as well as the carry and chicken Tox and asset this will position us to launch four new products and fiscal 21 and between two to 40 products per year and fiscal 22 and beyond.

Life Science will be focused on continuing to meet the demand for our customers driven by the ongoing pandemic as well as delivering new innovative products.

And number of new Master mixes in the pipeline that will raise the bar for performance and molecular assays. Additionally, the team will be hard at work supporting the dozens of customers testing and validating our products and new non cobot assays that filled the funnel for future growth beyond the pandemic fiscal 20 was truly a transformative year for meridian all of our hard work over the.

Previous two years prepared us to both weather, the storm and diagnostics and to accelerate a critical partner to the IBT industry battling a global pandemic and life Science. We are excited about the opportunities that lie ahead, and best is yet to come Lindsay with that let's open it up for any questions that the folks might have.

At this time, if you would like to ask a question. Please press Star then the number one and your telephone keypad.

Our first question comes from the line of Andrew Brochmann with William Blair.

The line is open.

They got to anniversary brought its actually Brian Weinstein and for Andrew Andrew is letting me ask questions on the call today. So I appreciate and in doing that so are you guys doing Inc.

And how are you doing.

Good day.

So I appreciate all the all the commentary here.

Maybe you can just.

Just help me bridge, a little bit the guidance from kind of where you were this year to to where you're going next year and a little bit more detail So life sciences.

132 million and go into 150 to 160.

Can you help just give a little bit more color on maybe.

Maybe the mix there between amino assay and molecular that you're thinking there.

Yes.

You talked about some new products, but just try and help us get from that 132 to one cash got 155 at the midpoint and then the same thing on diagnostics 121 go into 145, just a little bit more cash.

Color on sort of the build up to to those incremental revenue dollars there.

So I'll start Brian and then you can now and then you can add to this simple backend.

So so Brian first of all as you know life Science started.

This pandemic and really played a big role and the whole.

Response to cobot and doubling our sales to 132, which was a pretty big move.

What we have seen recently and we have continued to increase our overall bullishness in regards to our life Science business. We see continued demand and we see continued increase in the number of customers.

From a Bryan can give you the little bit more on the percentages, but the molecular reach.

Reagents and the life science side is leading the way we have picked up a large number of new customers on the molecular side and our slide deck, we give you a little bit more color about the number of customers and are using our master mixes and so that is probably the higher percentage. However, we've also seen we took a good amount of share and antibody testing on.

Fortunately that testing has not done the market hasn't fully understood how to use antibody testing, we do see that there will be a rebound to that as we start seeing a vaccine where people want to see if they got the antibodies after that but we have also now seen and increased resurgence on the antigen tests and there's a number of companies doing rapid antigen test to Inc.

Chris the overall testing capacity so we.

We've continued to kind of raise or even our internal numbers in regards to the life science side as we've seen the demand continued to be very very strong in our assumptions were really assuming pretty strong through first Q and Q Q1, and Q2, we don't really know what will happen beyond Q3 and beyond as you know as the world.

[noise] closer towards normalcy overtime, and so that's what I'd say and life science, and Brian can come and the backend and the diagnostic side.

And we see the slow, but steady continued improvement kind of returning to normalcy.

Our core business has been impacted but has been rebounding back somewhat slowly, but consistently and that continues as we go forward. So.

We see and the first half of the year and impact double digit impact and the core business for sure and in the back half of the year. We are anticipating that that will move closer to normal as we go forward led testing was one of the earlier ones that came back the tests like group B Strep for pregnant women really didnt move a whole bunch of certain parts.

Of our diagnostic business remained pretty strong even in the middle of this pandemic, but.

But what really really slowed up on the <unk> and the diagnostic side, Brian was things like group, a strep testing I think with kids not going to school or are taking school from from home. We did see a decline and the overall respiratory testing like for group, a strep and things of that nature.

The we are anticipating at this point and modest.

Amounts of co bid, we did just notified the FDA today of our intent as we mentioned on the revenue growth.

So we're excited about that once we get acknowledgement from the FDA and we would begin shipping to some early customers. What we're going to move slowly and then ramp up we are ramping up production on that side as well so.

Think of a think about 10% to 15% and that number being in the diagnostic side related to Sars koby too and the and the rest of the business.

With its recovery moving back from that 120, and moving moving up that's how you get to the 145, Brian you want to add to that Yeah. Let me just add a couple of things on the life science side of the business, Brian. So the 80 to 85 million that we have and our guidance around the Cove and 19 reagents from a mix perspective the percentage.

And is that I cited for the fourth quarter and the 80 20.

You can expect a similar mix between molecular and immuno on that $80 million to $85 million.

On the remaining amounts to get to the guidance of 150 to 160 that translates into $70 million to $75 million, we're expecting a couple of things to happen there one and recognize that in 2019, we were in the mid Sixtys. So we've got growth there and.

We are expecting our core and infectious disease reagents to copy coming back like we've been talking about with our diagnostics business and then you also have the effect of just greater assay penetration for our reagents and general and even though we are comfortable with that 80 to 85 right now I will say it is becoming a little more.

Care to breakout Cove and from non cobot and what I mean by that is we are starting to see customers who have almost call. It a second generation respiratory panel last day. So they started with a single cobot test right and now they're looking at developing a respiratory panel with a cold and target included.

We are selling the same reagents to that customer. So again, it just gets a little bit murky in terms of whats covert and what's non cold and hopefully that helps.

No that was great. Thank you for that on day.

Antigen side.

Any update on timing for you a capacity considerations and how you're viewing that market in particular.

So we.

We have as we mentioned in our thing just started and we just got product over to Europe. So we've just started to ship the product and and and to take customer orders and Europe. So its pretty early on from that standpoint, we are working with the partner here to help them to get you a and the United States.

I think we're anticipating that it's a it's a Q2 when that would come into come into.

Leave the capacity is going to be any kind of issue with this we're a little hesitant to go and we want to work to make sure that these guys do everything that they can do to get this eway approved before we before we get too bullish and in regards to what what that opportunity could can bring.

I will say that the performance of the product has worked very very well in Europe and and testing that has been done. So we're optimistic about the product and general.

Okay, Great and then last one for me.

And the Rabid gene can you just remind me of and the ability to obtain CLIA waiver for that platform and just general thoughts around the competitive environment for for for this type of platform. We're seeing a lot of companies starting to move into a into this space that are going after CLIA waiver here. So just just want to kind of make sure I understand kind of the positioning of the product a little bit more thanks guys.

Yes, absolutely Brian. Thank you so we have not.

First of all we do believe that the the ease of use and the product itself is very very likely to be able to receive CLIA waivable. It's incredibly simple test to run and we do believe that it can do and we view that as another plane and we would need to go get we are going to consider looking at claims like that and the future, but first things first we wanted to.

Get this way product, specifically, the cobot, either way and get that out there. So we we are considering additional claims in general different sample types and we are considering things like CLIA waiver, but.

We have not we have not begun to work on that yet at this point because we were so focused on bringing the easy way to market.

Great. Thank you guys.

Thanks, Brian.

And your next question comes from the line of E channel with each C. Wainwright. Your line is now open.

Hi, Thank you for taking my questions.

My first question is.

With respect to your fiscal.

Fiscal 2021 guidance have you taken into consideration the potential impact.

From the market entry of.

Colin I think that same day.

And as some years, you're referring to them and diagnostic side of the business correct taken that into effect, yes, yes, and so so we have a cash.

And if we do have in our and our target our win 40 to 150, we have made and assumption of and approval for the COVID-19 assay.

I would describe it as.

Huh.

And initial pass that we are working towards increasing capacity. So as we get this product out there and we can.

Well you know showed the customers see how well the product works and the game customer acceptance, we're working to increase the overall capacity. So we have a modest amount and COVID-19ien keen interest.

And I've been thinking about 10% to 15% of our overall number for that 140 150 is it's COVID-19 related and we will update as we work to number one now that we've submitted the way once we can obtain eway approval and begin selling the product I would say that we'll have much more line of sight on that as we as we come Inc.

You too.

Yes that was you were talking about the diagnostics segment, but.

The coconut if.

The availability of Coke and acting best saying have an impact on the diagnostic business up you'll IBP customers youre lifestyle and segment.

Oh, so that could be subject to impact as well right.

Yes, so we and maybe not sure I completely understand the question. Brian have you can you answer that one yeah I'll take that one so I think on the reagent side of our business from the the contacts that we've had with our customers, we're pretty confident and the 80 to 85 million between Melissa.

And there and immuno and I would say the immuno piece of that does not include a large piece for serology testing and I think the way we have thought about vaccines coming into play that is where we would we believe that there would be a place for serology testing. So that's kind of how we're thinking about.

That's what's in our guidance and I think as is more comes out around the vaccines. For example, we'll have more to say and the future around what we think the demand will be for reagents that would go into sorority test.

Okay, Okay got it and.

Thank you and also.

Second question regarding the recent researching and dynamic across the us Europe. So.

Could you provide any color on the D.

The inventory level of the reagent sets and should I be the customers and and.

And with the Covenant to research and do you think youre customers are likely to stock up on reagents and near term again, and therefore, having a significant.

Providing significant driver a few near term revenue and top line revenue such as to what you experienced in fiscal third quarter of 2020.

Yes, yes, so we and we are seeing strong demand.

In this quarter in regards to the life science reagents.

So we.

And as we said in Q4, we expected those customers were working through inventory and those customers have worked through inventory and we are seeing resurgence of our existing customers with orders, but also then picking up new customers along the way. So we do anticipate a strong start to the year and.

And there are certainly strong demand for that product line and.

We as we as we go forward and Q1.

Okay. Okay.

And for the rubber chain PCR test and once you get that you and entered the market I mean, how large is the market opportunity for this product and for this proprietary testing you and considering that.

Essentially you could be competing with your.

I'd be customers' products' testing products as well right.

Sure sure. So we're not providing a forecast at the product level at this time, but let me give you some data points to help you give an idea of the opportunity.

We mentioned before that we have about 231 ravaging systems in the field as of September Thirtyth.

We've also seen really strong demand for revenue stream with orders outpacing your installation. So we would anticipate that the number of revenue gains will continue decline significantly as we go forward and the next quarter or two in particular.

So we are currently building inventory and also for our other assays one of the things that we've learned as some of the other diagnostic companies stopped making other tests and so we've been able to pickup business for other product lines as customers couldn't get those products from the other manufacturer since they were only making COVID-19. So we have been working while we were preparing for this for their manufacturing to Ram.

And the capacity and the other products.

However, we we also knew that we needed to expand overall capacity, we hired a second shift in Quebec and that ship is up and running now that gives us capacity of around 80 to 100000 price per month.

And so we are actively making plans to increase capacity further as well and with the launch of revenue gene the scale for both instruments and production. The ask they really have intensified the plans to build a couple.

Capacity three to four times and where we are today. So we anticipate that the between now and our Q1.

All that we do that will that will be really pushing forward on trying to drive the capacity initiatives and we should be able to give a lot more color in regards to the the market opportunity there, but I think 80 to 100000.

Price per month, right now and high majority of those would be co but in the near term.

Got it. Thank you and last question could you provide some color.

I'll be a new cancer liquid biopsy solution is trendy to one you recently launched.

So we just recently launched that product we've had some initial customer reaction I would describe it is very early there has not been any significant revenue uptick from this and we also believe that products like that will take some time to grow.

Customers have to do their validations and all the other regulatory work. So we see a slow build on that that's really something that can be significant a year or two from now as customers who've tested it start bringing those products to market. So at this point, it's a pretty limited impact on our financials, we view that more as a longer term play for our life science business.

Okay. Thank you very much.

Thank you.

Our next question comes from the line of Stephens, Inc.

Per Sandler your line is now open.

Thanks.

Hey, John Congrats on the quarter and while margin very much.

Okay, Yes, so just a few questions a lot of covered a lot of ground and MCU and Eric.

If you could walk us through.

Substance on the 2021 guide and maybe back the cadence throughout the year I know you said diagnostics would probably be.

Backend weighted and the back half a year.

Do you think that's going to be offset by COVID-19, reagents and the front half of the year and you know.

How should we think about the.

You know the guide is it spread out through the four quarters.

Yes. So this is Brian Steve and I think.

On both a consolidated basis and certainly some of this is life science driven the first half of the year like we were alluding to and our guidance discussion.

We are expecting the first half of the year to be to be stronger.

Without a doubt I think as you talk about diagnostics, it's a little more even quarter to quarter I'm, a little bit more on the back and but a little more even particularly compared to life science and I think you know part of that is.

Got Cove and coming online here of late first quarter, beginning and second quarter for us with as you a product and then you really have a recovery of our core diagnostics business then.

And back online as we mentioned in the second half and a year. So a little more even distribution on diagnostics at this point and then definitely more and the first half on the life science side of the business and again, that's based on the current line of sight that we have and we may have more to say on that you know come our call after the first fiscal quarter.

Okay. All right that's helpful and and then maybe as a follow up question on the life Science segment I know and.

And keep three you had a big jump because of stocking issues do you see that happening and again in the future or has life science stabilize.

So I think what we would say right now is weve seen Jack just still I think alluded to this and his comments that we have seen some renewed demand here during our first fiscal quarter kind of similar to what we were seeing and our third.

Quarter from last year.

I think it's still a little too early to call third quarter of this year and.

Will we get a better line of sight on the second half of the year.

In general, Steve and though I think that we feel that you're likely to be strong and Q1 and Q2.

Hi.

We don't know that we will have the same lumpiness, but the life science side does tend to have a little more lumpiness with the way that the customers order because they were a big that of the key components that then they manufacture all the time, but I would say that our line of sight into the first half is it will be it will be a good start to the year for the life science business for sure.

Okay. That's helpful. I appreciate that and maybe one question on the on revenue growth C. I appreciate you're going to wait.

You know wait to get to eat away free shirt, and really pushing on manufacturing, but given that it's sort of a land grab and covert that team has there been an increase and your sales and marketing activity ahead of the revision and watch and talk about an absolute respiratory panel.

Absolutely. So we this when we announced at the <unk> and the <unk>.

And the summer when we had our color and August we announced that we were working on you way, how we saw very very strong customer interest.

Customers are struggling to meet that testing demand and.

It's unusual and diagnostics and normally you have one type of vendor that you use for a product that they're looking to source multiple vendors for Kobe and because of the supply chain challenges and so we saw increased demand very very high and the instrument side with people looking to secure instruments.

As well, we've we've been working hard to do that we're also trying to make sure that we don't over promise and under deliver so we're going to as we build our capacity to be built kits were going to bring more customers onto the cobot products. We don't want to start somebody and then back order them. So we're going to try to bring it back to customers on be able to supply their needs as we and.

Greece, our capacity bring on the next batch customers and we're going to we're going to go that way but.

We have seen very very strong interest and demand, but we've also as we said seen demand for the other products as well because quite frankly, a lot of the manufacturers and making things like group B strep and other products. So we're we're helping those customers that with those tests as well.

And John if I can just add to that I think on the placements to put some numbers to it Steve and we saw our fourth quarter placements pick up quite a bit.

Because we got to the 231 Mark as of the end of September we were sitting on 169 as of the end of June as far as our revenue and placements and we had I would say limited activity during the June quarter, and we probably had three at least three times the number of placements and the September quarters, we did and the June quarter.

Okay got it that's helpful and those are all kind of like preorders getting the instrumentation, okay that makes all sense.

Right exactly.

Thank you Steve.

That's all the time, we have for questions today, I'll now turn the call back over to Jack Kenny for closing comments.

Thank you Lindsey.

As we close this call I want to again, thank our team for their hard work. This year. They truly helped to deliver the best year and our company's history and have positioned us to do it again and fiscal 21 I also want to thank each of you for joining the call today and we look forward to speaking to you again next quarter. Thank you and have a great day.

This concludes today's conference call you may now disconnect.

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