Q1 2022 Meridian Bioscience Inc Earnings Call
Ladies and gentlemen, thank you for your patience to conference we'll be starting in two minutes. Thank you for your patience.
[music].
Greetings and welcome to Meridian Bioscience first quarter 2022 financial results conference call.
At this time all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce your host Charlie Wood, Vice President Investor Relations. Thank you. Mr. Wood you may begin.
Thank you Doug Good morning, and welcome to Meridian's fiscal 2022 first quarter earnings call with me are Jack Kenny Chief Executive Officer, and Julie Smith, Senior Vice President Controller, and principal accounting Officer. Please note that our SEC filings earnings release and slides to accompany this call are available on our website.
At Investor Dawn Meridian Bioscience Dot com.
We'll post a copy of these prepared remarks after the call.
Jack and I expect to participate in at least one conference prior to the next earnings call, but do not have anything to announce at this time per usual details of any events will be announced via press release and posted to our website as they are finalized finally, our Q2 fiscal 2022 earnings call is currently scheduled for Friday may six 2022.
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 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 Companys results may differ materially from those projects.
Meridian makes these statements as of today February four 2022 and undertakes no obligation to publicly update them. Additionally, the company's remarks also include market data based on managements knowledge of the industry and good faith estimates of management.
The market data referenced involves a number of assumptions and limitations and you are cautioned to not to give undue weight to such estimates when we believe the estimated market position market opportunity and market size information is generally reliable such information, which is in part derived from management's estimates and beliefs is inherently uncertain and imprecise and has not been.
Verified by any independent source lastly 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 related discussion are included in our earnings release, and I would like to turn the call over to Jack Thank you Charlie.
While disappointed that we were fighting yet another wave of COVID-19 infections across the globe I'm pleased to be here recapping another fantastic quarter for Meridian, one of the best in the company's history.
What is really exciting about this quarter to set the strong result is due to both businesses performing ahead of our internal plan. This dynamic bodes well for the quarters to come.
Diagnostics was up 10% year over year and the omicron wave of this pandemic drove higher demand for our life science reagents relative to our fourth quarter of fiscal 2021.
Julian will elaborate more but it should be noted that the first quarter of fiscal 'twenty. One was a record quarter for the company and while the metrics will show life science down year over year. This most recent quarter was one of the best on record with sales in the first three months nearing levels. It would've taken us nearly 12 months to achieve pre pandemic.
Operationally the company made tremendous progress in the quarter, perhaps outshining the strong financial results. The life Science innovation engine and London keeps cranking with the launch of its first sample specific mixes in our Lisle ready format, which are designed for use in molecular assays that are lyophilize.
These first products, where our saliva mixes and we'll be launching more throughout the year.
Enhancements made in fiscal 'twenty, one and our life science manufacturing still leave capacity for growth. The team has definitely manage the supply chain challenges plaguing other companies in the industry and we continue to have ample inventory of critical raw materials as.
As I had mentioned in the past our ability to meet the demand of our customers throughout surges. In this pandemic has won awards from our suppliers and helped US win business from the competition, we are being diligent and staying ahead of the situation to protect our reputation as one of the most reliable suppliers to the industry. In addition to being the leading innovator with our air drive that format and sample specific mixes.
Also in the quarter to diagnostic assays received approval from the FDA with kurian can't be receiving five 10-K clearance and the revenue <unk> Sars koby to assay receiving emergency use authorization. The ladder is being is being updated in response to the omicron variant and we are working closely with the FDA to get these shipping later this quarter.
Our lead care team and Bill Richardson has made substantial progress on resolving the issues with the third party components behind the recall initiated last year. The team is in the process of validating new packaging components and we remain highly confident that we will have this important product shipping again by the end of this quarter of course exact timing is subject to review with the FDA.
The ramp up of ravaging manufacturing continues its pace the new line in Quebec became operational in the quarter and the first line in Cincinnati, just completed validation and recently began producing kits as we announced earlier. This week. The NIH continues to be a strong believer in the benefits of the ravaging system awarding us another $2.5 million to support continued manufacturing of <unk>.
<unk> and the development of the respiratory panel.
Our H pylori franchises, our most important contributor to the diagnostic segment and the team keeps delivering results integration of both breadth I'd and <unk> acquisitions are now complete. This is a perfect example of the expertise we have built an M&A seamlessly integrating two acquisitions, including a carve out in the midst of a pandemic where travelers has been greatly limited.
This is a good segue into a new feature that I'd like to introduce in fiscal 'twenty two in an effort to provide a better appreciation for the opportunity that lies ahead at meridian I would like to take some time to provide further details on important areas of our business a good place to start is with H pylori and that franchise as the largest disease state for our diagnostics segment accounted for approximately 45.
Sense of diagnostic revenue in Q1, and offering a tremendous growth opportunity.
As you know meridian was the pioneer in stool antigen testing introducing the first assay of its kind in 1988, we have patents on the testing method, which expired in 2016 and 17 that yielded extremely high margins as new entrants emerge following exploration of the stool antigen H pylori patents, we took steps to protect that business first.
We entered into multiyear agreements to annually step down pricing with our largest customers second we entered into a strategic partnership with DSR and to accommodate higher volume customers by providing an H pylori assay on the fully automated high throughput liaison platform.
Adding this product to our portfolio allowed us to diversify our volume based market segments and complement the other technologies in our H pylori franchise.
These strategies have been successful in maintaining our leadership in testing volume, albeit at a lower average selling price.
In 2020, we ended the urea breath testing also known as <unk> for short to our already strong H pylori franchise with the acquisition of excellence Bioscience, the manufacturer of the breast <unk> system.
Last year, we acquired the breath Tech product line for Mazzuca, another urea breath test for each by Lori with these products. We are the only company selling FDA approved assays for will stool antigen and urea breath testing for each by Laurie. This is an important advantage for our sales force and crafting solutions for our customers. Each test has advantages and challenges and often clinicians are biased.
Towards one solution over the other while both testing methods have good sensitivity and specificity you BT has superior performance relative to stool you'd be T. Also use the sample type that it's easier to collect and process. The downside TVT is that patients need to stop taking medications that are suppressing their symptoms for two weeks prior to the test.
There is one other minimally invasive approach to detecting H pylori, which is serology. This was the first method developed protesting H pylori and has significant limitations first it has it is dramatically less sensitive than other than either <unk> or stool antigen testing second and most importantly, it does not confirm whether you have an active infection. This could lead to.
Misdiagnosis and the overuse of antibiotics. Additionally, it cannot be used to confirm eradication. After a patient completes a treatment plan, which can lead to long term consequences for the patient poor performance of serology testing has led to reduced or in many cases no reimbursement for this type of testing further key medical organizations, such as the American College of.
Neurology and the American Gastro and Illogical Association have recommended against using Serology test.
Despite that Theres still a number of doctors using these tasks and we estimate that over 25% of H pylori testing is done with serology.
Globally H pylori prevalence is very high as well as in the U S where it is estimated that on average 25% to 30% of the population is infected with greater than 50% infection rates and more ethnically diverse areas.
With only an estimated six to 8 million tests performed per year. Many people remain undiagnosed and untreated. This results in billions of dollars being spent on over the counter and prescription medications that only address the symptoms and not the underlying infection. When left untreated H pylori can lead to peptic ulcer and in some cases gastric cancer rates by Lori is the leading cause.
So there are very compelling reasons for both patient health and efficiency of healthcare spending to increase testing.
One of our strategies to increase testing is to provide education to both patients and physicians on the disease itself, the prevalence and negative consequences of not properly diagnosing and treating H pylori Meridian offers health systems, a solution with options for noninvasive guideline recommended active infection test rigor.
Regardless of the choice and testing method stool antigen or <unk>, we encourage more testing to accurately diagnose patients and reduce costs related to misdiagnosis and treatments.
Lastly, we have noticed that H pylori testing volume is weighted more towards the large reference labs and other products in our portfolio on average most products see 20% of testing binds performed at the National reference labs H for H pylori. The volume is roughly triple that theres, an opportunity to shift that testing closer to the patient, enabling a better patient experience and outcomes.
Additionally, it is possible to obtain a higher ASP that is a win win for both meridian and our IDM customers.
In summary, there are three vectors for growth in this disease state one converting existing serology volume to one of our better performing alternatives to grow the market through more testing and three drive higher asp's for decentralized testing. This makes H pylori one of the diagnostics segments best growth opportunities now I'm going to hand, the call over to Julie to provide some additional deep.
<unk> in our financials for the quarter.
Hello, everyone as Jack mentioned this was a very strong quarter from meridian that exceeded our expectations in both the life science and diagnostics segments Consol.
Consolidated net revenues were $88 million down 5% year over year, but second only to Q1 of 2021.
Diagnostics segment net revenues grew 10% to $33 million. This growth was driven by strength in gastrointestinal and respiratory product revenues, partially offset by negligible lead care revenues in the gastrointestinal category a significant driver of growth was the addition of brass tax which we did.
Not having Q1 of fiscal 'twenty, one and respiratory the primary driver of growth was increased demand for our mycoplasma group, a strep and RSV product interestingly floater demand while up year over year, it's still very light.
Lifestyle had a very strong quarter with net revenues of $55 million as we mentioned in last quarters call. We are no longer reporting the portion of life science revenue driven by COVID-19, many customers use our reagents and multiple tests. Therefore, it has become too difficult to estimate the portion of molecular reagents that are you still.
Lee in the manufacture of Covid on recast that said it is fairly obvious that the year over year decline in molecular is driven by decreased demand related to COVID-19, molecular testing, but what isn't clear is that there is offsetting growth from respiratory panels and non COVID-19 assays, which are manufactured using our molecular.
James on.
On the immuno side demand for Sars Cov, two antibodies, which are used to make rapid antigen test or the biggest contributor to growth. However, non COVID-19 immuno product revenues were also up more than 30% year over year. This was led by our blocker product line, which increased by almost $2 million or 100.
13%.
Consolidated gross margin was 56% with the diagnostics margin of 48% and our life science margin at 60%.
The diagnostics margin is low by historical standards. It was modestly better than our expectation. The primary driver of these lower margin is lead care being off the market, which is a drag of approximately 400 basis points.
Life Science gross margin was also down both year over year and sequentially from Q4 due to variation in the mix of revenue between them you know in molecular products.
As we have said in the past due to the nature of the molecular reagent manufacturing process, which benefits more from scale than the immuno business, our molecular products have dramatically higher gross margins than the immuno products.
Adjusted operating expenses were $29 million up $4 million year over year due to increases in consolidated G&A costs, R&D spending in diagnostics and sales and marketing expense across both business segments.
GAAP operating expenses were also $29 million up $2 million versus prior year, driven by the aforementioned items and partially offset by a decrease in legal and contingent consideration expenses.
Consolidated operating income on an adjusted basis was $21 million a margin of 23%. This breaks down to an adjusted operating margin of 48% for life science, partially offset by an adjusted operating loss of $2 million for diagnostics.
Overall, the biggest driver of operating margin is the lower gross margin for both segments.
Adjusted diluted EPS was <unk> 35, compared to 65 in the first quarter of fiscal 'twenty, one while GAAP diluted EPS was also 35 and.
In Q1 of 2022 compared to 61 in Q1 of 2021.
If you want to dig deeper into the drivers for the first quarter of fiscal 'twenty. Two please refer to our press release, and our 10-Q, which will be filed today.
Turning to the balance sheet as of December 31st we had $73 million in cash during the quarter. We also repaid $10 million on our line of credit putting us in a net cash position.
This leaves us with a borrowing capacity of 150 million as we mentioned on the last earnings call. In October we revised terms of our existing credit facility to increase the capacity to 200 million extend the maturity date to 2026 and incorporate other favorable changes in the covenants.
I will now turn the call back to Jack to discuss guidance and offer some closing remarks. Thanks Julien.
As you can see fiscal 'twenty two is off to a great start and we have even more optimism than we did at the outset as such we are raising our guidance. We now expect consolidated net revenues of between 315 and $330 million, which includes between 145 and $150 million of revenue for our diagnostics segment and between 170 and $180 million for our.
<unk> segment Youll notice that the diagnostic revenue guide remains unchanged. Our current view is that the modest outperformance in the first quarter, coupled with the increased demand we're seeing for our partner Sars Koby to rapid antigen tests will offset any loss revenue from the delay in the shipping of this ravaging Sars cov two assay.
We still expect diagnostic revenue in the second half to be moderately higher than the first half as lead care production comes back online and we have contribution from the ravages Sars Cov two assay.
The increase in life science revenue reflects the level of <unk>.
It reflects the level of demand, we're seeing for our reagents driven primarily by the omicron width as such you should allocate this increase more to the second quarter than the later quarters.
Adjusting operating margin is expected to be between 21 and 23%. This reflects inflationary pressures on wages and other operating cost slightly lower gross profit margin in diagnostics due to the impacts of the led to a recall and a lower life science gross profit margin due to a combination of lesser scale with our molecular products and an increased mix of our lower margin immune.
Products.
This all equates to an EPS range between $1 10, and $1 30 based on fully diluted share count of $44 5 million shares, it's really great to be able to present, a quarter with both business segments performing above our expectations and yet again being on a trajectory to exceed the guidance set at the beginning of the fiscal year. The rest of Q2 still requires some strong execution from our diagnostics.
R&D regulatory and operations team as well as both commercial teams, but the progress to date is promising and I remain highly optimistic that Q2 will be another quarter with great accomplishments for both segments.
I wanted to close with some brief comments on the governance changes, we announced coming out of the annual shareholder meeting last week. After 21 years, our chairman Dave Phillips retired from the board his contribution to the boardroom over that time was tremendous and we will miss his presence. Fortunately we have developed a strong bench for on our board and we did not need to look externally for daves successor.
We're excited to have John macro rate assumed the role and with the depth of talent of the rest of the board and my management team. We have the leadership to continue this tremendous run that we've experienced in the last 24 months now Julie and I are here for any questions you may have.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad, a confirmation tone will indicate your line is another question queue. You May press Star two if you would like to remove your question from the Q4 participants using speaker equipment, it may be necessary to pick.
Up your handset before pressing the star key.
Our first question comes from the line of Brian Weinstein with William Blair. Please proceed with your question good morning, Brian .
Hey, guys. Good morning, this is actually Griffin.
Correct, and we should start Brian .
Brian Andrew We'd love to know how you guys are are modeling and taking into account. What we think we multiple days in the city of Cincinnati kind of being shutting down following the Super Bowl with a great I mean is that contemplated in the sky.
We are very hopeful that we have that problem here in Cincinnati.
It's been what 31 year since the Bengals have are.
Have been in this game and.
We are cautiously optimistic that we are going to be highly unproductive on Monday, the 14th of February .
I also just tell you real quick I am a little conflicting I'm a I'm a bengals fan you live and since you have to be a Bengals fan I'm, a little conflicted however, because I'm from Detroit, and we have Matt Stafford and the Super Bowl and we have Eminem and half times, so I kind of have it both ways as the closest Detroit ever going to be the Super Bowl, So and either way I am going to have a good Sunday on the 13th.
Good stuff.
Alright, just on the start in the quarter and the guide for life Sciences, I understanding that breaking out.
Covid, specifically, but just directionally any sense, how we should think about that where COVID-19 revenue in life Sciences came in this quarter versus last quarter and then on the guide I appreciate the color on Q2 being a little bit more heavily weighted but can you just talk about the overall COVID-19 assumptions are you assuming any other surges or sort of a sequential decline throughout the year there.
Yeah. So.
<unk> done throughout the whole this whole process Griffin, because it's hard to predict.
Dicked exactly what's going to happen with Covid is really try to make sure where we have line of sight that we bring that into our guidance and we clearly have line of sight through this quarter with activities that are going on we definitely see strong performance. We had a good performance in Q1 and I think you can take from our guide that we see similar.
Type of performance in Q2 on the life Science side, Our guide doesn't really we kept our guide the same for the back half of the year that we've had historically, which is our off seasons are of a certain size and we say off season like the non respiratory season. So we are we have not modeled in our forecast that omicron continues to.
Rage up and down we viewed it more like what happened in 2020 in 2021 were in the spring and summer it kind of gets a little quieter than goes into more of an endemic type of situation and there's the revenue that we had in those other quarters as we envision a similar type of revenue in that quarter. Julie do you have anything does that make sense or any addition, yeah.
I know that that's exactly what we're looking at and I think the other thing that also has happened repeatedly throughout the pandemic is when we have these spikes customers stock up and so then sometimes after that we will see a little bit of a depth and we would right now.
There's a lot of demand if demand waned then custom.
Customers will have stock on hand, so that can impact our results, yes, and we've definitely seen that it's better now in the early days they were forwarding everything they could get their hands on supply chain, but because we've proven more reliable they arent ordering and is bigger batches at a time, but we still have some of that that carries over we historically have called our life science business, a little bit lumpy and.
And there is that same factor here with regards to Covid.
Yes, I think thats the primary driver for why the why we're down this year Q1 versus last year Q1, there were a lot of customer stocking up last year major startups last year, okay great.
Okay. Thank you.
Just another one on life Sciences, as we think about kind of post pandemic, you've talked about the strength of that business and how it's changed pretty significantly but can you just talk to any additional proof points about how we get through the acute phase of the pandemic what it looks like on the other side, what sort of a normalized life sciences business and any kind of proof points you have there.
Yeah, I would tell you that we in the Q4 quarter that we did we provided a little bit more guidance to try to give some people. Some reason why we have such confidence for what our life science business looks like on the other side of Covid and other side being more of an endemic environment. So we see the world that Covid is not going to go away that it will be.
Endemic and that we're going to have testing and it's ongoing and when you have a significant share of COVID-19 people using your products that will continue just at lower volumes and more endemic environment and so we really do view that we have.
A business that going into the pandemic was a $63 million life science business and we feel confident that we have 150 ish million dollar business now that we can grow from.
I would also tell you Griffin that we've had.
We had a chance to shine for these companies we got our chance we were new in the molecular space, because we had pivoted from selling to researchers and so this was our chance to shine and we delivered very well for our customers over the last couple of years and those customers are actively working with us on their new product pipelines and portfolios. So we.
Have they none of those tests have the volume that a COVID-19 would because it was so overwhelming to the world, but you just get into this regular cadence of new tests that are coming with these folks and we have a strong pipeline of that that's occurring so.
The longer this pandemic goes on the more entrenched we're getting with these customers as well so we find ourselves.
Here, we are two years into the pandemic and its a completely different environment with us and our customers on the life science side and so we're really.
<unk> believers at $150 million business that is growing double digits is what we have in this whatever post COVID-19 world looks like.
Yes.
Okay.
Really helpful.
And then just two on diagnostics number FDA submissions I think for expected. This year, but can you just kind of generally characterize the conversations youre, having with FDA.
They've been a little slow review times push out on some of the non Covid stuff and then any sense of any more specific timelines for those for the sugar toxin in C. Diff.
<unk> in respiratory and Gi for <unk>.
So so theres no doubt that the FDA was dealing with backlogs and dealing with challenges and.
That hasn't necessarily let up and an example would be can't be we put it in in the spring and really took several months before we even were able to kind of get them to really look at that with all the things that they had on their plate and it seems to go in waves when the omicron stuff hit again their activity level goes up.
We do anticipate that it's going to be a continued grind to get things through the FDA.
Hard for us to say if it frees up at some point you have to believe that it will but we havent seen it free up it's still been pretty.
FDA is working incredibly hard, but they've got a lot on their plate right now and so we have kind of been assuming that it's going to take us longer than normal for things to get approved and so as we model out the business. We are planning for a little bit longer periods of time before a product does get through final approval and start shipping. So I don't know if that completely answers Griffin Tonight.
But our dialogues with the FDA are good the question is getting the FDA to the table because they can't get to you. Because you are kind of in line. It's like you're waiting in line in the Q and you wait for your chance to get to the to the person to help you.
Once you get to them. They worked with you and they worked effectively but it's been hard to get to them at times.
Okay.
And then just the last one on HP I appreciate the color in the prepared remarks, when you talked about how disproportionately more of that testing is done retro reference labs other diagnostics and the pandemic has certainly accelerated decentralized specially but yeah I think the focus on our side has been on respiratory do you feel that the centralization trends.
In respiratory being similarly felt in Gi based on the conversations you're having with customers.
So I would I would say that all.
All customers the customers are faced with two challenges right now obviously, they're trying to support the COVID-19 testing, but there are also quite frankly supporting trying to figure out how to survive with late staffs. So.
It is it is less active right now than it will be when Covid goes back in a more normal state and when our supply chain and like hiring gets back to a little bit more normalcy.
So there is strong interest from customers to look at.
Things such as urea breath test that are being sent to reference labs and considering to bring them in the challenge. It is a little bit like the FDA has to get their attention when theyre trying to survive. So we knew that when we made these acquisitions, we knew that the the timeframe to get some of these conversions could take longer but we planned for it because we.
We're building our diagnostic business for the long haul so we see strong interest from customers, but the reality of it is is that it's slower right now because quite frankly labs are trying to survive between.
Between the Covid testing and the shortage of staff that they have.
Okay, great. Thanks for thanks for answering my questions and crude added back looks good luck guys. Thanks.
Thanks, a lot Griffin and good moment.
Our next question comes from the line of <unk> Chen with.
H C. Wainwright. Please. Please proceed with your question good morning.
<unk>.
Hi, Good morning, Thank you for taking my questions.
So.
You mentioned that the.
The revenue from the.
The mix from the molecular products.
There was a decrease in the mix from immunological products. There was some increase could you give us additional color behind that.
Yes, so I'd be glad to do that and then Julie you can wrap around if there's additional things.
So if you look at last year, when we had our $63 million ish quarter and life science.
We had a very very strong molecular sales and we did again this quarter. It was in the low thirties I don't have the exact number in front of me, but we did have but it was lower than last year. The main difference from last year was we had some customers in the United States that were ordering like multibillion dollars because they were stocking their supply chain because they were still the fear.
<unk> can I produce the test and so ultimately ultimately we we did have lower molecular sales still very high levels and the ordering patterns.
I'll give an example, a customer last year could say I want $5 million worth of this product and that happened in some cases those customers didn't know how quickly we're going to use it but they were trying to get their hands on anything that they could we have an environment now where that same customers more likely to come to us for $1 million order than a $5 million or because they know that we rely on <unk>.
Enable to produce we've got more confidence.
They built in us so that is a factor here and that specifically showed up in our United States business. That's why you saw the U S life science was lower significantly than last year.
And then the second factor here. He is if you look at what's going on in the world for all of US, Although we hear about our rapid tests in people one rapid test whether theyre shipping them to your house, whether you're going to the doctor, but they want to do a rapid test that area has been an area that has scaled up to be able to handle the COVID-19 challenges around the globe and we had.
Good market position. So we have seen exploding growth in regards to the rapid antigen testing area. So we sell wrap the antibody pairs that are used to do the rapid antigen test and that volume is skyrocketed versus last year. It was a fraction of what it was last year versus what it is right now so it's the.
A molecular is still doing great. It just leads were probably ordering patterns with some of those things and it's really the acceleration on the on the immuno side, specifically with the antibody pairs is what the differences Julie I think that covers it yeah. I mean those are the two main drivers.
Yeah.
Really the market shifting towards the rapid testing right now yes, we the last thing I'd say is we've seen some countries like the UK that at one point was doing all molecular testing and they came out said now we're going to switch and start doing all rapid immuno and so they kind of have bounced around a little bit. So that's also affected what's going on with the demand in general in some countries and stopped making decisions like that.
Yeah, and a big piece of that is definitely the at home tests, because they will turn available last year that true too and that's another whole market that's true.
Got it so you raised the.
2022 fiscal year guidance for a lifestyle segment was that primarily because we expect more revenue more COVID-19 related revenue or non copes with it.
We are seeing very good growth in non Covid, let me be clear I would say that's been more consistent with what we planned the increase in our guide is is truly for this activity. That's gone on we're not breaking out COVID-19 sales, but yes, it's activity that's related to the.
The aggressive nature that omicron has been I mean, I think it took over the world and we felt we felt that in our business. So that's why we basically said you had a $15 million beat or so in the first quarter kind of versus what people thought.
We've kind of guided towards it'll be similar type of performance in the second quarter versus that so we do see that if COVID-19 keeps continuing on our guidance would change, but we really tried to not get over our skis and really try to make sure that we can guide to what we have good confidence in versus just us trying to predict the waves of COVID-19 between.
Now and the end of the year.
And I would add that prior to the pandemic, we didn't really see a lot of seasonality in our life science business, we would get big orders here and there and have some inconsistency between quarters, but it wasn't necessarily due to seasonality I mean with COVID-19 that sees at all and we're probably going to continue to see seasonality in our business, we would expect to see a higher seasonality.
Correct, it's the nature of that.
Respiratory season, if your product yet.
So some European countries actually multiple European countries.
<unk> recently announced that.
Plan to lift all COVID-19 related restrictions in the near term so I'd like to have your perspective.
That's going to impact the volume of testing.
So we you know.
My personal opinion is is that.
We're in our respiratory season Omicron is raging people everybody's been getting it around the globe.
We fully would expect that it's going to come down peak and start coming down I think youre starting to see signs of that I think we will get into spring and things are going to feel more normal but the difference is going to be because everybody's going to open up more there will be higher levels of testing. So I do think that theres going to be ongoing testing, whether it be rapid testing to be able to go to dinner in new.
Your city or in Los Angeles.
Won't have to do that in Ohio by the way come to the Bengals game, you don't need to be tested just come to the game.
But I do think that there'll be a strong testing environment as we go forward.
So.
We would expect this is going to be something that will turn to a very seasonal thing whether we get some bumps along the way is questionable but.
I do think that youre going to see more and more people opening up you can't stay closed forever, you've got a you've got to have your businesses open up and have a market. That's slowing. So we do expect that we think testing is one of the hedges to help them to do that.
Yeah, Yeah got it okay. So lastly, what is the current status of met here.
I'm sorry, what.
Alright, let Carrie let Medicare tests, yeah, yeah. So we gave some color on that what I would tell you is that.
We worked very hard.
We had a third party supplier that.
Made some changes and some materials and ultimately it started creating a situation where our quality system picked up that we were having a detection.
<unk> suppression suppression of led results and so we identified that we worked with that we worked with the FDA that led to the recall so the quality system worked we feel good about that we've been working directly with the FDA. The challenge was trying to figure out the root cause and trying to figure out what happened and so it was a it was a very challenging thing to go through we did we didn't fit.
Out of the source of the contamination being related to cardboard and ultimately.
As bizarre as it is a diffusing into the tube. So there was a.
An impact that was occurring to the tubes, we've been able to prove that we can fix that and we're working through the process to validate that and to work with the FDA to create this product back on the market as quickly as we can so we're very optimistic that youll see this product back in shipping and in the hands of much needed customers, who need this point of care testing.
Here before the end of the quarter and will provide updates as we go but all things are looking very positive and we're extremely optimistic about that yeah and I would also like to point out that demand for that product has not waned.
Customers are still ordering instruments, and asking us to install them so that they're ready when the products back on the market. It's very encouraged there is a strong need for point of care led testing because if it if not you're drawing blood from a baby that people don't want to do and you have to wait two weeks for result, so having that result on the spot is critical and clearly the market is interested to get there.
Product back as quick as we can and the FDA is working collaboratively with us towards doing that safely.
Got it thank you.
There are no further questions in the queue I'd like to hand, the call back over to Jack Kenny for closing remarks, Doug. Thank you very much for your help today, we truly appreciate all of you who join us for the call today.
If you can't tell we're pretty excited about the state of our business and we think that our best days are still ahead of us and we look forward to sharing more with you about that in the coming weeks and months have a great day and go Bangles Uday.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.