MERIDIAN BIOSCIENCE INC

^{Magellan submitted 510(k) applications in December 2018, seeking to reinstate venous blood sample-types for its LeadCare® II, LeadCare® Plus™ and LeadCare Ultra®} testing systems. In the second fiscal quarter of 2019 the FDA informed Magellan that each of these 510(k) applications has been put on Additional Information hold. Further, while Magellan’s LeadCare testing systems remain cleared for marketing by the FDA and permitted for use with capillary blood samples, the FDA advised that it has commissioned a third-party study of Magellan’s LeadCare testing systems using both venous and capillary blood samples. According to the FDA, the results of the field study will be used in conjunction with other information to determine whether further action by FDA or the Centers for Disease Control and Prevention is necessary to protect the public health. Meridian intends to fully cooperate with the FDA as FDA completes its third-party study and continues to work to complete remediation actions at Magellan’s blood–chemistry manufacturing facility to the FDA’s full and complete satisfaction.

While we remain confident in the performance of the Magellan LeadCare testing systems, there can be no assurance that the ongoing investigation and study of the DOJ and FDA, respectively, or future exercise of their respective enforcement, regulatory, discretionary or other powers will not result in findings or alleged violations of federal laws that could lead to enforcement actions, proceedings or litigation and the imposition of damages, fines, penalties, restitution, other monetary liabilities, sanctions, settlements or changes to our business practices, product offerings or operations that could have a material adverse effect on our business, financial condition or results of operations; or eliminate altogether our ability to operate our lead testing business, or on terms substantially similar to those on which we currently operate.

^{On April 29, 2019, we signed a definitive agreement to acquire substantially all of the assets, as well as selected liabilities, of GenePOC Inc., a molecular diagnostics company located in Quebec City, Quebec Province, Canada. This purchase will be included in our Diagnostics operating segment. The maximum purchase price is $120,000, which consists of: (i) $50,000 to be paid at closing (subject to a working capital adjustment and a $5,000 hold-back to secure seller’s post-closing obligations); (ii) up to $20,000 to be paid in fiscal 2021, contingent upon the achievement of product development milestones; and (iii) up to $50,000 to be paid in fiscal 2023 based on certain sales and profit margin thresholds to be measured in fiscal 2022. GenePOC’s molecular diagnostics testing system is branded under the name revogene™}, and currently includes three FDA-cleared assays (C. difficile, Group A Strep and Group B Strep). The purchase is expected to close no later than early fourth quarter fiscal 2019, pending the satisfaction of certain closing conditions.

In connection with the proposed acquisition of GenePOC, we also expect to execute a new five-year $125,000 revolving credit facility that would replace our existing $30,000 credit facility. We expect the new credit facility will be secured by substantially all of our assets and will include certain restrictive financial covenants. We expect to draw down approximately $73,000 from this new facility and use approximately $20,000 of cash on-hand to repay the existing term loan outstanding at March 31, 2019 and fund the closing payment for the acquisition of GenePOC.

During the second quarter and first six months of fiscal 2019, revenues from our gastrointestinal products, which include tests for C. difficile, H. pylori and certain foodborne pathogens, among others, totaled $16,177 and $34,792, respectively. These revenue levels represent 16% and 12% decreases for this product category from the fiscal 2018 quarterly and year-to-date periods, respectively. Our C. difficile products continue to experience pressure as a result of competition, particularly our Alethia product, which experienced volume declines impacting both the quarterly and year-to-date periods. For our stool antigen H. pylori products, we have executed multi-year supply agreements with a number of customers, including our two largest reference laboratory customers, to secure volume, albeit at lower selling prices. As a consequence of this strategy, such products experienced price declines for the quarterly and year-to-date periods. We continue to believe there are ongoing benefits to be realized from our partnerships with managed care companies in promoting: (i) the health and economic benefits of a test and treat strategy; (ii) changes in policies that discourage the use of traditional serology methods and promote the utilization of active infection testing methods; and (iii) physician behavior movement away from serology-based testing and toward direct antigen testing. We experienced a favorable volume increase for the quarterly period as a result of promoting this test and treat strategy.

Revenues from our sale of products to test for elevated levels of lead in blood increased 2% during the second quarter of fiscal 2019 to a total of $4,330, and increased 3% for the fiscal year-to-date period to $8,760. In late December 2018, the documents to reinstate our venous blood claims removed in fiscal 2017 were submitted to the FDA, and in March 2019, we were informed by the FDA that each of the submitted 510(k) applications has been put on Additional Information (AI) hold. Further, while our LeadCare testing systems remain cleared for marketing by the FDA for use with capillary blood samples, the FDA advised that it has commissioned a third-party study of the LeadCare testing systems using both venous and capillary blood samples. According to the FDA, the results of the field study will be used in conjunction with other information to determine whether further action by FDA and CDC is necessary to protect the public health. We intend to fully cooperate with the FDA as it completes its third-party study and continue to work to complete remediation actions at our blood–chemistry manufacturing facility to the FDA’s full and complete satisfaction. We remain confident in the performance of the LeadCare products and believe that they serve a critical role in promoting the public health.