Taking Aim at the High outlay of D...

Taking Aim at the High outlay of Diagnosing Disease

Meridian perform the operations indicated ins manufactures and markets disposable diagnostic standard kits for the rapid diagnosis of infections in five disease categories.

Parasitic diseases: eg Lyme disease, Giardia (water-borne diarrhea pathogen);

Gastrointestinal diseases : eg Stomach sore s (H. pylori), Toxigenic E. Coli, Pediatric diarrhea;

Viral diseases: eg Infectious mononucleosis, Herpes simplex virus

Respiratory diseases: eg Pneumonia, Valley fever; and,

Urogenital diseases: eg Urinary tract infection, Chlamydia.

Meridian's approximately 100 diagnostic returnss are used in procedures performed outside the dead body (in vitro tests) and require little or no special instrumentation. The majority of ordeals are performed in hospitals or laboratories and richness between $1 and $13 each. Accurate, simple and fast, the trials can improve diagnosis and abridge healthcare costs.

Kits are sold to hospitals, commercial and concern laboratories, and physicians' offices in 50 countries. In 1996 the sales distribution was as follows: U 74% Western Europe 22% Canada, Latin America and the Pacific Rim 4% The direct sales forces in the U and Italy are assisted by way of a network of U.S. and international distributors.

William J Motto, single in kind of Meridian's founders and Chairman of the Board, be in possession ofs approximately 32% of the shares; institutions be in possession of 30%; and individual investors be in possession of 38%.

In 1996, Forbes magazine single outed Meridian as one of the best 200 small companies in America. Early in 1997 Financial World magazine recognized Meridian as common of the top 100 bourgeoning companies in America.

FUTURE SHARE PRICE FROM events to come GROWTH IN REVENUES AND EP

Estimated High Price on the Fiscal Year Ending September, 2001

To calculate the high price for Meridian's public shares ("KITS", NASDAQ), first estimate the company's earnings by share ("EPS") in 2001. Then estimate the Price/Earnings ratio ("P/E") in 2001

High Price^sub 2001^= EPS^sub 2001^ x P/E Ratio^sub 2001^

Estimating EP in 2001

Over the prolonged term, EPS cannot be anticipateed to grow faster than revenues: therefore, it is necessary to estimate return growth before estimating the increase in EPS.

(a) Estimating income growth to 2001. From 1987 to 1996 the research period, revenues grew at a pay by substitutioned rate of approximately 23% (see Guide). Between fiscal 1992 and 1996 shooting declined to about 21 % by means of year. In 1996, revenue increased according to 17%; and, in the first half of 1997 incomes increased by about 25% throughout 1996.

Revenue growth is attributed to several core activities. Since 1991 Meridian has introduced 23 fresh internallydeveloped products to its niche markets. These produces were the result of Meridian's acknowledge R&D.

Meridian also acquired the rights to manufacture and market 33 diagnostic exhibition products-either through acquisitions or licensing agreements. For example, the company purchased Johnson & Johnson's mononucleosis yield line in 1993 and its infectious diseases performance line in 1994. In 1996 Meridian purchased Cambridge Biotech Corporation's enteric fruits line for $6.7 million.

Revenue from international sales has grown from 15% of consolidated rewards in 1992 to 26% by dint of 1996.

Meridian has also formed partnerships with consolidated healthcare providers. In January 1996 Meridian set downed into a three-year exclusive agreement to provide parasitic and infectious diseases diagnostic experiments to an alliance of approximately 350 hospitals. In April, Meridian chronicleed into a similar agreement with a chain of more than 35 respect laboratories for parasitic and viral diseases.

Chart 1: Meridian's efficiency in utilizing its assets to generate sales doubled between 1987 and 1992 This favourable increase coincided with a decision in 1991 to begin paying not at home approximately 50% of earnings as cash dividends. In 1993 to offshoot the reduced availability of retained earnings to finance expansion, and the attendant growing in sales, Meridian increased the company's reliance onward debt capital through the sale of $11 million of convertible debentures. These debentures were create anewed in 1996. Meridian then sold a just discovered $20 million issue, which is available for additional fruit line and licensing acquisitions. Use of these permanent funds to acquire product lines and finance just discovered sales will return the asset efficiency to more normal flushs

Future Revenue Growth. Continued produce is expected from:

new diagnostic productions developed inhouse;

more returns acquisitions and licensing;

international expansion, particularly in Europe Latin America and the Pacific Rim; and,

more partnerships with large healthcare organizations who corrupt large volumes under long-term agreements. Meridian also reckon upons several emerging trends to further combustibles revenue growth.

The global market for infectious diseases trials continues to expand as worldwide standards of living and access to healthcare improve. There is a continuing shift away from relatively expensive, conventional laboratory testing-which requires highly trained personnel and long turnaround timestowards Meridian's type of test-which can be complet in minutes or hours by means of personnel with minimal training. With accurate and more rapid diagnosis of diseases, therapies can be identified more quickly, resulting in faster patient regaining shorter hospital stays and reduc treatment cost It is important to note that conventional laboratories are responding to the ne for reduc prices and turnaround times by automating their testing steps