Amid FDA concerns, Meridian signs agreement with Zeus Scientific to make test kits
Those 30 varieties of infectious disease test kits that Cincinnati, Ohio-based Meridian Bioscience, Inc. stopped shipping four months ago aren’t coming back.
Instead, Meridian is re-establishing active marketing, sales and distribution of 27 products under a supply agreement with Zeus Scientific announced in March. Headquartered in Raritan, N.J., Zeus will manufacture diagnostic tests comparable to the former Meridian products, then package and ship them under the Meridian brand name.
In January, Meridian voluntarily shelved 30 of its diagnostic tests in the aftermath of an FDA reinspection of manufacturing and quality procedures at its headquarters plant. An FDA press officer declined comment, saying the agency does not comment on pending applications for product approvals or ongoing inquiries.
Among the Zeus-manufactured, Meridian-branded products covered by the supply agreement are assays for detection of measles, mumps, chicken pox, Lyme disease, Herpes, Epstein Barr Virus, Mycoplasma and Legionella. Zeus was scheduled to begin shipments of the diagnostic tests by mid-April.
"A smart business decision," is how Jack Kraeutler, Meridian president and chief operating officer, described the three-year supply agreement. "We needed to focus our resources," he said. "After pulling 30 products off the market, we could bring them back through design control or find a partner, a high-quality manufacturer. We found Zeus."
A veteran producer of infectious disease serology products, Zeus will develop and manufacture additional testing products as well as work with Meridian on new technologies. Kraeutler said Meridian will pursue revalidation of its Herpes I and II type-specific products, whose shipments were affected by the January suspension, and continue producing 170 other products. Meridian products include diagnostic test kits, purified reagents, related products and biopharmaceuticals.
"We continue to give the highest priority to improving our quality systems in compliance with the FDA Quality System Regulation," Kraeutler said. Meridian has been very positive and very upfront with the FDA, Kraeutler said. The company has submitted a plan to the FDA outlining specific steps for satisfying FDA’s Quality System Regulation. Also, Meridian is sharing monthly status reports with the agency.
For assistance, the firm is bringing in outside consultants experienced in system regulations, revalidation, computer software and equipment. These charges will be reflected in operating results as they are incurred over the next 12 to 18 months. It is unclear whether its actions will be enough to head off further FDA remedial or enforcement action.
Kraeutler emphasized that the products returning to the market are not Meridian products. "These are Zeus products. They meet their tests, their procedures, their protocols and their quality systems."
"The job of compensating for lost revenues, improving efficiencies and reducing costs is well underway," Kraeutler said. In addition to shedding the test kits, Meridian announced layoffs at their Cincinnati plant. Meridian’s replacement products represent about $6 million, on an annual basis, of the previously estimated $9 million in annualized revenue loss. Gross profit margins for the replacement kits, the company anticipates, will be in line with the former Meridian products.
While Meridian projected a second quarter (ending March 31) loss, the supply contract with Zeus is expected to drive a return to profitable operations in the third quarter. In addition to the Zeus contract, Kraeutler said, Meridian has responded to the lost revenues by recruiting several key executives. The new vice president for operations and quality systems, Larry Baldani, is a former director of operations (sensory systems) at Instrumentation Laboratories in Ann Arbor, Mich., who has a lot of experience in managing operations and implementing quality systems (QSRs and ISO 9002).
"How fast we can return is up to us and our customers," Kraeutler said. Those customers include many labs whose recent complaints have centered on lack of availability and wide variations in results.
"I like their E. coli ImmunoCard very much, but we haven’t had product to evaluate," said one microbiology lab supervisor. The halt to shipments left customers and prospects puzzled and prompted statements of frustration on online forums. "Officially the stool test is on backorder … something stinks here, and it ain’t their stool kit. How about a little honesty for their customers … better be soon or we’ll be former customers," one lab manager wrote.
Said another, "Our laboratory observed a significant change in the performance of the Gull ELISA’s shortly after Meridian acquired Gull Laboratories. It appeared that Meridian had increased the sensitivity of the Gull ELISA’s because the OD values for the reference controls became much higher. The problem was that quite often they gave OD values above the acceptable quality control range stated in the product insert. We also saw great variability of the products from lot to lot. The technical service department was of little help in resolving the problems."
As for the ImmunoCards: "We discovered there was great variability from card to card," another lab supervisor wrote. "You wouldn’t believe the variability in the colors that were produced. I should mention their Fungal Immuno diffusion and their latex agglutination products have performed excellently and consistently over the years."
Before the shipment suspensions, developments had been breaking in the company’s favor. Meridian announced record net sales of $57,096,000 for fiscal year 2000, up 6 percent from the previous year. Net earnings for the year totaled $0.49 per share, more than triple the per share earnings a year earlier.
During 2000, Meridian restructured its European distribution to improve operating results. The company has relocated its European distribution center from Germany to Belgium. Also last year, Meridian acquired Viral Antigens, Inc. and entered into an exclusive supply agreement with OraSure Technologies, Inc. to bring to the market its Uplink technology. Viral Antigens provides specialized biological products to the diagnostics industry and protein expression capabilities to the drug development industry.
In the past six months, the company’s board approved a name change to Meridian Bioscience, Inc. to better reflect its widening focus on bioscience, research reagent development and other services related to the creation of new pharmaceuticals, vaccines and diagnostics.
— Nicholas Borgert
