Cincinnati-based Meridian Bioscience (NASDAQ:VIVO) would seem to be an unlikely player in the global coronavirus fight. This week, however, the company announced that one of its reagents is being used in the development of molecular diagnostics for that virus. 

Because the reagent is very stable, it can be freeze-dried, and thus is readily available for a patient sample to be run quickly for diagnosis -- important in a situation where time is crucial to help contain the outbreak.

According to the company's product marketing manager: "Over the last few days we have seen significant demand for our Lyo-Ready One-Step RT-qPCR Mix. This ready-to-use ... mix is designed to improve the accuracy of assays, increase operational efficiencies, and reduce their overall costs, making screening fast and affordable."

Bio lab testing

Image source: Getty Images.

A shot in the arm

While no one seeks to gain from the misfortune and illness of others, as investors, it is worth noting the benefits when a healthcare business is in a position to provide much-needed help. 

Meridian is a diagnostics and life sciences company that does large-scale manufacturing of reagents, antibodies, viral antigens, proteins, and enzymes to advance the development of diagnostic assays. It's been in business for more than 40 years. 

But over the past year, the company has suspended its dividend and seen the stock price drop over 40%. Traditionally, the company's policy has been to set a dividend payout ratio between 75% and 85% of each fiscal year's expected net earnings. So suspending the dividend was not taken lightly by management. The chart below shows the stock price and dividend history over the past five years. 

VIVO Chart

VIVO data by YCharts.

The reduction of the dividend in January 2017, based on the payout ratio policy, and the dividend suspension in April 2019 both match a corresponding drop in stock price.

A strategic shift

The suspension of the dividend came after the acquisition of GenePOC, a provider of molecular diagnostic instruments and assays, in April 2019. Meridian CEO Jack Kenny commented that this was "a critical element of our strategy to reposition our diagnostics business for sustainable long-term growth."

The change to the capital allocation strategy is intended to increase reinvestment in the business. After fiscal fourth-quarter results were reported in November 2019, Kenny noted "significant progress" and a stabilization of revenue in the diagnostics business. 

Is this new business a game changer?

With the business strategy as well as any dividend in a state of flux, investors may wonder whether the additional business from the coronavirus outbreak should even be a consideration. At this point, that new business cannot be quantified. 

Any long-term investor should be wary of making an investing decision based on a short-term event like this singular outbreak. But there are some market trends that would seem to favor the diagnostics business. 

Before this outbreak, management had noted in its annual report that the global market in testing for infectious diseases continues to expand. And that there's a shift toward more technologically advanced testing that can be done by less highly trained personnel and completed in much shorter times.

The contribution Meridian is making in helping with the coronavirus diagnostics may just be a good catalyst to begin more research into making a longer-term investment. Management has shown its intention to return capital to shareholders in the past, and if the new business strategy puts it in position for further growth, don't be surprised if the dividend policy is resurrected with a corresponding move in the stock price.