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Mesa Labs Loses Big Customer, Doesn’t Impair Intangibles Or Goodwill
Life sciences firm betting on China to make up for lost customer that accounted for 4.4% of 2022 revenue.
February 6, 2023
Mesa Laboratories (MLAB), a manufacturer of life sciences tools and quality control products, disclosed it lost a significant customer in the three months ended December 31, 2022. The customer, Sema 4 Holdings Corp., notified Mesa of its decision to exit the reproductive health screening business which negatively impacts Mesa’s Agena acquisition.
Sema 4 spent approximately $8.2 million during the first 12-months since Mesa acquired Agena, or the equivalent of 4.4% of Mesa’s 2022 sales.
Despite losing a big customer of a recently acquired firm— Mesa acquired Agena in October 2021— Mesa did not impair the intangible assets of its Clinical Genomics segment (to which Agena belongs). Segment revenue fell 5% in the latest quarter with Mesa warning performance will worsen:
“The loss of Sema4 is expected to result in a significant reduction of anticipated revenues for this division in future quarters.”
In accounting for the Agena acquisition, customer relationships accounted for approximately one third of the $300 million purchase price.
Goodwill accounted for 45.1%.
Mesa Labs fired staff and cut costs in the segment, forecasting annual savings of $4 million. It also suggested it can offset a portion of the Sema 4 loss by winning new business in China. Mesa’s Chinese distributor recently received government approval for an in vitro diagnostics panel, which Agena sells.
Over the last year, DuDil has tracked multiple medical device, robotics, and health care firms like Align (ALGN), Intuitive Surgical (ISRG), and Stryker (SYK) that have experienced margin pressure after winning new business in China, where price controls can make certain sales uneconomic.
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