MWI Veterinary Supply, Inc.
), a worldwide distributor of animal health products to
veterinarians, has formed a revised distribution relationship with
IDEXX Laboratories, Inc.
), a manufacturer of veterinary diagnostic products. Both companies
entered into a non-exclusive distribution agreement, per which MWI
Vet, as a business partner of IDEXX, will also be able to
distribute other competitive diagnostic products.
With this modified agreement, MWI Vet will remain a value-added
distributor of IDEXX and will be eligible for a reduced discount
from the list price at which IDEXX sells its products. Execution of
the new terms, which is expected by January 1, 2013, is subject to
the review and clearance of the U.S. Federal Trade Commission
('FTC'). MWI Vet believes that the modification of IDEXX's terms
will aid its future growth, although the financial impact was not
This issue came into the forefront in 2010 when IDEXX received a
request letter and subsequent subpoenas from the FTC regarding
investigation of its U.S. distributor strategy. FTC started an
investigation to check whether IDEXX violated the FTC Act by
engaging in unfair methods of competition. As per the initial
agreement with IDEXX, contrary to our original report, MWI Vet was
never barred from distributing competing products of IDEXX.
The U.S. market for animal health products distribution is highly
fragmented with numerous national, regional and local distributors.
MWI Vet is currently focused on preserving long-term customer
relationships as well as building new ones.
Other than the agreement with IDEXX, MWI Vet's long term
distribution agreements include a 13-year contract with Banfield,
the largest private veterinary practice in the U.S. The company
also maintains a strong relationship with Feeders' Advantage, a
buying group comprising several large cattle feeders in the U.S.
MWI Vet primarily sources the vast majority of its products from
several vendors. Although vendors have relationships with multiple
distributors, the company has successfully maintained long-term
relationships with many of them including the likes of
), Merial and Vedco. We believe that in spite of the veterinary
market being highly competitive, strong bonding with both vendors
and customers has enabled the company to achieve robust growth.
However, the company faces stiff competition from key player like
) among others. Currently, MWI Vet retains a short-term Zacks #2
Rank (Buy). However, over the long term (3-6 months), we are
Neutral on the stock.
(We are reissuing this article to correct a mistake. The
original article, issued August 10, 2012, should no longer be
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