), a manufacturer of point-of-care blood analysis systems for
medical and veterinary markets, recently expanded its rapid
diagnostics product line with the inclusion of a feline heartworm
rapid test. Also, the United States Department of Agriculture
approved the company's VetScan Canine Heartworm Antigen Test for
use in feline applications. Abaxis is expected to ship the new
product in January 2012.
The addition of feline heartworm rapid test to VetScan Canine
Heartworm Test will enhance the company's VetScan test line, which
also comprises VetScan Canine Parvovirus Rapid Test and the VetScan
Giardia Rapid Test.
The company operates in the North American Animal Health segment
by marketing blood analysis system under the name VetScan VS2 and
the VetScan Classic. The products include Point-Of-Care Blood
Chemistry Analyzer, which performs a panel of 13 tests on
veterinary patients. The Veterinary Market primarily consists of
companion animal hospitals, animal clinics, veterinary emergency
clinics, veterinary referral hospitals, universities, government,
pharmaceutical companies, biotechnology companies and private
Abaxis' veterinary reagent products fulfill a substantial part
of the clinical diagnostic requirements of veterinarians and the
research marketplace. The veterinary market is a major contributor
to the company's top-line growth. Abaxis sustained this trend and
once again reported strong results in the second quarter of fiscal
2012 (up 18% year over year).
We believe that this is a large market with an attractive growth
profile as increased spending is driven by the rising number of
households with pets, enhanced human-animal bonding, aging pet
population, more focus on animal health or preventative care,
advancements in pharmaceuticals and diagnostic testing. Abaxis is
executing well in its veterinary division with an expanded product
line and growing direct sales force.
The company intends to introduce more rapid assay of products,
which would boost the veterinary revenue. During the last reported
quarter, the company earned robust revenues in its VetScan Rapid
Test line ($2.1 million, up 46% year over year). We expect the
company's VetScan VS2 blood chemistry analyzer to continue to grab
market share in the veterinary market. Additionally, the company's
i-STAT product line should facilitate new VetScan VS2 sales as
well. Alongside, through the launch of full-service laboratory
testing facility, Abaxis Veterinary Reference Laboratories (AVRL)
is expected to compliment the company's veterinary sector growth
However, the company's margins continue to disappoint owing to
several challenges. We also remain apprehensive based on Abaxis'
dependency on distributors to sell its products and increased legal
expenses. Besides, the presence of many big players like
) and Idexx Laboratories has made the human and veterinary
diagnostic market highly competitive. Furthermore, soft
international market is also a headwind for Abaxis.
Currently, Abaxis carries a Zacks #3 Rank (short-term Hold
rating), which also corresponds to our long-term 'Neutral'
recommendation on the stock.
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