A definitive distribution relationship has been formed between
) - a manufacturer of point-of-care blood analysis systems for
medical and veterinary markets - and
MWI Veterinary Supply, Inc.
), a worldwide distributor of animal health products to
veterinarians. Per the deal, effective January 2013, MWI Vet, as a
business partner of Abaxis, will be able to store, market and
promote the entire veterinary product line of Abaxis in the
We note that Abaxis' veterinary instruments cater to a
substantial part of the clinical diagnostic requirements of
veterinarians and the research marketplace. As per recent data, one
third of the North American veterinarians practice working with
Abaxis instruments for routine wellness testing and annual
We believe that this is a large market with a high potential for
growth. An increase in the number of households with pets, enhanced
human-animal bonding, aging pet population, more focus on animal
health or preventive care, and advancements in pharmaceuticals and
diagnostic testing drive increased spending, which in turn is
favorable for the company.
Abaxis is performing well in its veterinary division with an
expanded product line and a growing direct sales force. The company
also intends to introduce more rapid assay of products, which would
boost the veterinary revenue. In the previous month, the company
launched its new Kidney Profile Plus panel for the treatment of
critical and chronic renal diseases in animals, especially in
canine, feline and equine species.
Alongside, Abaxis Veterinary Reference Laboratories' ("AVRL")
performance in the third full quarter of operations complemented
growth of the company's veterinary segment. Abaxis is optimistic
about its consistent performance in the veterinary market and
expects to maintain this growth momentum in the upcoming
On the other hand, in a highly fragmented animal health products
distribution market, MWI Vet is currently focused on preserving
long-term customer relationships as well as building new ones. In
August 2012, the company revised its distribution relationship with
IDEXX Laboratories, Inc.
), per which MWI Vet, as a business partner of IDEXX, will also be
able to distribute other competitive diagnostic products.
Other than that, 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.
We believe that despite the veterinary market being highly
competitive, strong bonding between vendors like Abaxis and
distributors like MWI Vet will enable both the companies to achieve
robust growth. The companies believe this new venture to
significantly add synergies to their individual businesses.
According to Abaxis, the new strategic partnership with MWI Vet
will enable it to further penetrate the western U.S. animal health
market, where the company has limited distribution. Currently,
Abaxis and MWI Vet carry a Zacks #3 Rank (short-term 'Hold'
rating). Over the long term, we are Neutral on both the
ABAXIS INC (ABAX): Free Stock Analysis Report
IDEXX LABS INC (IDXX): Free Stock Analysis
MWI VET SUPPLY (MWIV): Free Stock Analysis
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