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IDEXX Laboratories, Inc. (IDXX)
30th Annual JP Morgan Healthcare Conference
January 09, 2012, 17:30 p.m. ET
Jon Ayers - Chairman, President and CEO
Merilee Raines - Corporate VP and CFO
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Thank you very much. I’m also joined here by Merilee Raines, our Chief Financial Officer, and Merilee and I will be in the breakout room afterwards, really happy to have you all here at the JP Morgan Healthcare Conference.
First of course be familiar with our Safe Harbor statement. Let me change a pace. I hear there are always hundreds of companies presenting at the JP Morgan Healthcare Conference, and all of them but us are I think presenting on the human species and so we are switching track here and talking about some other mammals, that would be dogs and cats and livestock and poultry, generally animal health, a non-human. These are attractive global markets where of course, our big business is in pet healthcare, but we also have other animal health, livestock, and poultry diagnostics. We are big innovator, we are going to talk a little bit about that in both diagnostic and information technology and we had a really great track record over the last couple of decades of consistent top line growth even through the great recession and earnings growth.
Just to frame here, we are talking about mammals, that’s true, like humans. We are talking about the kinds of things that animals need, diagnostics, there are some similarities, but what is totally different is the commercial market. This is a market that is a cash business; there is really no third-party payer. It's subject to normal commercial economics as a result of the buyer of the services is the user of the services. In our case the veterinary practice that’s providing pet healthcare to your family pet, your dog, your cat. It's also a market that has far less regulation.
I’d say that we are likely regulated in terms or not regulated in terms of new product introductions and we don’t have some of the constraints such as HIPPA and other regulations that the human market has that cycle’s competition and innovation in information technology. And that allows us to move a lot quicker, we have a greater freedom to operator a greater to move forward with new product development and the other differences that we are talking to cat business. So, the pet owner is paying for medical services and so they really need to see value in the medical services and given the price points can be lower than they are in human health as a result of the normal commercial economics.
But these are all good, we think this is a very attractive industry environment and industry in a profession that’s seen good growth over the last couple of decades and we have been able to continue to innovate and grow in these markets.
If you look at our revenue profile, the large proportion of it 82% of that is what we call a companion animal group business. This is the lines of business that sell to veterinary practices around the world that are providing pet healthcare, primarily dogs and cats that would make up at least 98% of the volume. We also have some other good businesses that will get into briefly some in animal health and some in other related diagnostic categories.
If you look at, we are focused on the pet healthcare business, and if you look at the drives, the fundamental long-term core drivers of this business. I’d say that there are two with a third that’s really entering this space. First is starts with a pet human bond. The bond is an important emotional attachment, people more and more believe that their pets are integral family members, my cat sleep with me in my bed and that’s the case in many dogs and cats. We probably have many pet owners in this room and those of you who are or have been a pet owner you understand the real value and happiness that companion pet can provide you.
Many people say for example, that they have a better relationship with their pet than they do with their pals, because their pets are better listener. So, I think this really improves the human condition and of course as a result these are mammals they do need healthcare, and so they appreciate the healthcare that’s provided, and they are willing to pay for it.
The other driver of growth is veterinary medicine is advancing. And just like in human medicine the advances in veterinary medicine are allowing for the potential for a higher and higher standard of care. That standard of care demonstrably increases the longevity and improves the health and well being of the pet and the pet human bonds. And in fact if some cure that’s provided is preventative medicine is what we might call a wellness care. You can actually of course, reduce the cause of that pets medical care because you get to issues earlier and can dress them before they become acute and chronic and irreversible.