Abaxis Expands Rapid Test Portfolio - Analyst Blog

Abaxis, Inc. ( ABAX ), 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 (USDA) 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 research laboratories.

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 going ahead.

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 Alere ( ALR ) 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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