California-based global provider of portable blood analyzers, Abaxis, Inc. ABAX, recently agreed to sell off its AVRL (Abaxis Veterinary Reference Laboratory) business to renowned animal healthcare company VCA Inc. WOOF. As per the announcement, VCA’s laboratory division Antech Diagnostics, Inc. will purchase AVRL for $21 million in cash. The deal is expected to be completed by the end of this month.
Abaxis’ management is optimistic about the deal. Apart from enabling the company to focus on its core segments, this deal will strengthen its co-marketing relationship with Antech Diagnostics. Eager to end its stint in the reference laboratory market, Abaxis now seeks to concentrate on its advanced point-of-care analyzers which have been enhanced in recent times owing to the company’s relationship with Antech. According to Abaxis, Antech’s national network of laboratories and a strong technology platform will help optimally serve its customers.
Both the companies are expected to continue their collective work together with the distribution partners, with an aim to market a comprehensive diagnostic solution consisting of Abaxis’ point-of-care diagnostic products and Antech Diagnostic's reference lab services.
Management is also highly optimistic about the two strategic long-term agreements Abaxis has signed with VCA Antech. Management is confident that both these agreements will benefit Abaxis and will serve as potential contributors to the company’s increased level of sales in the upcoming years.
We take note that, revenues from AVRL maintained a strong growth momentum and recorded sales of $3.5 million in the company’s fiscal third quarter, up 38% on a year-over-year basis. The upside was the result of a large market with an attractive growth profile. Increased vet spending is driven by a rising number of households with pets, enhanced human-animal bonding, an aging pet population, focus on animal health or preventative care, and advancements in pharmaceuticals and diagnostic testing.
Earlier, the company had stated that, AVRL has the potential to play a key role in its business strategy. Hence, as of now, we remain on the sidelines regarding Abaxis’ decision to separate this profit-making business unit and await further clarity on the same.
Currently, Abaxis carries a Zacks Rank #3 (Hold). However, some of the better-ranked medical product stocks are LeMaitre Vascular, Inc. LMAT and Phibro Animal Health Corporation PAHC, both carrying a Zacks Rank #1 (Strong Buy).
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