Calif. Firm Gets Boost From ‘Mad Cow’ Scare
At least a few companies already have benefited from the “mad cow” disease scare, including one Bay Area firm that makes test kits used to diagnose the illness.
Hercules, Calif.-based Bio-Rad Laboratories Inc. rose $10.04, or 20%, to $59.82 on the American Stock Exchange as investors bet that the discovery of an infected animal in the United States would speed approval of the company’s test, used widely in Europe and Japan, to diagnose bovine spongiform encephalopathy, or BSE.
In heavy trading, Wednesday’s intraday peak of $65 beat the previous 52-week high of $62.85, set in June.
Bio-Rad has declined to say whether it has sought approval to sell the test in the U.S.
Currently, results of routine tests for BSE disease can take as long as two weeks. Bio-Rad’s test, which like the others already in use is performed on the brain tissue of dead cows, can return results in a matter of hours. That allows inspectors to keep meat from the tested animals from entering the food supply -- an important safeguard in Europe, which has suffered numerous BSE outbreaks.
“If widespread testing is mandated and adopted by the U.S. and/or Canada, we believe Bio-Rad is well positioned to capture a large portion of this market,” analyst Aaron Geist of Baird wrote in a note to investors Wednesday.
Bio-Rad’s test for chronic wasting disease has been approved by the U.S. Department of Agriculture. That disease for deer and elk is analogous to BSE in cattle.
“To the best of our knowledge, no other major BSE test provider has a USDA-approved test,” Geist wrote. “We believe Bio-Rad has a strong relationship with the USDA, which will prove invaluable in discussions surrounding BSE testing in the U.S.”
Geist, the only analyst who covers Bio-Rad, said the company could see an additional $7 million in sales and an earnings increase of 3 cents to 4 cents a share for the year.
The analyst based his estimate on a scenario in which the USDA decides to test about 700,000 cattle a year for BSE, up from 20,000 now, and assumed 100% market share for Bio-Rad.
He raised his rating to “outperform” from “neutral” and raised the share-price target to $73 from $54.
Other U.S.-based life sciences companies also got a boost Wednesday after news of the confirmed BSE case found in a Washington state dairy cow.
Shares of Princeton, N.J.-based Orchid Biosciences Inc. rose 14 cents, or 11%, to $1.37, and Strategic Diagnostics Inc. of Newark, Del., gained 17%, or 74 cents, to $4.99. Watertown, Mass.-based V.I. Technologies Inc., which is working on technology to remove the protein that causes “mad cow” disease, rose 38 cents, or 45%, to $1.22. All three trade on Nasdaq.
Abbott Laboratories Inc. of Abbott Park, Ill., said it had asked the USDA in October to approve its similar diagnostic test, which already is sold in 12 countries, including Britain and Japan. Shares in Abbott rose 35 cents to $46.86 on the New York Stock Exchange.
Bio-Rad, which is controlled by the family of founder and Chairman David Schwartz, produces diagnostic systems and tools including laboratory instruments, disease tests and imaging systems.
The BSE testing kits generate about $100 million in annual sales, or nearly 10% of Bio-Rad’s revenue, which in 2002 totaled $893 million, with earnings of $68 million, or $2.80 a share. About 64% of the company’s sales come from outside the U.S.
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Times wire services were used in compiling this report.
