Abaxis: Test Menu Expansion Continues amid Several Odds

On Sep 26, 2016, we issued an updated research report on Abaxis, Inc. ABAX, which develops, manufactures, markets and sells portable blood analysis systems. The stock currently carries a Zacks Rank #3 (Hold).

On a brighter note, Abaxis continues to remain a strong player in the veterinary market, with solid sales from its veterinary business. This business accounted for 82.7% of the company’s total revenue in the first quarter of fiscal 2017 and also witnessed double-digit growth.

Management currently expects to witness substantial enhancement in sales of its veterinary rotors in the Asia Pacific region, for the remaining three quarters of fiscal 2017. This would be an improvement on Abaxis’ part as its performance in this region remained weak in the first quarter.

Moreover, Abaxis’ Piccolo system continued to excel in the market. To date, its Piccolo remains the only point-of-care technology that can deliver comprehensive diagnostic grade chemistry results within the 15-minute visit window that retailers target.

On the flip side, Abaxis faces fierce competition in both the Medical and Veterinary markets, wherein the company competes with firms that have substantially greater resources. It competes primarily with commercial clinical laboratories, hospital clinical laboratories and manufacturers of bench top multi-test blood analyzers and other testing systems that health care providers can use on-site. Such severe competition may strain Abaxis’ top line in the future.

Also, Abaxis mostly depends on distributors to sell its products as well as on sole distributor arrangements in a number of countries. For instance, Abbott has the exclusive rights to sell and distribute Abaxis’ Piccolo Xpress chemistry analyzer and associated consumables in the professionally attended U.S. human healthcare market.

As a result, Abaxis no longer has control over the marketing and sale of its primary medical products in most of the U.S. medical markets, and is wholly dependent upon the efforts and priorities of Abbott in promoting and creating demand for the same. Failure to successfully develop and maintain relationships with these distributors could therefore adversely affect the company’s business.

Stocks to Consider

Some better-ranked stocks in the medical product sector are GW Pharmaceuticals plc GWPH, Lantheus Holdings, Inc. LNTH and Quidel Corp. QDEL. All these stocks sport a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Biopharmaceutical major, GW Pharmaceuticals has gained 81.5% year to date, much better than the S&P 500’s 5% over the same period. Over the past two months, the company has seen two estimates move higher, compared to no downward movement for the current fiscal.

Lantheus Holdings, a worldwide provider of diagnostic medical imaging agents, has an impressive long-term earnings growth rate of 12.5%. Year to date, the stock has performed better than the S&P 500, with a gain of 142.9%.

Quidel Corp., a provider of diagnostic testing solutions for applications primarily in infectious diseases, women’s health, and gastrointestinal diseases, has an impressive long-term earnings growth rate of 20%, better than the industry’s 14.8%. The stock recorded a gain of 15.4% year to date.

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