December 19, 2010

The Bottom Line: Idexx passes the test

Growing markets for quick, accurate ways to test for animal diseases, and for contaminants in water and milk, drive the health of a Westbrook company.

By J. Hemmerdinger
Staff Writer

WESTBROOK - It's good to be a dog, even when you get dragged to the vet.

click image to enlarge

Vanessa Vigue, a scientific research associate, performs a test at Idexx Laboratories in Westbrook.

Gordon Chibroski/Staff Photographer

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Idexx’s SNAP tests have multiple dotted test strips for determining animal diseases.

Gordon Chibroski/Staff Photographer



HISTORY: Idexx was founded in 1983 by David Shaw, now a partner at the Portland-based investment firm Black Point Group. The company launched with diagnostic kits and computerized monitoring systems for poultry, cattle and swine producers. Soon, Idexx entered the so-called companion animal industry, selling products that test dogs and cats. Today, the company sells products to 50,000 veterinary clinics worldwide and every year makes some 26 million SNAP tests, a product that lets vets quickly check pets for heartworm, Lyme disease and other illnesses. Idexx also sells products that test for contaminants in water and milk.

EMPLOYEES: 4,700, including 1,600 in Westbrook

CEO: Jonathan Ayers


Since Ayers took the helm in 2002, Idexx revenue nearly tripled from $386 million to more than $1 billion, and the number of staff in Maine has doubled to 1,600.

Nearly 40 percent of the company’s revenues come from international sales, in 168 countries.

Idexx has manufacturing plants in Maine, Georgia, the United Kingdom, France and Switzerland.

FINANCIALS: Idexx reported revenue of $1.03 billion in 2009, nearly the same as in 2008. The company expects 2010 revenue to be $1.1 billion.

STOCK: IDXX. Trading around $70 per share.

Many veterinarians today have sophisticated blood-testing equipment. In minutes, pets can be screened for a host of nasty diseases, like heartworm and Lyme disease.

That's also good for Idexx Laboratories, the Westbrook-based firm that makes testing equipment found in many veterinarians' offices.

In the last eight years, Idexx, one of Maine's largest publicly traded companies, has doubled its work force in Maine and tripled its worldwide revenue. More expansion is projected.

Jonathan Ayers, the company's president and CEO, attributes Idexx's growth to strong research and development and new products he said lead the market.

"It's like Apple created the iPhone and the iPod ... The stuff we sell today didn't exist before we launched it," said Ayers recently at the company's Westbrook plant.

Take for, example, the SNAP 4Dx, a product that looks like a home pregnancy test, but detects disease in animal blood. The device is 2½ inches long and made of white plastic. There's a trough at one end to catch blood, and a testing strip that changes color to indicate a disease.

Ayers said SNAPs make testing for diseases simple for vets and pets. The company turns out some 26 million SNAP tests each year in Westbrook.

The SNAP test isn't new -- the first version tested for heartworm and was released in the 1980s. But the company keeps updating it, making it better.

The latest 4Dx, released in 2007, tests for four diseases at once, including heartworm and Lyme disease, an infection Ayers said used to require thorough lab work to detect.

"You put blood into it, and if the dots light up, you have a disease," said Ayers.

David Shaw, now partner at Portland-based investment firm Black Point Group, launched Idexx in Portland in 1983. Idexx initially had five staffers and sold diagnostic tests for farm animals. Pet tests came a few years later.

In 1991, the company went public, trading under the symbol IDXX, and relocated to leased space in Westbrook's Five Star Industrial Park. Revenue was more than $100 million in 1994.

Jeffrey Langan succeeded Shaw as CEO in 1999, but Shaw returned that year when Langan left the company. Ayers became head in 2002.

Expansion continued, and in 2006 Idexx bought the 450,000- square-foot Westbrook complex on what is now Idexx Drive.

The purchase price was $17.85 million, according to the Westbrook town assessor's office.

The facility is massive, with long, dimly lit halls lined with the lockers of lab workers. In adjacent rooms, employees in white lab coats and safety glasses test Idexx products and assemble sophisticated blood analyzers. The building has a bistro, a cafe and an outdoor courtyard with lunch tables. Idexx also has a 55,000-square-foot call center on Thomas Drive in Westbrook and 23,000 square feet of space in the Riverfront Plaza building downtown, for its IT group.

In 2009, Idexx revenue topped $1 billion. That year, the company spent $65 million on research and development.

The company now has some 5,000 staffers, including 1,700 employees in Maine. The median salary of Maine employees is $48,000 per year, according to the company.

Idexx sells products in 168 countries, and roughly 40 percent of its sales are international.

The company's stock climbed from around $55 in August to more than $70 on Friday.

Dawn Brock, a senior analyst covering health care services at New York City investment firm Kaufman Bros., said Idexx has gained a reputation for its products.

"They have leading-edge technology and innovation. It is a competitive advantage," she said.

The company also has a fairly continuous stream of revenue, Brock said. They sell testing instruments, such as blood-analyzing machines, but also individual test slides.

Brock said Idexx has a "phenomenal leadership team" that has boosted efficiency by reducing the number of parts that go into machines, minimizing the number of vendors and improving the supply chain.

The popular SNAP tests are made by the Companion Animal Group, which had revenue of $843 million in 2009 and sells tests to some 50,000 veterinary clinics worldwide. This group's VetLab products include a variety of blood-analyzing machines, including ProCyte Dx, which gives a complete white and red blood cell analysis in just minutes.

"It's faster than your family doctor," Ayers said. "If you take your dog in for a checkup, the doctor has got (the results) during the visit and can look at them with you."

The animal group also sells the VetLab Station, an information management system that integrates test results into a single report. And for more detailed lab work, veterinarians can send samples to Idexx's laboratories.

Brock said the animal group's range of products gives Idexx an advantage. "They have a diversified operating portfolio. They have created multiple touch points with vets."

Another Idexx division, the Livestock and Poultry Diagnostics group, made $77 million last year selling products detecting disease in poultry, swine and cattle.

And the $73 million Water division sells water contamination tests in 35 countries.

A local Idexx customer is the Portland Water District, which supplies drinking water to Portland and surrounding towns.

Peter Rush, an environmental scientist with the water district, said the district tests water samples for coliform bacteria and E. coli bacteria with an Idexx powder called Colilert.

"If the sample remains clear, it passes. If it turns yellow it is positive," he said.

Portland Water District also checks saltwater at swimming beaches for bacteria with Idexx's Enterolent.

Rush said the water district has bought Idexx products for many years and worked with the company during product testing.

He said Idexx products are expensive but easier to use and less prone to error than earlier tests.

"We've been having a really good working relationship with them," he said.

Another Idexx division, the Dairy group, makes milk-testing products.

Ayers said an effort by this division in 2008 demonstrates the company's innovation and agility. That year, a deadly contaminant called melamine, used to enhance apparent food protein levels, was found in baby formula in China. Several children died.

Ayers said Idexx staff in China and Maine rushed to find a solution, and within just seven months -- a remarkably short development period -- released the SNAP Melamine Test Kit, which rapidly detects contamination in milk used to make baby formula.

Successes aside, Ayers said the recession was hard on Idexx. Revenue, which had grown for years, flattened between 2008 and 2009, but has since resumed climbing.

A restructuring in the last few years resulted in some lost jobs (just 1 percent or 2 percent of the work force, Ayers said), but overall the company has added employees in recent years.

Idexx had planned to build a $50 million headquarters building in Five Star Industrial Park and hire 500 new staff, but the expansion was stalled by a plan by Pike Industries to blast a rock quarry in the park.

Idexx reached an agreement with Pike and the city of Westbrook, but the expansion remains in flux, partly due to economic concerns, said Dick Daigle, Idexx facilities manager.

A few months ago, however, the company began building a new $5 million mezzanine to accommodate Idexx's growth. Daigle said the addition will be able to house 130 people.

In the next seven or eight years, Ayers expects the company to grow worldwide, perhaps doubling in size.

"With that will come more jobs. I'm not sure how many, (but) plans are for growth around the world," he said.

Brock, the Kaufman analyst, also expects more good things out of Idexx. She said the stock has been "on fire" in the last couple weeks, despite an uncertain economy, and she expects Idexx to capture more market share.

"Even when GPD goes flat to negative, these guys are growing," she said. 

Jonathan Hemmerdinger can be reached at 791-6316 or:


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