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Neogen Finds Partner for Rodent Control Product

Zacks Equity Research

Food and animal safety products supplier Neogen Corp. (NEOG) entered an exclusive licensing agreement with SenesTech to develop and market an innovative rodent control product. The new product will use fertility control as a tool to reduce rat populations, mainly in areas where traditional rodent control methods (which directly kill rodents) do not work.

SenesTech provides a unique technology for controlling the rat population. The technology leads to early menopause in female rats, disturbing the reproductive cycle with negligible impact on the environment. A female rat can give birth up to 144 offspring in a year.

SenesTech’s technology focuses on the development of species-specific protocols to chemically accelerate senescence, or premature aging. Neogen aims to manage chronic rat infestations in the short-term by using existing rodenticides and in the long-term by using the fertility control product.

The new rodent control technology is expected to acquire registration from the U.S. Environmental Protection Agency in 2014. SenesTech believes Neogen is the right partner for the project due to its size and market presence.

Neogen reported flat year over year adjusted earnings per share of 18 cents for the third quarter of fiscal 2014 compared with the year-ago level as well as the Zacks Consensus Estimate. However, net earnings declined 1.2% to $6.6 million from $6.7 million reported a year ago.

Revenues in the third quarter reported a rise of 21.4% to $62 million, edging past the Zacks Consensus Estimate of $60 million. On a year-to-date basis, revenues grew 18.9% to $180.1 million.

Neogen’s research and development expenses grew 6.3% to $2.1 million. Despite an increase in operational expenses, operating earnings rose 6.5% to $10.3 million but operating margin decreased 230 bps to 16.6% from the year-ago level of 18.9%.

Currently, Neogen carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the medical products industry include Cardica Inc. (CRDC), NeuroMetrix Inc. (NURO), and St. Jude Medical Inc. (STJ). All of them carry a Zacks Rank #2 (Buy).

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