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Neogen's Canadian Lab Buyout to Boost Genomics Business

Zacks Equity Research

Neogen Corporation NEOG recently announced the acquisition of Delta Genomics Centre. Based in Edmonton, Delta is a leading animal genomics laboratory in Canada. Meanwhile, the financial terms of the agreement have been kept under wraps. 

Per management, the buyout is expected to boost Neogen’s animal genomics business throughout Canada. Moreover, post-acquisition, Delta’s laboratory operations will be renamed Neogen Canada, and it will deem to be Neogen’s fifth animal genomics laboratory.

Notably, a long-term customer of Neogen’s genomic products, Delta is a major supplier of genetic testing to Canada’s purebred beef associations, commercial beef cattle producers, and national genomics research community.

Market Potential

Per a Transparency Market Research report, the global genetic testing services market is expected to reach a worth of $64,131 million by 2025, at a CAGR of more than 7.6% between 2017 and 2025.

Given the solid prospects, the latest development can be considered a timely one.

Genomic Business Progresses Well

Neogen’s animal genomic business has continued to develop rapidly with worldwide growth of 8% for the fiscal second quarter. Also, the company’s beef genomics business performed well, including both the beef breed associations and for commercial producers.

The business which originated in Lincoln Nebraska, has so far expanded well over the last few years, as the company continued to add laboratory capabilities in Scotland to serve the growing European market, purchased Deoxi lab, a genomic laboratory in Brazil, and moved into Australia, acquiring the genomics business from Queensland University in September 2017. This apart, recently, the company established a laboratory in Shanghai, China. This has already started to result in significant increase in animal genomics revenues for Neogen.

Again in September 2018, Neogen acquired Livestock Genetic Services. Per management, this buyout is expected to boost Neogen’s in-house genetic capabilities and complements the animal genomics business as well. Per the company, the takeover will position Neogen as a leading agrigenomics company worldwide.

Not to forget, Livestock Genetic has been a partner to Neogen's genomics business for long. Based in Virginia, Livestock Genetic specializes in genetic evaluation and data management for cattle breeding organizations.

Share Price Movement

Shares of Neogen have underperformed its industry over the past six months. The stock has declined 33.4% in comparison with the industry’s 8.4% fall. 


Zacks Rank & Key Picks

Neogen carries a Zacks Rank #3 (Hold), at present.

Some better-ranked stocks in the broader medical space are Veeva Systems VEEV, Surmodics, Inc. SRDX and athenahealth, Inc.  ATHN.

Veeva Systems’ long-term earnings growth rate is estimated at 19.5%. The stock flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Surmodics’ long-term earnings growth rate is projected at 10%. The stock carries a Zacks Rank of 2 (Buy).

athenahealth’s long-term earnings growth rate is projected at 17.7%. The stock carries a Zacks Rank of 2.

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