Zoetis, IDEXX, Schein among animal health scene-stealers at JP Morgan confab

The annual JP Morgan Healthcare Conference, which wrapped up Thursday in San Francisco, is typically a four-day showcase for the leading companies in human health, but this year the rapidly growing animal-health industry joined the party. Several drugmakers, equipment manufacturers, and distributors presented during the conference--all making the case to investors that animal health will drive strong growth going forward.

One of the biggest newsmakers at JP Morgan was veterinary diagnostics maker IDEXX Laboratories ($IDXX), which thrilled investors when it pre-announced positive fourth-quarter results. The company said it placed 2,000 hematology and chemistry analysis instruments in the U.S. during the quarter--a company record. Sales of its Catalyst system jumped 29% for the full year, including 20% U.S. growth and 40% ex-U.S. growth, the company said in a press release issued during the conference.

The company's stock jumped nearly 5% to $162.46 Wednesday before settling back to $158.33 the next day.

IDEXX has spent much of the last two years expanding its menu of diagnostic offerings, as well as its sales territories. It has also struck up some interesting partnerships, including a joint research effort with Hill's Pet Nutrition and Oregon State University to develop a biomarker for spotting kidney disease in cats.

All told, said CEO Jonathan Ayers in the statement, IDEXX "is well positioned to drive accelerated growth in the U.S. companion animal diagnostics market with our highly innovative, complete and integrated diagnostic and information management offering." IDEXX will release its fourth-quarter earnings report Jan. 30.

Veterinary drug giant Zoetis ($ZTS) also drew a crowd at JP Morgan. The company has been under pressure from Pershing Square's Bill Ackman, an activist investor who bought a boatload of shares last year, reportedly with the intention of encouraging the company to put itself up for sale. During a Q&A session after Zoetis' Wednesday presentation, analysts pressed executives for details about their plans to maintain Zoetis as a viable standalone company.

Among the topics was Zoetis' acquisition strategy. In November, the company paid $255 million to acquire Abbott's ($ABT) animal-health assets, which included a suite of surgical tool. Zoetis would like to find more such opportunities--"small or medium" transactions that fill holes in the company's product portfolio, said executive vice president Kristin Peck during the Q&A.

Chief Financial Officer Paul Herendeen added that Zoetis "would lever up, potentially aggressively" if the right deal came along.

But Ackman has griped about Zoetis' cost structure, which was also a topic of concern during the Q&A. When asked about opportunities to improve efficiency, Herendeen said the company had an operating spend of $1.8 billion in 2013, minus cost of goods sold. About half of that was sales and marketing expenses, he said, including the costs of maintaining the company's sales force of 3,500.

The greatest opportunities for cost-cutting, Herendeen said, may be in general and administrative expenses, which were largely impacted by the company's spinoff from Pfizer ($PFE). Zoeits is currently working to streamline its technology platforms, which should increase efficiency and bring costs down, he indicated. "I would say that our current level of G&A spend is above what you should expect for a company of our scale and of our global footprint. And that's because we're just putting it in place," Herendeen said.

Distributor Henry Schein ($HSIC) used the JP Morgan stage to educate investors about the markets it serves, including veterinary clinics. CEO Stanley Bergman told investors that Schein has made acquisitions and formed a number of joint ventures, allowing the company to expand its presence in the animal nutrition and orthopedic-equipment segments and to grow its geographic footprint in animal health in countries like Australia, Poland, and Ireland.

Bergman said during the presentation that the company has spotted many opportunities "to provide value-added services to the veterinarians. We have the largest installed base of practice-management software for veterinarians, and so we use that as a base to develop our relationships."

- here's the IDEXX release
- get more on IDEXX at Investor's Business Daily
- access transcripts of Zoetis' JP Morgan presentation and Q&A here
- watch Schein's presentation here