Analysts to Heska: Why has strong performance been overlooked?

Heska's HemaTrue Hematology Analyzer--Courtesy of Heska

Heska ($HSKA), a Colorado-based maker of veterinary diagnostics and specialty products, announced on Wednesday that its third-quarter revenues jumped 24% from the same period a year ago to $21.8 million, while its net income more than doubled to $513,000. Yet the analysts joining Heska's conference call after the earnings release were clearly impatient with the company's efforts to gain more visibility with both customers and investors.

"With the performance that you guys have had, the success that you have here, is there any intention or plan to maybe perhaps expand the sales team, take advantage of some of the opportunities that are out there?" asked one analyst.

"It seems like your efforts to gain attention from the Street have been fairly minimalist," noted another.

No doubt, Heska has been on a good run of late. It has spent much of the last year securing long-term contracts with veterinary clinics that buy its imaging and blood-testing equipment. It launched a new 5-part hematology instrument called Heska Element HT5. And yesterday, the company announced that it would be expanding its reach via a distribution agreement with Henry Schein Animal Health, the country's largest companion animal health distributor.

"This exciting new relationship will leverage Heska's sales team of 60 with over 300 Henry Schein field sales experts, who are trusted by thousands of veterinary hospitals that do not currently use Heska products," said CEO Kevin Wilson in the earnings release.

As for the company's visibility, its executives urged analysts on the earnings call to exercise a little more patience. On the question of expanding the sales team, Wilson replied, "I've never found that counting the numbers of sales reps is really a superaccurate way to determine our health." He added that leveraging Henry Schein's more than 300 reps would be a better strategy than expanding its own team of 60.

Chief Financial Officer Jason Napolitano chimed in on the issue of whether Heska is doing enough to attract investors, pointing out that the management team has spoken at investor conferences and paid visits to institutional investors--prompting "a shift in institutional holdings over the past year."

Investor interest in diagnostics makers has a tendency to ebb and flow, both in the public and private markets. In the third quarter, there were only 8 venture capital deals in the diagnostics industry.

On Wall Street, diagnostics companies can be especially vulnerable to investor flakiness. In March, shares of Heska hit a one-year high of $11.20 a share, prompting at least one "sell" rating and a brief swoon in the stock price. After the strong third-quarter report, however, Heska shares are now trading close to $14.

- here's Heska's earnings release
- access the earnings call transcript here

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