Phibro climbs on strong revenue growth, high hopes for new vaccine venture

Investors have been harsh lately when animal health companies fail to live up to high expectations, but the same fate has not befallen Phibro Animal Health ($PAHC). On Feb. 10 after the market closed, New Jersey-based Phibro announced that net sales in its second quarter rose 9% year over year to $189 million, and adjusted earnings per share came in at 35 cents.

Analysts had been expecting earnings of 37 cents, according to Zacks. Yet the company's shares climbed steadily throughout the week, from $28 the day of the earnings release to $30.85 by the end of the day Friday.

Investors may have been cheered by the company's high hopes for its animal health business, which primarily markets medicated feed additives. Sales in that unit grew 10% during the quarter to $118.8 million. Volume growth helped push the company's overall gross profits up 10% to $56 million, it said in a press release.

During a conference call following the release CEO Jack Clifford Bendheim told analysts he is particularly excited about Phibro's partnership with MJ Biologics, which the company announced in late January. Phibro acquired exclusive North American distribution rights to MJ's swine vaccine technology, plus the rights to additional products the two intend to develop in the future.

MJ, based in Minnesota, has developed a vaccine to prevent porcine reproductive and respiratory syndrome (PRRS), a hard-to-fight disease that causes an estimated $560 million in economic damages to swine producers annually. The vaccine is effective against 5 strains of the disease, according to MJ's website.

When pressed for estimates of just how big an impact this foray into vaccines would have on Phibro's top line, however, Bendheim said during the conference call that it was too early to say. "We're just getting our sales force acquainted with these products," Bendheim said, adding that MJ's sales up until this point have been "very, very small."

Bendheim predicted that the mere presence of a larger sales force would help the vaccine gain traction. When asked about the potential to grow the vaccine portfolio beyond MJ's initial product, Bendheim replied, "as we train our sales people and we get out there, I think we will see some increased market innovation."

- here's the earnings release
- access a transcript of the earnings call here

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