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Strategic Opportunity Overview – Animal Diagnostics ::
An Emerging Category With Strong & Attractive Fundamentals
A Sector Review & Analysis For Discussion by TSG

C O N T A C T S ::
Laura White Analyst +1-404-607-6954, office

Panna Sharma CEO & Managing Partner +1.212.572.6448, office +1.404.229.6955, mobile

2009 TSG & The Sharma Group, LLC Atlanta – Boston – New York – San Diego
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The Macro Trends In Animal Health Continue To Be Strong; However Growth Rates Vary Significantly Based On Geography, Animal Mix And Economic Cycle
 Increase in genetic testing, as conventional human diagnostic
methods continue to be adapted for veterinary testing of all types.

 Heightened awareness of the impact of global epidemics and foodborne disease, due to increasing public and commercial awareness on the global food supply chain and food safety issues.

$18Bn Global Animal Health Market
(TSG Estimates for 2008)

 Continued growth in the companion animal health market, where
premium animal health & wellness products have continued to grow despite overall pressures on consumer spending during the 20082009 economic downturn. For diagnostics, this has translated into increased disease-based testing, as well as genetic tests to identify breed or parentage.
E.U. $4.3 Bn

 Traditional diagnostics and detection companies are increasingly
assessing applied markets to expand the reach of products and platforms designed for human clinical/research use.

N.Am. $7.2 Bn China $3.9 Bn

Japan $1.3 Bn

 While livestock, poultry and farm animals continue to account for the
majority of animal health chemical demand, companion animal diagnostics are growing the fastest. Adjacent markets, such as agricultural Dx, food testing, and aquaculture, are also seeing significant growth.

The animal health market continues to exhibit solid growth prospects, with additional contributing factors including a rise in pet ownership, the relatively easy regulatory backdrop, the lack of third-party payer issues, and greater interest in new technologies to effect commercial cost-savings.
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The $1.8 Billion USD Market For Animal Diagnostics Has Outpaced The Growth Of The Broader Animal Health Market Over The Last 5 Years

The animal diagnostics market includes two segments – the companion animal health segment which includes mostly pets (canine, feline and increasingly fish and birds) and the commercial animal health segment which is mainly composed of livestock (cattle, swine, poultry etc.). The scope of this market includes diagnostic and monitoring instruments, hand-held devices and supplies as well as single use diagnostic tests for both segments.


Animal Dx Market Segment (Bn. – USD)

∑ = $23.2Bn
2.84 CAGR: 10%


Animal Health Market Segment (Bn. – USD)

∑ = $18.1Bn ∑ = $14.1Bn
1.20 CAGR: 8% 1.76


CAGR: 4%


CAGR: 5%


TSG does not include: • Laboratory services • Food testing / food safety dx • Vaccines • Nutritional and other chemicals • Pharmaceuticals/therapies • Animal supplements • Aquaculture testing





$1.8 Bn $16.3 Bn

Global Animal Diagnostics Market (2008)

Global Animal Health Market (2008)

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The Market For Animal Diagnostics Is Accelerating Growth, Especially in Areas of Genetic Testing and Companion Animal Testing

 Although the US will account for less of the overall spend on animal diagnostics –
mainly due to increased commercial animal testing in BRIC economies and increased spend on companion animals in Europe – the overall spend per companion animal will increase significantly
Geographic Shift In Animal Dx. Market Expected
Between 2008 and 2013

Animal Dx Spending in North America
(2013 – TSG Estimate)

12% 48% 40% 42%

15% 43%

39% 61%
Companion Commercial • In North America, companion animal Dx is expected to increase to over 60% of the spend as increased focus on breed testing, chronic disease testing and earlier intervention become more commonplace.
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North Am. Europe ROW • Emerging economies are expected to increase local livestock testing for both domestic and export markets at double digit rates in the next five years. • European economies will begin increased spending on routine companion Dx as animal testing becomes more mainstream • The US will increase testing on companion Dx but commercial Dx will remain flat as routine test prices decrease although volumes will increase slightly
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The Animal Diagnostics Market Is Still Fragmented With Several Emerging Firms, Pure Play Companies and Broader Life Science Corporations
The Animal Diagnostics Market Competitive Landscape – TSG 2009 Snapshot
10 9
Veterinary Diagnostics Institute

KEY TAKEAWAYS • Consolidation in animal Dx is likely to increase over the next 2-3 years as larger players initiate deals to access new customers, tests and platforms • Future entrants to this market may include pharma players with existing animal health franchises – such as Pfizer & Novartis – as well as human clinical players and dx technology companies such as Becton Dickinson • Quest’s foray into veterinary lab services may presage future deals or expansion as players seek to challenge VCA Antech’s dominance in this sub-segment


Rapid Diagnostek Synbiotics Advanced Animal Diagnostics D-Gen ID VET BioPet Vet Lab


Consolidation will increase as many large external players and potential entrants likely to make acquisitions over the next several years

Technology robustness(1)

7 6 5 4 3

Heska Neogen


Mars Veterinary MetaMorphix

Integrated Nano-Technologies



Merial / Sanofi Aventis Quest


Legend: Market Segment Focus

2 1 0 0

Companion Commercial Both Biopharma Other*

VCA Antech

Legend: Company Size TTM Revenues – as of Sept 2009 < $50 MM > $50 <$150 MM > $150 <$1 BN > $1 BN

Life Tech.











Marketing/Sale Presence(2)
(1) Cumulative $ invested into R&D and products development, patent portfolio (2) Customer base, partners, # of sales reps., marketing budgets Source: TSG

* Including Pharmaceuticals, Chemicals providers, Human IVD firms Note: This is NOT an exhaustive set of competitors

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Companies With Notable Franchises In Animal Dx Have Shown Above Average Growth – However, Valuations Metrics Differ Significantly

all data as o f September 1 2009 7,


IDEXX Laboratories


VCA Antech

Key Metric / Company Revenue (ttm - Millions USD) Average Annual Growth Rate 2006-2008 Gross Margin (MRQ - % of revenue) R&D (MRQ - % of revenue) SG&A (MRQ - % of revenue) EBITDA (ttm - % of revenue) Mkt Cap to Sales Multiple (ttm) Mkt Cap to EBITDA Multiple (ttm) Price to Earnings Multiple (FY-2010) Est. Operating Margin (ttm) Cash (MRQ - Millions USD) Market Cap (Mn. - USD) Enterprise Value (Mn. - USD) 52 Week Mkt. Cap Change (%)
Key Average Ratios

HSKA 75.9 4.43% 37.73% 2.20% 30.17% 5.53% 00.38x 06.95x

IDXX 996.6 17.91% 52.10% 6.24% 27.35% 21.19% 03.18x 15.01x 24.94x 16.30% 103.74 3170 3220 -3.86%

NEOG 118.7 17.41% 50.11% 3.63% 29.01% 20.54% 03.66x 17.81x 24.65x 17.26% 13.84 434.2 429.2 9.51%

WOOF 1300 14.04% 28.30% 0.00% 6.73% 22.08% 01.68x 07.60x 14.66x 19.41% 138.9 2180 2590 -9.98%

1.58% 5.32 29.2 29.0 -36.25%

Average Annual Growth Rate Average Sales Multiple Average EBITDA Multiple Average P/E Multiple (2010) Est.
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13.45% 02.22x 11.84x 21.42x
All data current as of September 17th, 2009. Notes: TSG’s $1.8Bn assessment of the 2008 animal dx market does not include revenues from veterinary lab services above.


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TSG Has Developed 10 Life Science Indices That Track The Public Companies And Market Sentiment In A Variety Of Specific Life Science Sectors

TSG has created 10 public market indices that cover a range of
business models and categories in the life sciences:
For more information, please review

 Bioscience Indices
     Global Discovery BioTools Global Diagnostics Molecular Diagnostics Point of Care Diagnostics Global Lab Services

 Regional Innovation Center Indices
 Israeli Life Sciences Index  Scandinavian Life Sciences Index

 Nutrasciences Indices
 Global AgBio Index  B2B Nutrascience Index  B2C Nutrascience Index

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