Neogen Corporation (NEOG - Free Report) has teamed up with International Genetic Solutions (“IGS”), which is a collaboration between progressive breed associations. The alliance is aimed at focusing on enhancing genomic impact in the IGS platform (currently, the only available major multibreed beef genetic evaluation). The partnership will also focus on improving research and development required to continue improving Neogen's Igenity Beef Profile.
With the partnership, Neogen aims to improve foothold in the global beef cattle market, which is an important segment of its agrigenomics business.
How Strategic is the Partnership?
Igenity Beef Profile is a major growth driver of Neogen's business in North America and globally. As a result of the collaboration, the company can access information to enhance the Igenity Beef Profile. Also, as part of the partnership, IGS will endorse and promote the use of the product. This will act as an important 'seal of approval' from one of the major genetic evaluation services in the world.
Neogen is currently on an expansion spree as it plans to serve the global animal genomics market. It recently set up its animal genomics laboratory services and bioinformatics centers at various locations in the United States and Scotland.
Rationale Behind the Collaboration
Currently, the beef industry (as a protein source) is facing rising competition globally. Under such circumstances, the Igenity Beef Profile is a reliable mean to aid customers to maintain efficiency and profitability.
Selecting the best animals for breeding programs is now absolutely crucial. Replacing each heifer represents an investment of about $2,000 per head in cost of development and lost sale opportunity. In the face of such a situation, the partnership with IGS will provide the required research that will lead to product improvement and development for a few years. This will also result in a significant revenue growth for the cattle segment of Neogen.
Huge Industry Prospects
Per a report by Grand View Research, the global beef market size was estimated to be approximately $300.6 billion in 2017 and is expected to see a CAGR of 3.1% between 2017 and 2025.
Given the increasing demand and growth potential of the market, the collaboration has come at just the right time.
Neogen has been in the news for quite some time now, with respect to its recent developments in food safety.
Last month, the company received AOAC validation for NeoSeek genetic testing service to be used for its STEC proprietary testing platform. The test identifies seven Shiga toxin-producing strains of E. coli (STEC) in a food sample, which causes severe illnesses in humans.
Around the same time, Neogen signed a development and licensing agreement with Corvium, Inc., allowing Neogen’s customers to have access to an improved version of Corvium’s CONTROL-PRO food risk intelligence platform. In the same month, Neogen received Performance Tested Method Certification from the AOAC Research Institute for its Reveal Q+ for Deoxynivalenol (DON) test, intended for the speedy quantification of the mold toxin in grains.
Share Price Performance
The company has declined 15.5% in the past year, wider than the industry’s fall of 0.8%. However, the S&P 500 index rallied 1.5% during the same period.
Zacks Rank & Key Picks
Currently, Neogen carries a Zacks Rank #3 (Hold). A few better-ranked stocks from the broader medical space are Capricor Therapeutics, Inc. (CAPR - Free Report) , GW Pharmaceuticals PLC (GWPH - Free Report) and Neurotrope, Inc. (NTRP - Free Report) .
Capricor, with a Zacks Rank #2 (Buy), has a projected third-quarter 2019 earnings growth rate of 28.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
GW Pharmaceuticals estimates third-quarter earnings growth rate to be 72.8%. It currently sports a Zacks Rank #1.
Neurotrope, with a Zacks Rank #2, has a projected third-quarter earnings growth rate of 27.7%.
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