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California

2 Firms Chosen for Cow Testing

Bio-Rad of California receives $15 to $20 a test and more revenue from equipment and supplies.

March 19, 2004|Jerry Hirsch | Times Staff Writer

The U.S. Department of Agriculture said Thursday that a test developed by a Northern California company to detect mad cow disease would be one of two used in a expanded program to search for the illness in America's cattle herds.

The test by Bio-Rad Inc. of Hercules slashes the time it takes to detect the disease from days to just hours.

The USDA also approved a similar system developed by Idexx Laboratories Inc. of Westbrook, Maine.

Earlier this week, the government announced it was stepping up a program to search for the disease in animals that are sick, injured or even dead when they arrive at the slaughterhouse.

It will now test up to 400,000 so-called downer cattle over the next 12 to 18 months. It also plans a random sampling of 20,000 healthy cattle. It's believed that humans who eat brain or spinal material from an infected cow can develop variant Creutzfeldt-Jakob disease, a brain-wasting illness. .

Prior to the discovery of the disease in a Washington dairy cow in December, the U.S. planned to test fewer than 40,000 of the 35 million cattle slaughtered domestically each year.

The expanded USDA program "is a major step" toward determining the prevalence of mad cow disease in the United States and might lead to a much bigger program, said analyst Aaron Geist of Robert W. Baird & Co. in Milwaukee.

"There would be many millions of tests conducted," said Geist. "In Japan they test every animal."

With additional government approval, the test could be easily adopted throughout the meat-packing industry for "only pennies a pound."

That would hold a huge payoff for Bio-Rad, Geist said. The company receives $15 to $20 a test and additional revenue from equipment and supplies.

Investors have largely come to the same conclusion. Bio-Rad shares rose 90 cents to $57.05 on the American Stock Exchange on Thursday. They have risen 65% in the last year

Bio-Rad officials said they were pleased the test "met the stringent requirements" of the USDA.

The department's approval of the Bio-Rad test, while important for the company, will have a limited upside effect in the near term: Assuming Bio-Rad wins half the market, that would add $4 million to $5 million to the $1 billion in sales it collected last year, Geist estimates. The company had profit of $76 million.

Idexx shares fell 78 cents to $54.99 on Nasdaq. That's because Bio-Rad, the dominant player in mad cow tests, is expected to win most of the business. It has 60% of the market in Europe and nearly all of it in Japan, Geist said.

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