Investor's Business Daily, July 13th, 2007
Dade Behring Holdings
Deerfield, Ill.
dadebehring.com
Most companies with new products seek sweeping vistas of opportunity. Not so Dade Behring with its new medical laboratory testing system, Dimension Vista.
The company is going slowly because it wants to make sure customers are happy with Dimension Vista, says analyst Jeffrey Frelick of Lazard Capital Markets. "It's doing a methodical rollout."
With many rivals, Dade's DADE strategy is to protect its reputation, even if that means a slow launch. In the first three months of 2007 it put Dimension Vista into 10 sites to observe how it performed.
The new system does a variety of tests in a single operation, without having to change the chemical-based reagents used in the tests. It's aimed at high-volume medical labs -- those performing more than 1.5 million tests a year.
Targeting high-volume labs is a major shift in strategy and opportunity for Dade Behring, says analyst Quintin Lai of Robert W. Baird, which expects business from Dade.
In the past, Dade aimed at small and medium-volume labs that need less comprehensive testing systems. Dimension Vista will double the company's opportunity in the $11 billion-plus market, Lai says.
There are 4,000 high-volume labs worldwide, Frelick says. Dade could sell Dimension Vista systems to 15% of them in the first three years.
THE FINANCIALS
Dade has grown annual profit each year since 2003, though 2006 earnings rose only 6%. First-quarter earnings this year gained 26%, while sales moved up 10%. Second-quarter results are due July 25.
Analysts expect earnings to rise 14% this year and 13% in 2008. The company's stock hit an all-time high of 57.50 on Thursday and currently trades near 56.
Dade officials wouldn't comment.
THE COMPANY
Dade's roots go back to Emil Beh-ring, a German bacteriologist who won the Nobel Prize for medicine in 1901. In 2003 the company emerged from a 2002 bankruptcy and got its Nasdaq listing.
Dade is sixth worldwide in the sale of diagnostics lab products. It's the largest pure-play in-vitro diagnostic company in the world.
Aiming at high-volume labs puts it in competition with Abbott Laboratories' ABT diagnostic division, soon to be owned by General Electric GE. Other competitors include Roche RHHBY, Siemens SI and Beckman Coulter BEC.
Every year about one-fifth of high-volume lab contracts come up for bids, Lai says. "As contracts roll over, Dade will have the opportunity to win some of them but the majority stay with the incumbent."
Dade's differentiator is Dimension Vista's ability to run many tests on the single platform, he says. But the real money is not in the hardware -- it's in the reagents, which are unique to each manufacturer's systems. Dade gets more than 90% of its revenue from consumables, services and operating leases.
LOOKING AHEAD
The Food and Drug Administration has approved the Dimension Vista to perform 107 diagnostic tests. By the end of 2007, Dade should have approvals for a total of 120, Frelick says.
The firm plans to step up sales of Dimension Vista with a big global launch in 2008.
