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Neogen Sees Food Contamination Fears Driving Growth

“It’s not just at the processing plant. It goes all the way back inside the farm gate.”

– LON BOHANNON

The growing risk of food contamination resulting from large production facilities and rapid distribution is putting Neogen Corp. on track to reach its objective of annual sales of more than $200 million by 2013, a top official said.

The company, which makes products for food and animal safety such as rodenticides and diagnostic tests to detect foodborne bacteria, is seeing a rise in demand for its products.

“There is definitely a trend in the use of our kind of products just because of the way the food production system has changed in the last 20 years and is going to have to change in the next 50 years to meet the demand for food,” president and chief operating officer Lon Bohannon told Reuters.

Contamination can spread even more rapidly across states and countries as logistics systems become more efficient, putting more pressure on companies to quickly identify and prevent contamination of foodborne pathogens.

“It’s not just at the processing plant. It goes all the way back inside the farm gate,” Bohannon said.

Demand is swelling for products like rodenticides, cleaners and disinfectants from poultry and pork producers to control viral and bacterial contaminations, including the H1N1 virus, Bohannon added.

The company has also increased its focus on research and development and is developing tests for drug residue and food allergens, apart from extending its diagnostic technology to more applications for animal safety.

Drug residue is a growing area because of concern over the use of antibiotic drugs in animals, so testing on meat tissue, milk and other food products is likely to grow, Bohannon said.

The company has also seen some growth in demand for its products to detect natural plant toxins.

Parts of the United States this year experienced cool, wet weather, leading to mould growth that can leave behind residues of mycotoxins in plant crops.

“Domestically, it’s been a little bit better than an average year for mycotoxin testing,” Bohannon said. “In Europe, it’s been a little less than average and in the rest of the world it’s been pretty much average.”

ACQUISITIONS ON HORIZON

The company had revenue of $118.7 million the fiscal year ended May 31, and it aims to expand at a rate of about 20 per cent a year, split about evenly between organic growth and acquisitions.

On its earnings conference call last month, the company said it was looking at four acquisition opportunities.

“We have made progress on two of those acquisition candidates where we have moved further down the line in terms of due diligence, and we have seen nothing so far that would lead us to not continue to pursue them,” Bohannon said.

GROWING GLOBALLY

Neogen’s revenue in international markets has grown at a compounded annual rate of 29 per cent over the past five years, and it sees opportunities especially in countries that have an interest in exporting to the U. S. food market, Bohannon said.

Neogen is eyeing markets like China, Mexico and Brazil, where it opened a subsidiary earlier this month.

The company has a collaboration with a government institution in Beijing to develop diagnostic tests for certain plant diseases unique to China.

However, the company is taking a longer-term approach in China, Bohannon said.

“We think it is going to be a very good market for us at some point in time, but we are not going to go there, spend a bunch of money and end up losing money in the short term waiting for that market to develop.”

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