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Bio-Rad soars on expecations for mad cow test

Shares of Bio-Rad Laboratories Inc. soared to a record high  Wednesday on expectations that its diagnostic test for mad cow disease could win approval in the United States, after the first finding of the disease in the U.S.
/ Source: Reuters

Shares of Bio-Rad Laboratories which makes test for mad cow disease, jumped Wednesday on a possible first appearance of the illness in the United States.

Hercules, Calif.-based Bio-Rad is the market-leading provider of tests for bovine spongiform encephalopathy, or BSE, commonly known as mad cow disease. On Tuesday, the government said a Holstein cow from the state of Washington was tested as a “presumptive positive” for BSE.

Class A shares of Bio-Rad ended Wednesday at $59.82, up $10.04, or 20 percent, on heavy volume on the American Stock Exchange. The day’s strongest level of $65 was a 52-week high surpassing the prior high of $62.85 set June 6.

“If widespread testing is mandated and adopted by the U.S. and/or Canada, we believe BIO is well positioned to capture a large portion of this market,” said analyst Aaron Geist, of Baird, in a note to investors Wednesday.

Bio-Rad’s test was the first approved by the U.S. Department of Agriculture for Chronic Wasting Disease, or CWD. This disease for deer and elk is analogous to BSE in cattle.

“To the best of our knowledge, no other major BSE test provider has a USDA-approved test,” Geist wrote. “We believe BIO has a strong relationship with the USDA which will prove invaluable in discussions surrounding BSE testing in the U.S.”

Geist, the only analyst who covers Bio-Rad, said if this turns out to be an isolated case of BSE, Bio-Rad could see an additional $7 million in sales and an earnings increase of 3 cents to 4 cents a share.

The Baird analyst based this estimate on a scenario in which the USDA decides to test about 700,000 cattle a year for BSE, up from 20,000 now, and assumed 100 percent market share for Bio-Rad.

He raised his rating to “outperform” from “neutral” and raised the price target to $73 from $54.