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Research Report Available Online: 2008 Veterinarian Survey Industry Report

April 28, 2008 - William Blair & Company recently issued an Industry Report on its 2008 Veterinarian Survey – Ask the Experts: Results From Our Fourth Annual Veterinary Health Care Survey. To better understand key trends affecting the animal health care industry, we recently conducted our fourth annual survey of veterinary professionals at one of the largest veterinary conferences in the world—the 2008 North American Veterinary Conference (NAVC) in Orlando, Florida. Our survey focused primarily on trends in the veterinary diagnostics and distribution markets, as these two sectors represent key business segments for the veterinary health care companies in our coverage universe. In total, we surveyed 900 veterinary professionals and students from the United States and abroad. Analysts Ryan Daniels and John Kreger’s key findings include the following:

Long-Term Growth Outlook Remains Solid, but Broader Economic Concerns Are Weighing on Vets’ Minds. Judging by our survey results, it appears the majority of veterinary professionals still view the industry as relatively healthy; however, nearly 26% of U.S.-based respondents indicated that overall pet owner spending could decline in 2008 (well above the 8% metric reported, on average, the previous two years). In our view, the slowing U.S. economy and turmoil in the housing and credit markets are likely driving a slightly more cautious near-term view from veterinarians.

Veterinarians Continue to Expect Increased Use of Diagnostic Laboratory Testing Over the Coming Years. For the fourth consecutive year, less than 2% of our survey participants indicated that they expect a decline in the volume of diagnostic testing over the next three to five years. Rather, 87% of participants believe that the industry will trend toward more, or significantly more, testing in the future. Moreover, this increased use of laboratory testing should benefit providers of both in-clinic diagnostic equipment and reference laboratory services, as participants indicated that growth was likely in each category.

Veterinary Professionals Appear Pleased With Current Distributors, Equipment Manufacturers, and Lab Services Providers. Overall, our covered companies scored well in customer-satisfaction ratings. For example, 90% of respondents were satisfied with reference laboratory services from both VCA Antech and IDEXX Laboratories; 88% were satisfied with IDEXX’s diagnostic products; and 89%, 92%, and 100% were satisfied with MWI’s, Webster’s, and Henry Schein’s distribution services, respectively. Accordingly, we continue to believe that significant market share shifts between existing providers are unlikely (with the possible exception of the consolidation of distribution vendors, which we expect will occur over the coming years). Instead, we believe all providers likely will benefit from the previously discussed trend of increased spending on veterinary products and services as well as increased diagnostic testing, although perhaps to a lesser extent than the prior few years.

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