November 1, 2007
Comparing year-over-year gains at Inverness Medical Innovations (AMEX: IMA ) is becoming harder with each passing press release announcing the purchase of another company.
Adjusted net revenue for the third quarter came in up 64% over the year-ago quarter, but almost all of the growth was due to recent purchases. Organic growth of product revenue, adjusted for the impact of its new joint venture with Procter & Gamble (NYSE: PG ) , was up a more reasonable 8.4% for the quarter.
The company is continuing to establish itself as a global player, experiencing a 34% increase in year-over-year international sales from its Biosite acquisition. That number will only go up after the close of its recent acquisition of PanBio, which will increase its presence in Australia. In addition to increasing its international sales force, Inverness is also moving manufacturing overseas. Many of the products formerly manufactured by Biosite are being transitioned to China, which is helping to increase margins.
As expected, the mergers are having an overall positive impact on the company's expenses. Inverness estimates it has already achieved an annual savings of $39 million from the addition of its two largest acquisitions -- Biosite and Cholestech -- on the way to its goal of $70 million per year within three years. It looks like its outbidding of Beckman Coulter (NYSE: BEC ) for Biosite might have been a shrewd move.
Believe it or not, management hinted -- I'd even go so far as to say they insisted -- that they're not done trading stock for revenue. While I'd think it would be hard to integrate multiple companies at the same time, management feels the integration process is easier now that the company is larger (and certainly more experienced). Looks like investors can look forward to a few more quarters of difficult year-over-year comparisons.