ORLANDO, Fla. — Bio-Rad Chairman David Schwartz will tell you that he is not involved in the day-to-day running of the Hercules, Calif.-based molecular biology tools company, but the 80-year-old co-founder of the company does have a stake in the firm.
On Tuesday, Schwartz, who stepped down as Bio-Rad's CEO in 2002, spoke at a company media event at Pittcon 2005, held here through Friday.
Wearing a sports jacket with a gold Bio-Rad lapel pin celebrating 50 years with the company, and a Western bolo tie with a silver long-horned cow clasp, Schwartz spoke of founding the company in Berkeley, Calif., in a Quonset hut to provide tobacco mosaic virus isolates from plants grown by his wife, Alice, a biochemist. That first product didn't sell, but the second ones did.
Today, the company offers some 6,000 products and has a market capitalization of $1.28 billion — despite an almost 11 percent drop in the company's stock since February. Last week, BIO shares fell some 17 percent after a downgrade by an investment bank following the company's release of its fourth-quarter results (see BCW 2/24/2005).
"Bio-Rad is a fun company, we do the things we like to do and there is not much attention paid to the stock market and the quarterly reports," Schwartz said.
As for Wall Street, Schwartz said he's not mad. When Bio-Rad's stock tumbled last week, Schwartz said his wife cut a $1 million check from their personal checking account to convert options priced at around $10 a share. The stock was at approximately $50 at market close on Tuesday, up over 2 percent for the five-day period.
While the company is public, the founders control a majority of the stock, which over the past five years has outperformed the S&P 500 index by more than 200 percent as Bio-Rad has moved to focus on the life-sciences research and clinical diagnostics markets.
Schwartz said he expects the company to remain one of the last large scientific tools companies to not be acquired over the next 10 or 20 years. His son, Norman, 54, is Bio-Rad's current CEO (see BCW 01/13/2005). To explain what he meant by Bio-Rad as an independent company, he pointed to Amersham, which he called the "old Pharmacia," being bought by General Electric.
Today, Bio-Rad claims a 70-percent market share in the BSE post-mortem testing market, collecting a large portion of revenues from government agencies that mandate the use of a test — Japan, Europe, and Canada. The company is very closely associated with the disease and when news emerges about a possible cow infected with mad cow disease, Bio-Rad's stock moves.
Schwartz laughed when he talked about false positives and Bio-Rad's test.
"We have 100 percent of the Japan testing market, and we got it by a quirk," he said. "Japan had a suspected mad cow. Our test was positive and Roche's and Abbott's were negative," Schwartz told Biocommerce Week. "A Roche salesman said, 'Oh, you have a positive? That must be Bio-Rad's test, it's always positive.'"
Schwartz said that the Japanese researchers verified the positive by having a laboratory in the UK test the suspected beef. It turned out to be accurate and Bio-Rad won the contract.
Bio-Rad acquired the TSE ELISA technology that the test is based on in 1999 as part of a $210 million purchase of Pasteur Sanofi Diagnostics. It rolled out the test for purchase in 2000, applying it to mad cow disease and chronic wasting disease. The company claims accuracy of greater than 95 percent on its tests, Brad Crutchfield, Bio-Rad vice president, told Reuters. He said one out of every 240,000 double-positive tests was found to be a false positive after more sophisticated testing.
Today, however, Bio-Rad's revenues from BSE testing are declining, a result of dropping prices, not fewer tests being administered, the company said.
"Since we have so much of the business, everybody bids madly lower," Schwartz said. "They know they aren't going to win the contract."
Schwartz said the test was priced at $14 when it was first rolled out. He declined to say what it costs today, but confirmed that it is lower than that.
Schwartz also declined to comment on whether he thinks the US would test its beef for the disease. The US beef industry slaughters some 10 million to 12 million cows a year, and, at $14 per test,represents up to a $168 million opportunity for Bio-Rad.
But even though Schwartz sports a silver cow's head at his collar-band, he said he doesn't eat beef.
"Maybe I will — if they start testing," he said.
Japan, which requires BSE testing for beef and utilizes Bio-Rad's test, was formerly the largest buyer of US beef, but banned importation in 2003 after a Washington state cow — imported from Canada — was found to have the disease. The country has recently agreed to open its borders to beef from US cattle from 14 to 17 months old, but has not set a date for that. In February, the Japanese government said a Japanese citizen died from variant Creutzfeldt-Jakob disease after eating infected beef. Officials believe he contracted the disease in Britain, Reuters reported.
The US has suspended the importation of Canadian cattle since May 2003, when Canada's first domestic case of mad cow disease was discovered. However, starting next week, a US Department of Agriculture rule is set to take effect allowing imports of Canadian cattle under 30 months old. Canada, too, requires testing and uses Bio-Rad's test.
Plus, the US Department of Agriculture has so far bought some 400,000 BSE tests — for "surveillance" purposes — Schwartz said.
Meantime, Bio-Rad has opened another market for its assay, Schwartz said. The company has linked up with the state of Wisconsin, which is offering a program to test for chronic wasting disease in deer. Hunters can leave a venison sample with the state's health agency for the voluntary test.
"Hunting is a $1 billion a year industry in Wisconsin and the state doesn't want to lose that," said Schwartz.
— Mo Krochmal ([email protected])