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Neogen's Food Safety Business Thrives on Ergot Alkaloids Test

Zacks Equity Research

Neogen Corporation NEOG recently developeda simplified lateral flow test for ergot alkaloids, known as Reveal Q+ MAX. Being the first rapid test for ergot alkaloids, this test is compatible for use with Neogen's Raptor testing platform.

This latest development is expected to strengthen Neogen’s foothold in the global food allergen testing market. Notably, food allergen is a segment of the company’s food safety business.

A Brief on Ergot Alkaloids

Ergot alkaloids are natural toxins produced by a fungus that commonly infects rye and wheat. Ingestion of ergot alkaloids can cause ergotism, a dangerous disease affecting humans and animals. Per Romer Labs, Ergotism is one of the oldest known mycotoxicoses. There is historical evidence of the outbreak of human epidemics inflicted by ergot in the Middle Ages known as St. Anthony’s fire with symptoms of gangrene, central nervous and gastrointestinal effects.

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How Does Reveal Q+ MAX Work?

This test for ergot alkaloids delivers detailed quantitative results within 50-5,000 parts per billion (ppb) range in only eight minutes after extraction. According to the company, traditionally, the testers were complex laboratory methods or imprecise visual tests.

Recent Developments in Food Safety Business

Neogen has been making significant developments in its food safety business for the past few months.

In November, the company received approval from the AOAC Research Institute for its Reveal 3-D regarding Peanut test to check the presence of peanut in food. The test is intended to prevent peanut residues contaminating foods.

The company collaborated with International Genetic Solutions (IGS) in September 2019 to focus on intensifying genomic influence on the IGS platform as well as enhance research and development necessary to continue improving Neogen’s Igenity Beef Profile.

Earlier in August, Neogen received Performance Tested Method Certification for its Reveal Q+ for Deoxynivalenol (DON) test from the AOAC. The test will be put to use for the rapid quantification of mold toxins in grains. The company also signed a development and licensing agreement with Corvium in the same month to provide customers with exclusive access to a developed version of Corvium’s CONTROL-PRO food risk intelligence platform.

Further, Neogen’s NeoSeek received the AOAC validation for Shiga toxin-producing strains of E. coli (STEC) in August. NeoSeek is a testing platform that determines the genetic composition of bacteria in a food sample, detecting and identifying seven STECs causing severe illness in humans.

Industry Prospects

Per a Mordor Intelligence report, the global food allergen testing market is anticipated to witness a CAGR of 8.32% between 2019 and 2024. The key factor driving the market is increased awareness among consumers about the safety of food products that they consume.

As the rising awareness is spurring market potential, the approval seems aptly timed.

Price Performance

Shares of the company have gained 11.5% in the past six months compared with the industry’s growth of 3.6%.

Zacks Rank & Key Picks

Currently, Neogen carries a Zacks Rank #3 (Hold). A few better-ranked stocks from the broader medical space are Haemonetics Corporation HAE, NuVasive, Inc NUVA and ResMed RMD. While ResMed sports a Zacks Rank #1 (Strong Buy), the other two carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Haemonetics has a projected long-term earnings growth rate of 13.5%.

NuVasive has an expected long-term earnings growth rate of 10.9%.

ResMed has a long-term earnings growth rate of 12.9%.

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