In a report published Monday, Canaccord Genuity analyst Mark Massaro detailed an investor meeting with IDEXX Laboratories, Inc. (NASDAQ: IDXX)'s management which reaffirmed the analyst's "positive trajectory" of the company's new product launches.

Massaro noted that Idexx's survey data indicates 25 percent of VCA Antech customers expressed an interest in switching to Idexx's reference lab or purchasing SDMA, its early diagnosis for chronic kidney disease. The analyst also noted that the company holds IP for SDMA which took years to develop, thus the company holds an advantage as barriers to entry are high.

Massaro said that the company's management team also acknowledged that it underestimated the degree to which distributors would react to going all-direct and the impact that Zoetis Inc (NYSE: ZTS) and Abaxis Inc (NASDAQ: ABAX) would have in their new rapid test launches. According to the analyst, Idexx is "taking competitive concerns seriously" and implementing necessary steps to overcome these pressures.

Massaro also stated that Idexx's management team declined to comment on recent reports that Zoetis is interest in scaling up its animal health diagnostic business. In fact, the analyst argued that Zoetis could make a bid for Idexx.

"Idexx's head of sales formerly worked at Zoetis, and at a $24 billion market cap with approximately $600 million of cash on the balance sheet and operating in a low-interest-rate environment, coupled with the fact that Zoetis successfully dropped its distributors and favors the "all direct model," we think Zoetis could make a bid for Idexx," Massaro wrote.

Bottom line, Massaro suggested that the possibility of Zoetis acquiring Idexx, along with a new share buyback authorization and the CEO recently buying stock indicates the risk to reward profile on shares is to the upside.

Shares remain Buy rated with an unchanged $80 price target.

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