Idexx closing subsidiary, ending business in Russia

Four months after Russia’s unprovoked invasion of Ukraine, one of Maine’s largest homegrown companies has decided to permanently close its Russian subsidiary and to stop doing business there.

International veterinary medicine powerhouse Idexx Laboratories, based in Westbrook, revealed its decision in a formal disclosure filed with the Securities and Exchange Commission June 14, but has not otherwise drawn attention to it.

“Idexx has decided to wind down and liquidate our sole Russian subsidiary, as well as its direct Russian operations, starting immediately,” the company said in the disclosure to investors. “These discontinued operations consist of marketing and selling diagnostic products for veterinary clinics in Russia.”

“As Idexx works to wind down its Russian operations, the company is focused on providing transition support to its impacted Russian employees,” it said.

Idexx, which had 18 staffers in its Moscow office before the invasion, continued to operate in Russia even as hundreds of other U.S., European, and international companies pulled out in response to the brutal invasion of Ukraine in which Russian forces have systematically executed civilians, intentionally destroyed hospitals, schools, and apartment blocks, leveled entire cities, and created a worldwide food crisis by blockading Ukrainian ports.

According to a job ad description removed from the company’s website in March, Idexx’s Moscow office provided in-person sales, technical support, customer service and installation services to Russian customers, most of them presumably veterinary clinics using the company’s diagnostic equipment on dogs, cats and other pets. Before the invasion, the company also was hiring personnel to expand its water testing business in the country. Idexx also sells diagnostic services for industrial-scale poultry farms, but it is unclear if they do so in Russia.

Idexx has repeatedly declined to speak to the Press Herald about the company’s decision to maintain operations in Russia and did not respond to inquiries about what had caused them to change tack. Ethics experts have previously said that depending on what they are selling in Russia, the company can make a credible moral and humanitarian argument that providing pets with lifesaving medicine and services is akin to providing human medicines to the country.

“But sometimes when what is at stake is important enough, it can be really important to firms to take really strong public actions that will be interpreted by the public as reflecting their values – and forgoing opportunities for profits is one way to show your commitment to the values at stake is genuine,” Brian Berkey, assistant professor of legal studies and business ethics at the University of Pennsylvania’s Wharton School, told the Press Herald in March.

On April 6 – six weeks after the invasion began – Idexx announced that it had “significantly scaled back” its operations in Russia and was no longer shipping or selling veterinary diagnostic equipment there. However it said it would continue to support “employees and veterinary customers that already use Idexx products.” The company did not respond to requests to clarify what that meant or to distinguish whether the scaling back exceeded what they were legally compelled to do by U.S. sanctions.

The new disclosure reveals the company continued to market and sell diagnostic products after that announcement, although they had suspended “sales of veterinary diagnostic equipment; promotional, marketing, and hiring activities; and new business development and related investments.” Presumably this means it stopped selling new testing machines April 1 but not the products needed to conduct the tests on them.

Last week’s disclosure to the SEC was a so-called 8-K filing, a report publicly traded companies must file “to announce major events that shareholders should know about.” In most cases, companies must file such a report within four days of the triggering event. In the filing, Idexx said its 2021 revenue in Russia represented less than 1 percent of its consolidated revenue for the year and that it had no manufacturing or “significant supply arrangement” in Russia.

“After we conclude the wind-down of our direct Russian operations, only a limited number of our products, which are important for human or animal health care, will continue to be sold in Russia pursuant to ongoing third-party distribution agreements,” the disclosure said.

Idexx is a world leader in the veterinary diagnostics and software fields, with over $3.2 billion in revenue last year. In a 2016 presentation to potential investors, then president and CEO Jonathan Ayers said 83 percent of revenues came from companion pet care, a field that he noted had characteristics that allowed for rapid innovation, growth and profits.

“The veterinary industry is different than human healthcare in important, unique and attractive ways. We have no third-party payers. We have no FDA. We have no informed consent or HIPAA,” Ayers said, referring to federal privacy laws for human patients. “We can innovate much faster without those encumbering regulations and move faster in the veterinary market. It is a cash pay business and it is a business model which is pretty similar in that regard around the world. So we don’t really have these same issues in other countries either.”

Another prominent Maine company that initially continued its longstanding business with a Russian oil giant pulled out April 1. Portland fuel payment processor Wex Inc., had been continuing its 22-year fuel payment services contract with the North American unit of Moscow-based Lukoil, which because it was based in the U.S., was not technically covered by sanctions.