The Experts in Animal Health

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 Brakke Consulting’s
 Animal Health News & Notes for April 22, 2005

 Copyright © Brakke Consulting, Inc.
earnings news:
Fort Dodge
other news
Bovans Beheer
Burns Veterinary Supply
Global Veterinary Products
Hendrix Poultry Breeders
Nutreco Holding
> Merck reported results for the first quarter of 2005.  First-quarter sales for animal health joint venture Merial were $504 million, an 18% increase compared to the first quarter of 2004. (company website) 
> Pfizer reported that Animal Health revenues for the first quarter of 2005 increased 16% to $496 million. (company website)  
>  Akzo Nobel reported that first quarter 2005 revenues for animal health division Intervet were up 2% to EUR 262 million ($338 million). Autonomous growth of 3% was partially offset by a negative currency translation effect of 1%. Revenues of both Biologicals and Pharmaceuticals grew. (company press release)   
> Wyeth reported results for the first quarter of 2005.  Net revenue for animal health division Fort Dodge increased 12% to $245 million for the first quarter due primarily to higher sales of livestock and companion animal products. The increase in companion animal net revenue was offset by lower sales of ProHeart 6 resulting from the voluntary recall of ProHeart 6 in the US market in September 2004. Excluding the favorable impact of foreign exchange, worldwide Animal Health net revenue increased 10% for the 2005 first quarter. (company website)  
>  Lilly reported results for the first quarter of 2005.  Worldwide sales of animal health division Elanco in the first quarter were $195.5 million, an increase of 7% compared with the first quarter of 2004. (company website)  
>  Schering-Plough reported results for the first quarter of 2005.  Animal Health sales grew 14% to $193 million, reflecting solid growth across core brands and a favorable foreign exchange impact of 4%. (company website) 
> ImmuCell Corporation announced the results of its operations for the three months ended March 31, 2005. During the three months ended March 31, 2005, product sales increased by 17% to $1,428,000, as compared to the same period in 2004. During the three months ended March 31, 2005, total revenue increased by 29% to $1,596,000, as compared to the same period in 2004. Product sales growth continued to be driven principally by First Defense, while the bottom line benefited from income recognized under the December 2004 product development and marketing agreement with Pfizer for Mast Out. (company press release)  
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>  The Butler Company and Burns Veterinary Supply, Inc. announced that they will merge.  The transaction will create the nation’s leading distributor of animal health products and services to veterinarians.  The combined company will be called Butler Animal Health Supply, LLC.  Kevin Vasquez, President and Chief Operating Officer of Butler, will serve as President and CEO of the newly formed company; Kim Allen, President of Burns Veterinary Supply. will serve as President of the Commercial Division, responsible for sales and marketing.  Howard Deputy, Chairman and CEO of The Butler Company, will retire upon the closing of this transaction.  As part of the transaction, Heritage Partners, Inc., the current owners of The Butler Company, has agreed to sell the company to Oak Hill Capital Partners II, L.P.  Burns Veterinary Supply, Inc. is currently a wholly owned subsidiary of the Darby Group Companies, Inc.  Butler Animal Health Supply, LLC, will be equally owned by Oak Hill and Darby. Financial terms were not disclosed. (company press release)   
> Intervet announced that Chris Ragland has been named president of Intervet Inc, the US division of Intervet BV, succeeding Klaus Olbers, who was promoted to global VP for research and development. Ragland joined Intervet in 2000 following Intervet’s acquisition of Hoechst Roussel Vet.  Both Olbers and Ragland will continue as members of the Intervet International Management Team. (Feedstuffs)     
> Farnam has combined its specialty, New Z No-Snag Tags, with industry leaders to offer the best animal identification solutions under one broad umbrella.  Farnam  will custom design a system to track individual animals throughout the production process.  A complete system allows producers to choose the ear tags, readers, data accumulators, software, and a data storage system to manage their business smoothly and profitably.  Installation services and system operation training are also available from Farnam to finish the package. (company press release) 
>   SurgiVet, Smiths Medical PM, Inc. Veterinary Division, announced it has completed the acquisition of Global Veterinary Products, Inc.  Global, formerly Cook Veterinary Products, provides critical care access products for a wide range of applications.  Global will be integrated into SurgiVet and the combined business will hold a strong position in the market for anesthesia, monitoring, and critical care devices used in veterinary facilities throughout the world.  Financial terms were not disclosed. (company press release)  
>  NETHERLANDS   Nutreco Holding N.V. has signed an agreement in principle to sell its 50% share in the joint venture Hendrix Poultry Breeders to its partner Bovans Beheer B.V. Completion of the deal is expected in the second quarter of 2005. The deal will produce a book profit for Nutreco of approximately Euro 8 million. (Wattnet Meatnews)
> CANADA   A group of Canadian cattle producers  have filed class action lawsuits against the Canadian government and the local subsidiary of Ridley Inc.  The suits allege “gross incompetence and negligence” that led to the discovery of BSE in a cow in Alberta.  Agriculture Canada failed to consider safety issues when compiling a list of permitted animal feed ingredients in 1988-90 and lost track of 80 cattle that had been imported from the UK and Ireland, allowing them to be ground up into cattle feed. The allegations against Ridley Corp. relate to preventative actions taken by the parent company in 1996 but not by its Canadian subsidiary.  In their statement, the Canadian producers claimed that Ridley banned the use of rendered cattle parts in cattle feed in May 1996, but the company’s subsidiary only stopped the practice in Canada in August 1997, when authorities banned it. (Feedstuffs)
>  JAPAN – BSE   Two more cattle in Japan have tested positive for BSE. The two, one black cow born in 1987 and a Holstein born in 1995, were found in the Miyagi Prefecture. If the initial test results are confirmed, they would be Japan’s 18th and 19th known cases of BSE. (Meating Place)
>  US – BSE ALLEGATIONS   Last week, Canadian news reports quoted two former USDA veterinarians that claim the US covered up additional cases of BSE. However, USDA officials say the allegations are completely false, and that it reported immediately the one dairy cow that was confirmed with BSE in Washington state in December 2003, and there have been no additional cases. (Drovers Alert)
> US – VACCINE NOTIFICATION LAW DEFEATED    Controversial bills that would have required veterinarians to disclose vaccine risks to clients were defeated and expired in Maine and Nevada on April 6 and April 15, 2005, respectively. The Maine legislation will not be formally defeated until the full legislature meets at the end of this month, but the legislation is “virtually dead.” If passed, the legislation would have been the first in the nation.  According to VMA representatives, such protection already exists in the Veterinary Practice Act. Veterinarians already educate their clients about the pros and cons of vaccines, but do not want to be mandated into a “one-size-fits all approach” to that education.  (AAHA NEWStat)
> NEW GLOBAL TRADE ALLIANCE FORMED   The Global Alliance for Liberalized Trade in Food and Agriculture, was launched in Geneva, Switzerland.  The Alliance brings together 38 organizations representing agriculture and food producers, processors, distributors, retailers and consumers from more than 15 countries.  It has been formed to advocate for global liberalization of international trade in agriculture and food and has issued an international call to WTO members to reach a comprehensive agreement on agriculture for the Hong Kong ministerial meeting.  (Wattnet Meatnews)
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New jobs are added regularly at We’ve added 15 new positions in the past week.  If you haven’t visited lately, come take a look!
The companies reporting for the first quarter are supporting our expectations of industry growth for 2005.  It’s been several years since so many of the leading companies have been able to put together such nice growth numbers for 6 to 8 quarters in a row.
As we’ve discussed before, other than increased energy costs, we just don’t see anything on the horizon that’s going to bring these revenue growth rates down in 2005.  Of course, there may be an occasional “blip” on the radar in some areas, for some companies. 
The companion animal market continues to demonstrate dramatic growth in both services and products in all categories.  We believe some of the parent companies are beginning to appreciate the consistent revenue and cash flow contributions of their animal health businesses.  Animal health may be one of the more stable businesses in their portfolio.  Could this be why the large equity firms continue to seek opportunities in these markets versus other alternatives?
Congratulations to the management teams at Butler and Burns.  Who’s next?
Have a great weekend.
Ron Brakke
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