The Experts in Animal Health

Brakke Consulting’s
Animal Health News & Notes for July 18, 2003

Copyright © Brakke Consulting, Inc.

>  Akzo Nobel reported that second quarter 2003 sales of its animal health division Intervet were 243 million euros ($278 million), a decrease of 13% over the second quarter of the prior year.  Intervet was impacted by weak business conditions in the US, which were partially offset by a generally improved performance in the rest of the world.  Sales for the first half of 2003 were 496 million euros ($567 million), down 10% compared to the first half of 2002.  (company website)

>  Farmland Industries announced operating income of $45.3 million for the third quarter of the 2003 financial year.
This represents a substantial improvement compared to an operating loss of ($93.0) million in the third quarter one year ago. Year-to-date operating income of $95.5 million is compared to an operating loss of ($126.9) million during the nine-month period last year. Overall, after inclusion of reorganization expense, non-cash restructuring charges and results from discontinued operations, Farmland reported a net loss in the third quarter of ($47.2) million compared to a net loss of ($189.5) million during the third quarter of the prior year. (Wattnet Meatnews)

In 1997, Brakke Consulting developed an extensive report on the worldwide aquaculture business and the opportunities for animal health, nutrition, and investor companies in the next decade. We have just completed an all-new update of that report on the aquaculture market. 

The past six years has seen a great deal of change in the aquaculture business.  These changes and their implications for current and future suppliers are highlighted in the new 60-page report.  If you currently supply or have been considering supplying the aquaculture industry, you’ll find this report most useful and helpful in our planning process.  The opportunity continues to increase in value for participating companies.

The study will be completed at the end of July and available for purchase at a price of $3,000.  For more information on the report, please call 972-243-4033, or email .
>  Intervet recently opened its new state-of-the-art facility in DeSoto, Kansas.  The $46 million complex will serve as Intervet’s regional R&D, production, and administrative center in the Midwest.  The new complex is the primary research farm for the company’s livestock vaccines and the primary manufacturing site for its cattle and swine vaccines.  It is also the distribution center for the US. (Feedstuffs)

>  DRAXIS Health Inc. has granted an exclusive license for Europe to Ceva Sante Animale for the marketing and distribution of Anipryl or the use of approved Anipryl claims. Under the terms of the agreement, Ceva has the right to promote approved Anipryl indications in Europe. Ceva currently markets a selegiline product in Europe known as Selgian, which is indicated for the treatment of behavioral problems of emotional origin in dogs. Anipryl is indicated for the treatment of canine Cushing’s disease and canine cognitive dysfunction syndrome (“CDS”). The agreement further provides for Ceva to pay the DRAXIS animal health subsidiary a percentage royalty on European sales of Anipryl and/or the use of Anipryl claims, in addition to nominal milestone payments upon the regulatory approval of Anipryl in the U.K. and in subsequent additional jurisdictions within the European Community. DRAXIS and Ceva have also mutually agreed to discontinue the existing opposition proceedings between the parties that are before the European Patent Office relating to respective Selgian and Anipryl patent claims. (Business Wire)

>  Nestlé Purina PetCare is launching a national client education initiative following the results of a recent national survey that reveals as many as 50% of patients seen by veterinarians could be overweight and that client education is one of the top challenges when it comes to fighting the problem. The “Know the Score” program launches nationally this July in with a consumer awareness program in five key markets around the US. The program also includes an intensive effort in Austin, TX where Nestlé Purina is offering local veterinarians at over 300 clinics opportunities for their clients to have their pets’ body conditions scored. (company press release)

>  For the second consecutive year, Neogen Corporation has been named to Fortune Small Business’ list of the 100 fastest-growing, publicly-held small businesses in America. Companies were ranked based on three criteria: earnings growth, revenue growth and stock performance over the past three years. The three criteria were then averaged to create the final list. For the period of March 1, 2000 to Feb. 28, 2003, Neogen had an average annual revenue growth rate of 19%, average annual increase in net income of 24%, and average annual increase in its stock price of 19%. Neogen’s growth in operating income during the same three-year period averaged 35%. (company website)

>  Farmland Industries and Smithfield Foods have signed an agreement for Smithfield to purchase Farmland Foods for $363.5 million in cash. The agreement is subject to court approval as a “stalking horse” bid and will be the basis for an auction process involving parties interested in purchasing Farmland Foods. Under the agreement, Smithfield Foods would continue to operate all Farmland plants and maintain production levels at the plants. In addition, Smithfield would retain all Farmland Foods’ employees, including the management team, and honor Farmland contracts with unions and hog producers. (PRNewswire)

>  A federal bankruptcy court in Kansas City has approved US Premium Beef’s bid to purchase Farmland Industries’ interest in Farmland National Beef. The company will be renamed National Beef Packing Company LLC once the acquisition is completed later this summer. The $232 million purchase includes packing plants in Liberal and Dodge City, Kan., further-processing facilities in Pennsylvania and Georgia, and Kansas City Steak Company in Kansas City, Kan. (Drovers Alert)

>  EMerge Interactive reported a determination made by the NASDAQ stock exchange that the company has not stayed in compliance with the marketplace’s minimum $1 per share bid price and is therefore subject to delisting.  EMerge has requested a hearing on the determination and has received a stay on the delisting pending the outcome of the appeal. (Feedstuffs)

> The FDA announced the filing of a Consent Decree of Permanent Injunction against X-Cel Feeds Inc., and individual officers based on violations of the Food, Drug and Cosmetic Act. In the Consent Decree, the Firm and officers admitted liability for introducing adulterated and misbranded animal feeds into interstate commerce and agreed to implement measures to correct the violations under FDA’s supervision. X-Cel, a feed manufacturer headquartered in Tacoma, Washington, failed to comply with FDA regulations (the 1997 Animal Feed Rule) designed to prevent the establishment and spread of BSE should it ever be found in the US, and FDA regulations concerning the manufacture of medicated feeds. US industry compliance with the 1997 Animal Feed Rule currently exceeds 99%. (AnimalNet – FDA)

>  Ridley Inc., which last year sold its European pig-breeding unit, is divesting the Cotswold Swine Genetics business as well. Ridley is in negotiations for the sale of a significant portion of the North American assets of CSG to parties interested in utilizing the assets to continue production and marketing of Cotswold breeding stock.  Ridley bought Canadian franchise rights from Cotswold Pig Development Co. in the early 1990s and acquired the parent company in 1998. It said the divestment is expected to conclude in mid-2004. (AnimalNet – CP Wire)
In the past year or two, the exhibit halls at veterinary conferences have seen a proliferation of veterinary compounding pharmacies.  In response to frequent questions about this topic, Brakke Consulting will be conducting a study of the phenomenon of veterinary compounding.  The study will answer questions such as
– what do veterinary compounders offer?
– what types of companies are offering compounding services?
– how many and how big are they?
– how frequently are veterinarians using compounding services?
– are there differences in veterinary usage between equine and small animal practitioners?
– are veterinary compounders taking business away from traditional pharmaceutical manufacturers?
The study will be completed in July 2003, and is available at a price of $3,250.  For more information, please call 972-243-4033 or email .
>  US   North Carolina’s health department reported that the number of horses infected with eastern equine encephalitis has tripled in the last two weeks in Georgia, North Carolina and South Carolina.  South Carolina has 45 horse cases of the disease, which is almost always fatal to unvaccinated horses. Georgia has reported 32 horse cases and 10 infected birds. North Carolina has reported 13 horse cases. (AnimalNet – AP)

>  JAPAN   Japan is preparing to raise tariffs 11.5% on all US beef imports and has threatened a ban if America re-opens its borders to Canada. Because of a recent surge in beef imports, which comes on the heals of a slump in beef consumption in Japan related to an outbreak of BSE in 2001, chilled beef imports are up 47% in April and 32% in May from a year earlier. If the import increase exceeds 17% from year-earlier levels for the April-June quarter, the safeguard mechanism is triggered to protect its domestic beef industry. (Meating Place)

>  US   The House of Representatives voted to effectively rescind the country-of-origin labeling requirements signed into law last year and due to take effect by fall 2004. Legislation that would forbid the department from spending any money to force companies to stick the labels on beef, pork and lamb products was approved on a 347-64 vote as part of a $17 billion budget bill for the USDA. (AP)
>  PARAGUAY   Three hundred cows in northern Paraguay will be slaughtered after 13 were discovered with foot-and-mouth disease.  Paraguayan meat producers were at the time attempting to dig out of an export freeze brought on by the discovery of two infected cows last October. After the initial discovery a vaccination program was introduced, but the newly infected cows, which belong to nomadic Indians, are moved frequently and often miss being vaccinated. Authorities said it would take one year for Paraguay to earn a foot-and-mouth disease-free status from the International Epizootic Organization. (Meating Place)

> CANADA   The Canadian Pork Council has approved a series of pilot studies designed to help establish guidelines for a national traceability system.  The traceability system pilot studies, which will involve approximately four abattoirs and 50 swine producers, will test the cost and effectiveness of different systems which deal with individual identification and lot identification.  The studies are expected to get underway in August and results are anticipated in November 2004. (AnimalNet – Farmscape)
The first second-quarter earnings report from one of the big animal health companies reflects some of the difficulties of the current market.  We look forward to additional reports in the coming weeks from other companies.

Several of the stories this week relate either directly or very closely to the topic of food safety.  The animal protein business is undergoing massive changes of one type or another, related to producing safe food.   The consumer has spoken, and the branded food companies and regulatory agencies are listening.  This makes an already tough business even tougher.

We hope to see many of you in Denver this weekend or next week at the AVMA conference.

Have a great weekend.

Ron Brakke

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