Animal Health News & Notes for July 26, 2002

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Brakke Consulting’s
Animal Health News & Notes for July 26, 2002
Copyright © Brakke Consulting, Inc.
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COMPANY EARNINGS RELEASES

>  Pfizer reported that Animal Health sales in the second quarter 2002 increased 11% to $274 million (up 15% excluding the impact of foreign exchange), compared to the same period in 2001. This strong performance reflected double-digit growth in both livestock and companion animal product lines. Revolution, Rimadyl, Dectomax and RespiSure/Stellamune showed strong sales growth. Sales for the first six months of 2002 increased 10% to $513 million. (company website)

>  Akzo Nobel reported that for the second quarter 2002, its animal healthcare business Intervet was severely impacted by incidental items (especially obsolete inventories), weak currencies and market conditions in Latin America. (company website)

>  Wyeth reported that second quarter 2002 sales of its animal health division Fort Dodge were $194 million, an increase of 1% over sales in the second quarter 2001.  Sales for the first six months were flat at $355 million.  The company reported that sales of West Nile Virus vaccine offset decreases in ProHeart 6 sales. (company website)

>  Eli Lilly reported that second quarter 2002 sales of its animal health division Elanco were $162 million, an increase of 4% compared with the second quarter of 2001. Excluding the effect of exchange rates, sales grew by 5 % for the quarter. (company website)

>  Schering-Plough reported that second quarter 2002 sales for its animal health division were flat at $171 million compared to the second quarter 2001.  This was a result of lower US sales due to product availability issues tempered by growth in international markets.  Sales were also flat excluding foreign exchange.  (company website)

>  Novartis reported that first half 2002 sales for its animal health division increased 10% in local currencies (4% in CHF) to CHF 512 million ($312 million).  Acquisitions contributed 5 percentage points to growth.  The farm animal business continued to grow dynamically, led by therapeutic anti-infectives Tiamutin and Econor.  The vaccines and aquahealth businesses again outperformed the market.  In the companion animal business, Program sales declined, but this was more than offset by double-digit sales growth from Interceptor and Fortekor.  (company press release)

 
>  Pharmacia reported that second quarter 2002 sales of its animal health division increased 10% in the quarter, to $122 million.  Sales for the first six months of 2002 increased 7% to $241 million. (company website)

>  Colgate-Palmolive reported that innovative new products and veterinary endorsements continue to drive growth at Hill’s, which had strong results both domestically and internationally. Unit volume grew 6.0% and dollar sales rose 8.5% in the second quarter 2002 versus 2nd quarter 2001. Dollar-operating profit increased 15%.  (Business Wire)

>  Ceva Sante Animale reported an increase of 13% to 96 million euros ($95 million) for the first half of 2002, compared to the first half of 2001. (company communication)

>  Alltech Inc. announced audited consolidated year-end  sales for 2001 of $131 million, an increase of 22% compared to 2001.  The Animal nutrition division represented $119 Million of these sales, with the Alcohol &, Food divisions together representing the remainder.  (company press release)

>  ImmuCell Corporation announced that financial results for the three month period ended June 30, 2002, showed total revenues decreased by 15% to $1.6 million compared to the same period in 2001, while product sales decreased by 21% to $1.4 million.  The net loss of ($23,000) in 2002 compares to net income of $105,000 for the three month period in 2001.  For the six month period ended June 30, 2002, total revenues increased by 4% to $3.5 million compared to the same period in 2001, while product sales decreased by 2% to $3.2 million.  Net income of $146,000 compares to the net income of $222,000 for the six month period ended June 30, 2001. (Business Wire)

>  VCA Antech, Inc. reported financial results for its second quarter and six months ended June 30, 2002.  Revenue for the second quarter ended June 30, 2002 increased 9.5% to a record $117.2 million from revenue of $107.0 million in the same quarter last year. Operating income for the three months ended June 30, 2002 increased to $28.5 million from $8.4 million for the comparable period in 2001. Revenue for the six months ended June 30, 2002, increased 9.5% to a record $221.9 million from $202.7 million in 2001. (Business Wire)

>  Sales for Maple Leaf Foods Inc.’s second quarter ending June 30 increased 4% to $1.3 billion from $1.2 billion for the same period last year. Earnings from operations of $51.3 million increased from $38.9 million last year, an increase of 24%. This increase is principally due to very strong results in the Bakery Products Group and higher Meat Products earnings. (Meating Place)

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SPECIAL REPORT – RIDE ACROSS IOWA

It was reported late Thursday that Brakke Consulting Senior Consultant John Volk is currently wearing the “maillot jaune” in the 55 and over age class of the annual Ride Across Iowa this week.  Since the direction of the race is west to east, there is probably an incentive for a native of Illinois to ride as fast as he can to get back home.

Congratulations, John!
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COMPANY NEWS RELEASES

>  The Food and Drug Administration (FDA) amended the  animal drug regulations to reflect approval of a supplemental new animal drug application (NADA) filed by Intervet, Inc. The supplemental NADA provides for change from prescription to over-the-counter marketing status for oral use in dogs of fenbendazole granules for removal of certain internal parasites.  (AnimalNet – Federal Register)

>  The Butler Company announced the launch of Butler Nutrisentials “Lean Treats.”  The treats are manufactured for Butler by Kelly Foods, a company best known for their Bil-Jac line of diets and treats.  Lean Treats are manufactured with real skinless chicken under a proprietary vacuum-sealed cooking process which maintains the nutritional integrity of the protein.  What this means to the pet is a higher quality, more readily digestible and palatable protein source.  They are supplied in a professional looking 4 oz resealable zipper pouch pack, 10 pouches to a case and are available only through veterinarians. (company press release)

>  On July 19, the New York Post reported that Veterinary Pet Insurance (VPI) had denied medical claims for Bear, one of the September 11 New York City search and rescue dogs.  VPI immediately responded that Bear never had any insurance at the time of the rescue efforts; therefore it was impossible for VPI to have denied any claims.  In March 2002, VPI offered free insurance policies for all search and rescue dogs involved in those efforts. Those policies were intended to insure these heroes for the future, and like any insurance policy, would not be responsible for past events.  VPI, like many other animal-related organizations, had assumed that FEMA or some other state or national agency would cover any medical bills arising from the rescue efforts, since they provided such a valuable service to the community and the nation.  When VPI learned on July 19 that no one had paid Bear’s medical expenses, they immediately offered to have the VPI Skeeter Foundation pay for those bills.  VPI has also offered the VPI Skeeter Foundation to help with the medical expenses of any of the other 9-11 rescue dogs, within its limits, and will find others to contribute if the need is in excess of the Foundation’s capacity. (company communication)

>  Nestle Purina PetCare is sponsoring Canine Health Online, a free internet question-and-answer forum where visitors can ask canine health experts questions concerning dogs’ health.  The internet program is designed to help those who are concerned about canine health get the most accurate information about the latest canine health topics, including research, training, care, and breed-specific issues. Visitors can suggest topics, look over the forum schedule, search the archives or review frequently asked questions. (PRNewswire)

>  Embrex, Inc. announced it has been named to Fortune Small Business (FSB) magazine’s top 100 list of America’s Fastest Growing Small Companies for the second year in a row. FSB, in collaboration with Zachs Investment Research, researched and selected U.S. public companies that trade on the major exchanges with less than $200 million annual revenue. These select companies were then ranked according to their earnings growth, revenue growth and total stock return, including dividends. Those rankings were averaged to create the final list. (PRNewswire)

>  Trek Diagnostics Systems Inc., earlier this year launched the ESP para-JEM system, which detects growth of Mycobacterium avium subsp. paratuberculosis (Mpt), the bacteria that causes Johne’s disease, in two to three weeks. Previous testing methods required 12 to 16 weeks to diagnose the slow-growing mycobacterium.  It is voluntary to have animals tested for Johne’s, although some states now prohibit transport of infected animals and/or require that they be branded to show Johne’s infection.  Trek developed the new diagnostic machine and Cornell University performed validation testing over the past year. Purdue and other veterinary laboratories are using the machine on a trial basis.  (AnimalNet – Ag Answers) 

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BRAKKE CONSULTING, INC.
Do You Know Where Your Company Is Going?

Brakke Consulting is an excellent resource in the strategic planning process.  Brakke Consulting’s past assistance in strategic planning has included:
– reviewing the revenue estimates and success probability of the product pipeline,
– reviewing the timing of various new product introductions versus probable timing of competitive introductions, and estimating the impact of various scenarios
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Brakke Consulting can provide insights and professional assistance that improves the likelihood of success.  Please contact us if you would like the benefit of professional assistance in any of these areas. Contact information for all offices is available on our website at www.brakkeconsulting.com.

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ANIMAL HEALTH NEWS

>  US   A recall of ground beef suspected of being contaminated with E. coli O157:H7 that caused illnesses in 18 people is being expanded to 18.64 million pounds and 21 states, according to officials at the USDA. The beef recall involves product produced at the ConAgra Beef Co. plant in Greeley, Colo.  Eighteen people became ill after consuming the contaminated beef.  The recall is an expansion of the June 30 voluntary recall of 354,200 pounds of fresh and frozen ground beef products. Friday’s voluntary action was taken following a scientific and technical review of plant practices and company records by FSIS.  (Meating Place)

>  US   In light of the latest recall of ground beef because of contamination by E. coli O157:H7 bacteria, scientists and physicians associated with the American Council on Science and Health urged consumers to demand that such products be irradiated to prevent future illnesses.  Food processors have been slow to adopt irradiation out of concerns about consumer acceptance, although retail sales of irradiated beef have been widely accepted when consumers are informed of the product’s improved safety profile.  The nucleus of ACSH is a board of 350 physicians, scientists and policy advisors–experts in a wide variety of fields–who peer review the Council’s reports. ACSH’s top priority is to help Americans distinguish between real and hypothetical health risks. (Meating Place)

>  BELGIUM   Belgium reported finding a second farm where pigs had tested positive for the banned growth hormone MPA.  The AFSCA food safety agency gave no details of how many pigs at the farm had tested positive for MPA.  The agency said it had found traces of the hormone in a batch of 4,000 pigs imported from the Netherlands to a farm in Limburg in northeast Belgium and was considering whether it would have to order them all to be slaughtered. (AnimalNet – Reuters)

 
>  US   Two-thirds of beef producers in the USA continue to support the Beef Checkoff Program, according to the results of an independent survey released at the 2002 Cattle Industry Summer Conference in Reno.  Conducted for the Cattlemen’s Beef Board (CBB) by Aspen Media and Market Research, the research was completed in June, and has a margin of error of plus or minus 3.1%. The semi-annual survey is demographically representative of U.S. beef and veal producers and dairymen. (Wattnet Meat News)

>  US   The University of Idaho filed a patent on a new and faster method to detect failed pregnancies in cattle.  The new test is a cow-side test that uses a blood sample to detect the presence of a protein produced in early pregnancy.  If the protein is not present 3 weeks after breeding, a pregnancy was not established.  The technology has been licensed to AspenBio, Inc. (Hoard’s)

>  CANADA   A collaboration between Spanish scientists and Canada’s Lethbridge Research Centre has resulted in a new diagnostic test for cattle warble grubs.  The new test is 95% accurate for diagnosing active grubs and can be used on all age classes of animals. The previous test is only reliable on calves after their first pasture season. The previous test detects a specific antibody that cattle release in response to the grub., but this antibody can be released up to six weeks after the grub has left the animal.   The new test detects Hypodermin C, a protein secreted by the parasite as it migrates through the animal.  (AnimalNet – company press release)

>  US   The Cattlemen’s Beef Promotion and Research Board approved a $48 million checkoff budget for the 2003 financial year. The budget focuses on continuing to build demand for beef.  The USDA now must approve the budget before any money can be spent.   (Wattnet Meatnews)

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BRAKKE CONSULTING VIEWPOINT

The results for the first six months for those companies reporting this week seem to be generally positive.  It appears to us that this group of companies created new sales volume in the range of $150 million for the first six months.  If the firms not yet reporting match this performance, the sales growth for the half-year will be impressive.  Can this sales activity hold up for the last half of the year?  We see no reason why it cannot.

Notwithstanding the high decibel level of the media reports on the stock market’s decline and finger-pointing at CEO’s of mega-firms, the basic consumer economy seems to be OK, if not strong.  This should bode well for the companion animal market.  There are some signs of weakness in the food animal and poultry areas because of lower livestock prices. 

It will be interesting to observe the annual year-end sell-in of products to the trade in the face of recent accounting scandals, etc.  The companies that have booked large consignment sales in the past may not have the comparable CEO and CFO support of these activities this time around.  If that happens, it could dampen 4th quarter sales.

[Ron Brakke]

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