Animal Health News & Notes for June 14, 2002

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Brakke Consulting’s
Animal Health News & Notes for June 14, 2002
Copyright © Brakke Consulting, Inc.
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Company Earnings Releases

>  PetMed Express, Inc. announced results for the year ended March 31, 2002. Net income was $825,000 for fiscal 2002, compared to a net loss of $2.8 million for fiscal 2001. Net sales for the year ended March 31, 2002 were $32.0 million, compared to $10.0 million for the year ended March 31, 2001, an increase of 220%. PetMed Express also reported new customer growth of approximately 275,000 customers for fiscal 2002, of which 41% ordered through the company website. (Business Wire)

>  HJ Heinz reported that sales in the U.S. Pet Products and Seafood segment increased 3.2%,
primarily as a result of the increased volume (up 5.9%) of StarKist tuna and pet snacks.  Unfavorable pricing, primarily related to pet snacks and pet food, reduced sales in those areas. (Business Wire)
 
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Company News Releases

>  Procter & Gamble has granted a license to Travel Meals LLC to produce, market and distribute new Travel Meals travel packs featuring Iams dog and cat foods.  P&G will share in the revenue and will supply the food and biscuits for the Travel Meals.  Travel Meals come packaged in a sturdy plastic container than transforms into food and water bowls.  The packages also contain special scoop bags for dogs and disposable litter box with litter for cats. (Petfood Industry Enews)

>  Del Monte Foods Company announced that it has entered into a definitive agreement with H.J. Heinz Company under which Heinz’s U.S. StarKist seafood, North American pet food and pet snacks, U.S. private label soup, College Inn broth, and U.S. baby food businesses will merge with Del Monte in an all-stock transaction. A newly created, wholly owned subsidiary company will be spun off to Heinz’s shareholders and immediately merged with a subsidiary of Del Monte to create the new Del Monte. The new company will retain the Del Monte name. Included in the transaction will be the 9-Lives, Kibbles ’ n Bits, Pup-Peroni, Snausages, and Nawsomes!, pet brands. As a result of the merger, Del Monte is expected to assume approximately $1.1 billion in debt associated with the spun-off businesses. (Business Wire)

>  Medafor, Inc. announced that it has signed an exclusive agreement with Abbott Laboratories for the distribution of HemaBlock “Stop the Bleed” to the veterinary market in the US and internationally.  HemaBlock is a microporous polysaccharide powder based on Medafor’s patented microsphere technology.  The product will be marketed to veterinarians for surgical, dental, and critical care applications. (company press release)

>  Alcide Corporation announced that it has licensed its technology know-how and trademarks associated with Alcide’s dairy industry mastitis prevention business to IBA, Incorporated in a new 5-year agreement.  For the past five years, IBA has distributed the Alcide mastitis prevention products domestically including UDDERgold Plus, 4XLA and Pre-gold. Alcide sales to IBA in the present fiscal year will be approximately $2.1 million or roughly 22% of Alcide’s sales to the dairy industry. Under the new arrangement, IBA will manufacture products using Alcide’s technology and carrying Alcide’s trademarks for direct distribution through IBA’s extensive United States distribution network. Alcide will no longer manufacture products for IBA nor will Alcide be involved in distributing product to IBA. (Business Wire)
 
>  Cargill agreed to invest in $10 million in a research agreement with Metamorphix for a large-scale survey to find genetic markers that can predict which cattle possess desirable traits such as heavily marbled meat.  The study will be guided by a genetic map of the cattle genome assembled by Celera Genomics Group.  Celera previously sold its agricultural business to Metamorphix in a stock and revenue-sharing transaction.  Metamorphix has exclusive rights to the cattle data, as well as similar information being developed at Celera on swine and chickens. (Wall Street Journal)

>  Felton International reported that Seaboard Farms, one of the nation’s leading pork producers and processors, is the first swine production company to adopt the Pulse 200 needle-free injection system in their live production operations. Developed to eliminate needles, and the problems associated with needle injection, the Pulse 200 propels a 2 mL dose of vaccine through the skin and into the desired injection site. University and commercial efficacy trials confirm that swine injected with the Pulse 200 exhibit serological responses equal to those in pigs injected with a needle.  Industry experts expect the device will significantly reduce injection site lesions and trim losses associated with needle injection and eliminate disposal of used needles and other medical wastes. (company press release)

>  A class action lawsuit has been filed on behalf of purchasers of the common stock of Pets.com, Inc. between March 7, 2000 and November 7, 2000, inclusive against defendants Merrill Lynch & Co., Inc. Merrill Lynch is charged with issuing misleading analyst reports about Pets.com. (Business Wire)

>  CANADA   Pheromone Sciences Corp announced that it has completed the preliminary feasibility trial of its large animal fertility and ovulation detection technology for large animal breeding at the Ontario Veterinary College.  The study was successful in detecting hormone-related changes indicative of heat in the majority of the dairy cows tested, confirming the company’s ability to adapt its proprietary PSC Fertility Monitor technology to the specific physiology and living environment of the dairy cow. In doing so the company intends to pursue further development of this product to predict impending estrus. (AnimalNet – company press release)

>  US   Protein Sciences Corporation announced that it has entered into a research and license agreement for its patented swine influenza vaccine with an unnamed international developer, producer and distributor of biological products for animal diseases.  The agreement provides for an up-front payment, milestones based on successful completion of various development stages and royalties on product sales. The vaccine is a recombinant hemagglutinin influenza vaccine that has shown safety and efficacy in extensive Phase I and II clinical trials.  (AnimalNet – company press release)

>  SWEDEN   BioGaia AB, which holds the patent on using Reuteri lactic acid bacteria in livestock feeds, has decided to withdraw from marketing its own animal health products and will instead license them to other companies. (Pig International)

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BRAKKE CONSULTING, INC.
                 Mergers, Acquisitions & Divestitures

  >  Are you interested in growing your business by purchasing another company, product line or technology?

  >  Have you been thinking about selling your company, product line or technology?

  >  Have you considered merging your company with another firm to improve shareholder value?

In the past two years, Brakke Consulting has handled over a dozen projects related to acquisitions or divestitures.  We were the sales Agent of Record for the December 2000 sale of Megan Health to Avant Immunotherapeutics.  We have assisted with valuations and due diligence on confidential transactions, and provided executive counsel on a number of potential transactions.

Brakke Consulting has the experience, insight, abilities, and contacts that provide our clients with the highest quality services in the animal health, pet, veterinary, and specialty chemicals markets.  Please contact any of our offices for a confidential consultation on our range of services.  Contact information for all offices are available on our website at www.brakkeconsulting.com https://brakkeconsulting.com and click on a starred location on the world map.

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Animal Health News

>  GERMANY   Germany’s Junior Agriculture Minister warned that a scare over organic food tainted with a cancer-causing agent may widen just a day after Germany assured the European Union that it had the situation under control.  Apparently grain contaminated with the banned chemical was discovered in a company that produces conventional, or non-organic, animal feed.  A cereals supplier in the process of converting his operations to organic from conventional methods had delivered the tainted wheat to an animal feed works.  (AnimalNet – Reuters)

>  INDONESIA   An outbreak of Marek’s disease has swept through West Java’s 2 major chicken suppliers and killed 2.8 million young chickens in the first quarter of this year.  The Association of National Chicken Breeders (PPAN) stated that there was limited spread of the virus although there is a possibility of its return. (AnimalNet – The Jakarta Post)

>  KOREA   A milk cow in central South Korea tested positive for foot-and-mouth disease, the first such case since several pigs were stricken with the deadly animal disease a month ago. South Korea has been struggling to allay international concerns about the possible spread of the highly contagious disease during the soccer World Cup. As a preventive measure, authorities slaughtered 130 milk cows in nearby areas. The area is about 1 1/2 miles from the farm where the disease was first reported on May 2. (AP)

>  US   Two gifts totaling $6 million will be used to establish endowed chairs at Colorado State University.  One chair will be endowed within the Orthopedic Research Center, and the other within the Animal Cancer Center. The two chairs will provide a secure source of funding to attract and retain the best scientific minds and to increase applied research into the areas of veterinary and human health issues.  The Orthopedic Research Center is dedicated to conducting research into the treatment and prevention of musculoskeletal problems occurring in equines as well as humans. (university press release)

>  NEW ZEALAND   A New Zealand supermarket is testing a new fresh-meat storage system that would keep meat fresh for up to two months. Plastics company Vertex is launching its SecureFresh chilled-meat packaging system and Progressive Enterprises is testing the system. The SecureFresh system extracts oxygen from the meat pack and replaces it with carbon dioxide. As long as the meat is kept at 0°C, it should stay fresh for up to two months, according to Vertex, thus cutting waste for supermarkets. (Food Systems Insider)

>  US   Ventria Bioscience announced the publication of research relating to the use of its recombinant proteins, lactoferrin and lysozyme, as an alternative to the use of antibiotics in poultry diets.  The article will appear in the June issue of the Journal of Nutrition.  Broilers were fed one of three diets containing: 1) no antibiotics (negative control); 2) antibiotics (positive control); and 3) recombinant lactoferrin and lysozyme.  The lactoferrin and lysozyme group
showed an improvement in gut health, lower feed intake and an average improvement in productivity of 6.25% versus the control group and showed equivalent performance to the antibiotic group. Based on the successful results in poultry production, the company plans to
test this technology for application in other animal species, such as swine, turkeys, beef and dairy.  (PRNewswire)

>  AUSTRALIA   Meat and Livestock Australia is set to capitalize on a unique opportunity for Australian animal science by establishing a major sheep gene function program involving a number of research groups.  Though there is significant capability in Australia and New
Zealand, the R&D effort is dispersed. MLA is committed to harnessing the dispersed resources and science that will create major breakthroughs in sheep gene function of industry and commercial significance.  MLA has identified the following as four major areas of investigation appropriate to a sheep functional genomics approach, leading to critical industry commercial targets: (1) host response to internal parasites, leading to control of internal parasites; (2) host response to bacterial pathogens, leading to control of Johne’s Disease; (3) biology of the digestive system and muscle, leading to improved efficiency of utilization of feed for meat production and quality; and (4) biology of reproduction and maternal ability, leading to improved animal survival to weaning. (AnimalNet – Meat and Livestock)

>  US   A California company has developed a product with the same technology used by police departments to track stolen cars, to provide an “invisible leash” for man’s best friends.  The PetTrax collars have a micro-transmitter that emits a radio beacon on a unique frequency for each registered pet.  PetTrax rescue technicians can track a lost dog as much as 10 miles away, though most dogs only run several miles from their home.  PetTrax has contracted with a number of security companies within its coverage areas, including Wilshire Protection and Southern California Security Services, to provide the lost animal searches.  The company will continue to grow its coverage areas in Southern California before expanding to other parts of the nation. (PRNewswire)

>  US   A new innovative video produced to relax and comfort man’s best friend became available June 1, 2002 just in time for Pet Appreciation Week. “Comfort for Dogs” is a 45-minute video produced with specially integrated sights and sounds that relax dogs while their owners are away.  The video features soothing video clips for dog lovers and specially scored music that also enhances the dog’s surroundings. (PRNewswire)

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Agribusiness News

>  The EPA has signed off on the safety of all but two of 30 pesticides it studied to see whether they are unreasonably dangerous to human health when combined. The EPA said that reviewing the cumulative risks of organophosphorus pesticides gave the agency general confidence in the safety of the nation’s food supply. Over the past several years, the EPA has reviewed all but five of 49 organophosphorus pesticides. Fourteen have been or will be taken off the market. The EPA contends the five for which it didn’t consider the cumulative risks posed little threat to human health. It is the first time federal regulators have studied how an entire class of chemicals might react with each other and be hazardous in the human body. (AP)

>  A new Internet-based commodity game developed by a Montana agricultural economist is giving farmers the opportunity to experiment with new ways of selling their grain, without risking real money. The game, called Commodity Challenge, teaches farmers the basics of the cash,
futures and options markets. It simulates trades, letting producers practice with phantom cattle and grain allotments, as producers compete to capture the highest prices. Commodity Challenge costs only the time invested to learn.  The game, initially tested by farmers in Montana, has been expanded to farmers in Idaho, Minnesota, Texas and Wyoming. The six-month-long game begins in September. As many as 6,000 producers are expected to take part, and the game could be offered nationally as early as next year.  Farmers who did best playing Commodity Challenge this spring averaged 15 cents per bushel more on their wheat and barley allotments than other players. (AP)

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Brakke Consulting Viewpoint

This week’s newsletter covers a number of product, technology or marketing innovations to improve the health of animals.  While none are likely to be blockbusters, the results do reflect a continued investment by companies in innovation that should result in increased sales.

For several years, Brakke Consulting has been discussing the impact that generics, genetics and geriatrics will have on the business of animal health.  We have also suggested a number of times that genetics is likely to have a significant impact, especially as time goes on.  The investment by Cargill in a Metamorphix technology highlights how at least one of the large animal protein integrators views this new technology.  If your planning does not reflect an impact from genetics breakthroughs on your product sales over the next decade, we believe you may have missed a key factor in the future.

[Ron Brakke]

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