Animal Health News & Notes for June 7, 2002

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Brakke Consulting’s
Animal Health News & Notes for June 7, 2002
Copyright © Brakke Consulting, Inc.
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Company Earnings Releases

>  PETsMART reported a first quarter net income for 2002 of $22.1 million, versus a net income of $1.2 million for the first quarter of 2001.  Net sales for the first quarter of 2002 were $645.8 million, compared to $582.2 million last year. Comparable store sales grew 12.1% over the first quarter of last year.  Services sales for the first quarter were $37 million, up 38% compared with the first quarter of last year, an increase that continues to reflect the company’s focus and
investment in growing pet services.  (Business Wire)

>  Smithfield Foods Inc.’s earnings for the fourth quarter of fiscal 2002, ended April 28, fell to $24.9 million versus $48.5 million excluding unusual items a year ago.  For fiscal year 2002, Smithfield reported record earnings of $195.7 million compared to $174.9 million prior to unusual items. Sales in the fourth quarter totaled $2 billion, 30% above the $1.5 billion in the same period last year. For the full year, sales were $7.4 billion, up 25% from $5.9 billion in fiscal year 2001. The increases were due to the sales of newly acquired companies and an improved product mix in the company’s value-added product categories. The company attributed the lower results in the fourth quarter versus a year ago to sharply lower live hog prices and weak fresh pork demand as a result of the excess protein supply in the domestic marketplace. A major contributing factor was the Russian ban on chicken imported from the United States.  (Meating Place)

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ACVIM Meeting – Dallas, Texas

The 2002 meeting of the American College of Veterinary Internal Medicine was held last week in Dallas, Texas.  There were 2,700 attendees, which included over 2,000 veterinarians and 320 speakers.  The majority of the attendees were not board diplomates, reflecting the increasing sophistication of veterinary general practitioners.  The ACVIM is a national certifying organization for large and small animal veterinary specialists in internal medicine, cardiology, neurology and oncology.  The well-attended lectures were held on a variety of current topics, as well as numerous presentations of research findings. 
 
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Company News Releases

>  Walco International, Inc. closed on its acquisition of Hi-Pro Animal Health from Friona Industries.  According to company executives, Walco was offered the opportunity to acquire Hi-Pro Animal Health because Friona wanted to focus their resources on the beef business.  Walco already provides products and services to the cattle feeding segment, and the acquisition will extend its coverage to the cow/calf and stocker markets.  Financial terms were not disclosed. (company press release)

>  Vetoquinol N. A. Inc., the North American subsidiary of the Vetoquinol Group, announced that it has finalized an agreement with IGI Inc. by which Vetoquinol N. A. Inc. will acquire the Pet Business activity of IGI Inc.  Vetoquinol USA Inc. will continue to distribute the Evsco and Tomlyn product lines and will be managed by essentially the same team of experienced executives. It will employ more than 30 people under the responsibility of Mr. Ian Parker.  Financial terms were not disclosed.  (PRNewswire)

>  Idexx has filed a patent infringement lawsuit against Abaxis over the latter’s canine heartworm antigen test.  The suit argues that the method and kit claims associated with Abaxis’ product “fall within the scope set forth” in Idexx’ Snap canine heartworm antigen test patents.  Abaxis’ product is manufactured by S.A. Scientific, which has also been named as a defendant in the lawsuit.  (Veterinary Practice News)

>  Virbac Corp. launched Allermyl Shampoo for management of pruritus in dogs and cats due to allergic skin disease.  Allermyl was originally developed and launched in Europe by Virbac S.A. more than two years ago. (Veterinary Practice News)

>  Novus International has agreed to settle a class action lawsuit filed in the US by poultry and swine farmers over the sale of feed supplement.  Novus will pay the farmers $35 million to settle the suit.  The lawsuit was filed in 1999, claiming that Novus had violated the US antitrust law in its sale of methionine for use in pig and poultry feed. (Watt Feednet)

>  Waltham USA introduced a new dietary breakthrough in the fight against heart disease in dogs at the annual meeting of the ACVIM.  Developed by Waltham USA in collaboration with veterinarians from Tufts University, Waltham Canine Veterinary Diet Early Cardiac Support aids in the dietary management of early cardiac disease in dogs.  Waltham Early Cardiac Support is a complete and balanced nutritional dog food that contains ingredients including taurine, arginine, L-Carnitine, omega-3 fatty acids, B-complex vitamins and antioxidants such as vitamin C and E.  The diet will be available through veterinarians beginning July 2002.   (company press release)

>  AniGenics, Inc. announced that effective immediately, it will be known as Pyxis Genomics, Inc.  The company’s board of directors approved the new identity in order to more precisely convey genomics as its core technology and to differentiate the firm from similarly named biotech companies. (PRNewswire)

>  Farmland Industries announced that it has filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Farmland will maintain its current business operations while it continues ongoing efforts to reposition the company to support its core businesses. Farmland Industries holds an ownership position in several business entities that are not included in this action because their operations and financing are handled separately. They include Farmland National Beef Packing Co., L.P.; Agriliance, a fertilizer marketing joint venture; and Land O’Lakes Farmland Feed, an animal feed joint venture with Land O’Lakes.  ADM-Farmland, a grain marketing company formed one year ago, is also a separate company not included in this action.  Farmland received approval from the U. S. Bankruptcy Court for its first day pleadings.  The approvals include allowing Farmland to begin using $306 million of debtor-in-possession financing it secured to continue its business operations while working its way through the bankruptcy process. (Meating Place, PRNewswire)

>  Smithfield is adding to its stable of deli product offerings by acquiring an 80% interest in Stefano Foods Inc. Stefano’s is a leading producer of a line of Italian convenience foods. Stefano’s products will be marketed through the Smithfield Deli Group, formed in February, to market all deli meat brands of Smithfield Foods’ independent operating companies to the retail deli trade. Stefano Foods has annual sales of $22 million.  Smithfield Foods acquired an 80% interest in Stefano’s for five and one-half times projected EBITDA. Stefano’s management has chosen to retain a 20% interest and remained actively involved in the business. (Meating Place)

>  Hormel Foods and Cargill Inc. announced their intent to form a joint venture between Hormel and Excel Corp, a Cargill subsidiary, to market nationally branded fresh case ready beef and pork under the existing Hormel Always Tender brand name.  The joint venture will be named Precept Foods. (Feedstuffs)

>  CVC Capital Partners, a London-based investment group, is in exclusive talks with Italian Montedison to buy the company’s animal feed business Provimi.  The deal is valued at an estimated 700 million euros ($658 million).  Provimi is reportedly being sold because Montedison wants to focus on its energy business.  Provimi operates 73 plants in 26 countries, and some experts have estimated that it has as much as a 7% share of the global animal feed market.  CVC Capital Partners acquired Adisseo (formerly Aventis Animal Nutrition) from Aventis last year. (Watt Feednet)

>  The FDA has ordered a nationwide recall of a horse drug sold over the Internet called Miracle Leg Paint, because it contains mercury that is poisonous both to horses and to people. Miracle Leg Paint, marketed by Equine Miracle Corp., contains a mercuric chloride blistering agent.  The company agreed to recall it this week. (AP)

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BRAKKE CONSULTING, INC.
EXECUTIVE SEARCH AND RECRUITING SERVICES

We continue to expand our executive search business within the animal health, veterinary, pet and specialty chemical markets.  In the past few years, we have filled over 100 positions from division CEO’s to product managers for the leading companies in our industry.  We believe that our services in executive search are of the highest quality.

In 2001, we added field sales recruiting to our search and recruiting services.  We now have two consultants working full time in this area of our business. 

If our your firm has never used Brakke Consulting’s executive search services, we encourage you to either visit out website at www.BrakkeConsulting.com or call any of our offices to learn more about how we are uniquely qualified to help you find the best possible candidate for your position.

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

>  CHILE   Chilean agricultural authorities reported that at least 400,000 birds must be slaughtered because of an outbreak of avian influenza. The measure was adopted to avoid the spread of the virus, whose presence was being investigated following the death of 110,000 chickens in central Chile. The initial suspicion of avian influenza in Chile was based upon clinical
observation and serological evidence.  Ongoing laboratory investigations are meant to determine if the virus strain involved has the virulence of highly pathogenic avian influenza (HPAI), also known as fowl plague, which is an OIE list A disease. (AnimalNet –ProMed)

>  KOREA   South Korea confirmed the first positive case of foot-and-mouth disease in a pig since the World Cup finals began, dashing hopes that the outbreak was over after no new cases were reported for nearly two weeks.  All 1,500 pigs were slaughtered on the farm where the pig that tested positive was found, which is 40 km (25 miles), the closest World Cup venue.  Authorities plan to discuss steps including possible vaccinations or wider culling of animals in a bid to control the disease. South Korea is currently co-hosting the month-long World Cup soccer finals with Japan. (AnimalNet – Reuters)

>  ISRAEL   Israel has discovered its first case of BSE.  Tests on a cow that died on a communal farm from the Golan Heights turned up positive. The Agriculture Ministry plans to slaughter the cow’s offspring and three other cows in that herd.  Since this discovery, the Agriculture Ministry is requiring the brains of all slaughtered cattle older than 30 months to be examined before selling for human consumption. The internal organs from all high-risk cattle will be destroyed.  (Meating Place)

>  IRAN  The hemorrhagic virus infecting 30% of Iran’s cattle stock and causing a number of human deaths was diagnosed as Crimean-Congo hemorrhagic fever. The disease was first detected in the northeastern Khorassan province in 1978 after entering Iran through imported cattle from eastern states. The fever broke out in Pakistan and Afghanistan, Iran’s eastern neighbors, earlier this year. The virus causing Crimean-Congo hemorrhagic fever is transmitted by ticks. (ProMed)

>  GERMANY   Poultry meat in Denmark, the Netherlands and Austria is being tested for traces of an herbicide that entered the European food chain via a pesticide store in former East Germany.  A German organic poultry producer may have exported meat contaminated with the herbicide to the three countries.  (AnimalNet – Reuters)
  
>  US   Health officials said last week that a salmonella outbreak at the Dallas Wyndham Anatole Hotel was bigger in scope than any other US food-borne disease outbreak.  The outbreak overlapped the Annual Meat Conference, co-sponsored by the American Meat Institute and the Food Marketing Institute, which was held April 21 to 24 at the hotel.  From mid-March through April 25, health officials identified at least 650 people from all 50 states who suffered from fever, abdominal cramps and diarrhea after eating at the hotel.  Although epidemics aren’t ranked by size and others have involved more people, health authorities couldn’t recall another outbreak that affected residents from all 50 states. Everyone has recovered. (Meating Place)

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Agribusiness News

>  The acquisition of Aventis CropScience by Bayer was completed after the relevant anti-trust authorities approved the transaction. The clearances are subject to certain commitments to be fulfilled by Bayer after the closing.  The enterprise value of the transaction, which was agreed in October 2001, was set at € 7.25 billion ($6.9 billion). Aventis held a 76% interest in this business, while Schering AG held 24%. Aventis has received total proceeds of around € 5.7 billion in cash and debt deconsolidation from the transaction.  (company press release)

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Brakke Consulting Viewpoint

Consolidations, more consolidations, and even more consolidations seem to be the stories of the week.  The business areas of animal health distribution, animal protein production, and marketing for animal feed all had announcements related to consolidations or merger activities this week.

It is tough to have a successful business in today’s environment without the efficiencies, critical mass, or unique product or brand positions necessary to produce profits.  Even one of the largest producer-owned cooperatives, Farmland, filed for bankruptcy protection in the past week.  While it is a bit difficult to understand the corporate legal complexities of all the joint ventures and partnerships, one thing is clear: the producers, owners and customers for Farmland and other large agricultural companies are changing rapidly, and firms need to make the tough decisions sooner versus later.

Have a great weekend.

[Ron Brakke]

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