The Experts in Animal Health

Brakke Consulting’s
Animal Health News & Notes for January 25, 2002

Copyright © Brakke Consulting, Inc.

Company Earnings Releases

>  Pfizer reported that for the fourth quarter 2001, Animal Health sales increased 3% (7% excluding foreign exchange) to $301 million, compared to the same period in 2000. The improved performance reflected new promotional and distribution practices, various restructuring initiatives, and double-digit revenue growth of Rimadyl, Revolution, RespiSure and Dectomax. These benefits were partially offset by lost revenue from the divestiture of the feed-additive product line in 2000, and the impact of mad cow disease and foot and mouth disease in Europe. Excluding the feed-additive divestiture, revenues in the quarter grew 19% (23% excluding the impact of foreign exchange).  For the full year 2001, animal health revenues were $1,022 million, a decrease of 3% over the year 2000. (company website)

>  American Home Products reported that fourth quarter sales 2001 for its animal health division Fort Dodge were $217 million, a decrease of 6% compared to the comparable period in 2000.  Sales for the full year 2001 were $776 million, a decrease of 2% over the prior year.  The decline in animal health revenues was due primarily to a general weakening in the livestock markets globally, and continuing concerns about foot-and-mouth disease and BSE.  This was partially offset by the June 2001 US launch of ProHeart 6.  (company website)

>  Eli Lilly reported that fourth quarter sales 2001 for its animal health division Elanco were $188 million, a decrease of 5% compared with the fourth quarter of 2000. For the full year of 2001, animal health sales increased 3% to $686 million. Excluding the effect of exchange rates, sales decreased by 3% for the quarter and grew by 6% for the year. (company website)

>  Schering-Plough reported that 2001 fourth quarter sales for their animal health division were $201 million, a decrease of 7% from the fourth quarter 2000.    Sales for the full year 2001 were $694 million, a decrease of 4% (down 1% when foreign exchange is excluded) over the prior year.  The company stated that sales were affected by manufacturing issues in the US. (company website)

>  IDEXX Laboratories, Inc. reported net income of $9.8 million for the quarter ended December 31, 2001, compared to net income of $9.8 million for the same period in the prior year. Revenue for the fourth quarter increased 4% to $95 million from $91 million for the fourth quarter of 2000.  For the year ended December 31, 2001, net income increased 3% to $37.6 million from $36.6 million for 2000, and revenue for 2001 increased 5% to $386 million from $367 million for 2000.  During the fourth quarter the company reported continued strong sales of companion animal and production animal test kits and water testing products. Revenues from laboratory services and information systems businesses also increased significantly over 2000.  (company website)

>  PETsMART, Inc. announced that it expects comparable store sales growth for the fourth quarter of fiscal 2001 to improve to approximately 9 percent, versus its previous expectations of 6 to 7 percent growth. In addition, the company announced that it has purchased for $9.5 million the remaining 16.3% interest in the subsidiary, and will integrate and PETsMART Direct, its equine direct marketing business, into its overall operations. (Business Wire)

Company News Releases

>  IDEXX Laboratories, Inc announced that Jonathan W. Ayers has been elected Chairman and Chief Executive Officer, succeeding David Shaw.  Mr. Ayers most recently was President of Carrier Corporation, a division of United Technologies, Inc.  Mr. Shaw, IDEXX’s founder, retired as Chief Executive Officer in 1999 but later returned to that position to provide interim leadership and to establish a leadership succession plan. (company press release)

>  Shares of Bayer AG posted a modest rise in the German pharmaceutical company’s debut on the New York Stock Exchange. Trading under the ticker symbol BAY, the U.S. shares opened at $33.09 and rose to close at $33.17 Thursday in New York. In Frankfurt, Bayer closed at 36.91 euros ($32.42) Wednesday and rose 2% Thursday to close at 37.61 euros ($33).  The company has long had a presence in the United States. Its U.S. subsidiary, Bayer Corp., was founded in 1865.  (AP)

>  Church & Dwight announced the acquisition of 100% of the stock of Biovance Technologies, and that BioVance’s products BioChlor and Fermenten will be merged into the company’s existing animal nutrition group.  The name Biovance Technologies will be returned to its founder, but all other products and operations will remain with Church & Dwight.  Terms were not disclosed.  (Feedstuffs)

>  Farnam Companies Inc. acquired marketing rights to the Constant Delivery (CD) Resuscitators, a respiratory device made in various sizes for small and large animals.  The CD Resuscitator, manufactured by McCulloch Medical, in response to breeders and veterinarians who expressed frustration concerning birthing complications, treats asphyxiation in animals.  Unlike traditional bag mask resuscitators, the range of CD Resuscitators are very easy to use and have been developed from a new type of patented human resuscitator. (company press release)

>  BIOCOR Animal Health, Inc. announced the launch of a new advertising and promotional campaign for its Bronchicine CAe canine vaccine.  The campaign “Every Dog, Every Kind, Every Time” is based on testimonials from veterinarians and animal shelter administrators who use Bronchicine CAe, an injectable vaccine for canine cough. The testimonials serve as both research and content for print display ads for trade publications, direct marketing materials to distributors and for feature stories on the safety and efficacy of the vaccine for trade publications.  In addition, the campaign will include a “Think Blue” promotion, focusing on the product’s bright blue packaging, for trade show booths, direct mail and promotional items. (company press release)

>  The EPA announced the settlement of an administrative enforcement action against Petmed Express, Inc. for allegedly selling misbranded foreign-labeled versions of the popular flea-control products, Advantage and Frontline. EPA contended that such activities constituted violations of the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA). While not admitting the alleged violations, Petmed Express, Inc., formerly known as, agreed to pay a penalty of $100,000 and to properly dispose of mislabeled products placed under a stop sale order by the EPA. The company had been selling the products labeled for sale in other countries including Australia without the required U.S. labeling. (Business Wire)

>  Planalytics Inc. announced that PETsMART, Inc. has signed an agreement to access Impact LR, an Internet-based application that measures the specific effects of future weather on consumer demand by product, location, and time. PETsMART will use Impact LR to aid in allocation and marketing of flea and tick control products. Impact LR provides retailers and manufacturers with knowledge of how weather has and will influence their business up to one year in advance in order to support more for effective planning and forecasting, product distribution and allocation, and advertising and promotion timing. (PRNewswire)

>  National Farms has decided to sell its seven feedyards.  It may also sell the Kansas City Livestock Exchange Building, which houses the company’s headquarters, and the surrounding 40-acre development that was formerly the site of the Kansas City Stockyards.  National Farms owns six feedyards in Kansas and one in Colorado for a total one-time capacity of 270,000 head, making the company the nation’s sixth-largest cattle feeder. The fixed assets of the seven feedyards are estimated to be worth $50 million.  National Farms chief executive officer Bill Haw says the feedyards are largely autonomous, and he expects the current employees of the yards to be hired by the new owners.  (Drovers Alert)

2002 Animal Health Industry Overview

We have been spending a great deal of time over the Holidays on our Annual Industry Overview presentation.  The Overview this year will focus on the following areas:

–  review of the leading 12 companies 
–  review by segment of the US industry
–  hot industry topics for 2002
–  Int’l issues by region
Seating for these presentations is always limited and fills quickly.  The two presentations at the NAVC earlier this month were quite popular.  We will be presenting the Overview once at the Western Conference in Las Vegas in February.  Registration is $325.00 for the first attendee at the conference location from a company and $275.00 for each additional attendee at the conference location from the same company.

Western Veterinary Conference
Wednesday, February 13, 2002
MGM Grand Hotel, Room 303
One Seating Only at 9:00 am

For additional information please contact Jane Morgan at 972-243-4033 or email

Animal Health News

>  UK   The International Epizootic Office (OIE) scientific and technical department has declared
Britain free of foot-and-mouth disease, clearing the way for costly international trade sanctions to be lifted.  In addition to being a symbolic victory for Britain in its nearly year-old campaign against the livestock illness, the OIE’s decision effectively clears the way for British meat and dairy exports to resume to non-EU countries. (Reuters)

>  GERMANY   About 200 pigs have been slaughtered and 10,000 placed in quarantine after a case of swine fever was confirmed in Germany.  Several animals were found to have the disease on one farm Bitburg area.  This is close to two farms, which suffered swine fever last October. A three-km (two-mile) radius quarantine zone around the latest case has been imposed with 30 farms containing 10,000 pigs, he added. The 200 pigs of the farm involved have been slaughtered and sent for burning. (Reuters)

>  JAPAN   Researchers in Japan have developed a pig feed that is said to reduce cholesterol in pork. The pigs have been fed a feed supplemented with oriental herbs. The feed is said to reduce cholesterol levels in the meat by 22%. According to reports from the Leatherhead Food Research Association, the researchers at the Gyeongsang National University believe the supplement urushiol, which is produced by plants such as poison ivy, lowered the fat content and the cholesterol levels in the pigs.  In other research in Japan, scientists are reported to have transplanted a gene from spinach into a pig to change the fat into linoleic acid, an unsaturated fatty acid. The research was carried out by the School of Biology-Oriented Science and Technology at Osaka’s Kinki University. (Wattnet Meatnews)

>  US   The Western Veterinary Conference is pleased to announce the 2002 Western Veterinary Conference Student Scholarship Award recipients.  In addition to receiving a $2,500 scholarship, each student receives a $1,000 stipend to attend the 74th Annual Jack Mara Western Veterinary Conference February 11 – 14, 2002.  The 27 students from every veterinary school nationwide will also participate in some special conference programs and an awards reception sponsored by Hill’s Pet Nutrition, Inc.   (press release)

Agribusiness News

>  Certis USA, LLC, a wholly owned subsidiary of Mitsui & Co., Ltd. has signed a letter of intent to acquire certain assets of the Bt biopesticide and insecticidal nematode businesses owned by Ecogen, Inc.  Assets purchased by Certis would include Ecogen’s products CryMax, Lepinox, Condor, Cruiser and Raven biological insecticides, as well as Bt strain libraries for biopesticides, product registrations, trademarks, patents or licenses and certain fixed assets. Certis USA was established by Mitsui in April 2001.  Its products were previously sold under the name of Thermo Trilogy Corporation.  The acquisition is expected to conclude during the first quarter of 2002 after obtaining necessary approvals of both companies. (PRNewswire)

Brakke Consulting Viewpoint

The earnings reports to date show a mixed bag of results.  In general, animal health continues to suffer from a lack of dramatic new products to drive increased sales growth.  We continue to believe that generics will provide most of the news until new technologies reach the market. 

It is clearly time for R&D to be given a higher priority and investment by most firms.  Developing a new market with a new or improved technology is much more efficient than protecting or taking market share from competitors.

Have a good weekend, and we hope to see you at the Western Veterinary Conference.

[Ron Brakke]

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