The Experts in Animal Health

Brakke Consulting’s
Animal Health News & Notes for November 30, 2001

Copyright © Brakke Consulting, Inc.
Company Earnings Releases

>  PETsMART, Inc. announced results for its third fiscal quarter, which ended October 28, 2001. The company reported third quarter 2001 net income of $5.8 million versus a loss of $(2.4) million in the third quarter of 2000. Third quarter net income increased $3 million over the second quarter of 2001. Sales for the third quarter of 2001 increased 10.6% to $598.6 million compared to $541.3 million in the same period of last year. Comparable store sales grew 7.6% over the third quarter of last year. Year-to-date sales increased 9.3% to $1.8 billion, and net income was $9.9 million compared to a loss of (3.7) million for the same period of 2000. Year-to-date comparable store sales were up 5.4%. (Business Wire)

The 2001 Brakke Flea & Heartworm Study is now available.

Each fall, Brakke Consulting updates its annual report on the US Flea Control and Heartworm Markets.  In addition to updated sales figures for the major products, the study includes two new surveys of small animal veterinarians and retail pet stores, as well as a special section covering the effect of the September 11 terrorist attacks on veterinary income.  The study also includes information on Fort Dodge’s new ProHeart 6 heartworm preventative, Novartis’ Capstar flea adulticide, the arrival of generic ivermectin heartworm preventatives, and a review of products in development. 

Orders placed before December 15 will receive a discounted price of $3,250.  After that time, the regular price of $4,000 will be charged.  To order your copy of the report, please contact us at  or call (972) 243-4033. 

Company News Releases

>  Aventis Animal Nutrition is being re-named Adisseo after its sale by the Aventis group to European private equity company CVC Capital Partners, under a deal due to be completed during the first 3 months of 2002. (Pig International)

>  Ivy Animal Health announced the purchase of the Compudose and Encore growth promotant implant lines from Elanco.  Ivy had been marketing the products through its VetLife division for more than five years.  The acquisition includes the Compudose trademark, NADA’s for both products, and patented technologies and manufacturing equipment.  In addition, Ivy entered into a long-term distribution agreement with Elanco to distribute the products in all markets outside the US.  (Feedstuffs)

>  PETCO Animal Supplies, Inc. announced its new re-branded e-commerce website homepage.  PETCO entered the e-commerce business with its joint venture partner, one of the original pet food and supplies e-commerce sites. PETCO acquired selected assets of Petopia late last year and began the transition to PETCO early this year.  The new homepage completes the metamorphosis from Petopia to PETCO. (PRNewswire)

>  Reader’s Digest announced the launch of a new product, PetCare Pet Insurance Programs, owned by Pethealth Inc., a strategic partner.  PetCare Pet Insurance Programs are currently available in 35 states and the District of Columbia. Other state approvals are pending.  All four types of PetCare Pet Insurance policies pay 100% of payable claims, minus a fixed deductible based on policy choice (up to the policy limit).  Pethealth Inc., is a Canadian corporation that conducts business in the United States through its U.S. subsidiary, PetCare Insurance Agency Ltd. PetCare Pet Insurance Programs are underwritten in the United States by Lincoln General Insurance Company, York, Pa., through Avalon Risk Management, Inc. (PRNewswire)

>  VCA Antech Inc. last week opened almost 10% below its offering price at $9.10 in its Nasdaq debut, after raising less than expected in its initial public offering.  VCA, formerly known as Veterinary Centers of America Inc., raised $140 million by selling 14 million shares at $10 each, at the low end of the range of between $10 and $12, which had been lowered at the last minute from $12 to $14.  VCA, which has one of the largest networks of veterinary diagnostic labs and animal hospitals in the country, is at its second try as a public company. It was publicly traded from 1991 until September 2000, when it completed a recapitalization with an entity controlled by merchant banking firm Leonard Green & Partners.  The entity purchased 2 million shares in the IPO. (Reuters)


Brakke Consulting completed its NYC area due diligence seminar on 11-29-01.  Presentations regarding management best practices for the due diligence process for either the buyer, seller or licensee were presented by Eli Thomssen, John Volk, Ron Brakke, and Senior Managers from Bear Stearns.  Each registered attendee received a booklet covering the process for future use. 
Brakke Consulting provides a full range of services to assist company owners or managers in the merger, divestiture, and technology licensing area.  Please contact any of our offices for more information or visit our web site at

Animal Health News

>  US   Chronix Biomedical, a translational genomics company, announced that it has filed a patent application for a serum-based test to detect bovine spongiform encephalopathy (BSE). This discovery is the result of an ongoing collaboration with the Institute of Veterinary Medicine, Georg-August University in Goettingen, Germany, a leading European veterinary research institute. The application describes unique genetic material found in cows affected with BSE but not in healthy ones examined.  A major advantage of this discovery is that animals need not be sacrificed to be tested as is the case with current methods for BSE detection. (Business Wire)

>  SLOVAKIA   Slovakia’s reported the country’s fourth case of BSE, just two months after the country became the second central European state to discover the disease. Vets confirmed BSE during a mandatory test on a five-year-old, domestically bred cow, which died on a farm near the central-Slovak town of Zvolen. Slovakia’s first three cases of BSE appeared earlier this autumn, just weeks after the neighboring Czech Republic discovered eastern Europe’s first two cases. (Reuters)

>   The Office International des Epizooties (OIE) is considering adding the swine disease  Post-weaning Multi-systematic Wasting Syndrome (PMWS) to a list of diseases that must be declared internationally. The proposal to include PMWS in an OIE list would not take effect until May 2002.  When a disease is included on one of the two OIE lists, each of the 158 member states must report any case of the illness and must meet certain criteria when trading potentially infected animals and animal products.  PMWS is present in many countries, including EU countries such as Britain, Ireland, Spain, Germany, France, Belgium, Italy and the Netherlands, according to the British Meat and Livestock Commission. (AnimalNet – Reuters)

>  UK   Tough foot-and-mouth restrictions which severely limited livestock movement for hundreds of Cumbrian farms in the UK have been lifted.  The move will free up farmers at 944 sites in the county to move animals more freely for the first time since the outbreak of the disease.  The decision was taken by the Department for the Environment, Food and Rural Affairs, which has also relaxed restraints on a further 1,450 farms in the county. (AnimalNet – PA News)

>  JAPAN   The Japanese agriculture ministry lifted a ban on imports of poultry meat from the United States 13 days after its imposition The ban was imposed following the discovery that chickens on a Connecticut farm were infected with avian influenza.  The Agriculture, Forestry and Fisheries Ministry concluded there was no abnormality in the U.S.  (AnimalNet – Kyodo World Service)

>  US   Four hundred and sixteen cases (413 confirmed, 3 probable) of clinical West Nile virus (WNV) infection have been reported in horses from 19 states in 2001 through November. The latest reported date of onset of illness was 17 Oct 2001. Additional cases with later onset dates are likely to be confirmed in the near future.  At least 70 of 294 horses for which an outcome has been reported (24%) died or were euthanized. (AnimalNet – ProMED-mail)

>  US   The Federal Crop Insurance Corporation (FCIC), an arm of the USDA, has approved the first pilot price risk insurance program for livestock producers, known as Livestock Risk Protection (LRP). The American AgriBusiness Insurance Company (AABIC), located in Des Moines, Iowa, developed the program to insure farmers against declines in market price. Targeted initially at pork producers, LRP will be tested first in all 99 Iowa counties. FCIC will limit the number of hogs a producer may insure per year to 32,000 head.  (Wattnet)

Agribusiness News

>  Pharmacia Corp. plans to spin off its agricultural subsidiary Monsanto to company shareholders during the second half of next year.  Pharmacia currently holds 85% of Monsanto and will distribute its stake to Pharmacia shareholders through a tax-free dividend in the second half of 2002. The company spun off 15% of Monsanto through an initial public offering last year. (AP)

Brakke Consulting Viewpoint

During the balance of the year, we will include each week a few comments on one or more of the management challenges that managers will likely be facing in 2002. The first area we would like to cover is the issue of deflation.  We believe that deflation will be a new factor for management to deal with over the next 12 to 18 months. Most experts believe that the US economy will be in a recession at least through the first two quarters of next year.  This will put pressure on consumer purchasing of pet products and high value foods such as animal protein. The animal industry is filled with excess capacity in manufacturing and with the market flat or not growing there will be pressure to reduce prices to generate volume.

In the flea/tick area there will a very limited number of new products, so there will be a battle for market share.  Again, this is likely to put pressure on pricing and discounting.  We believe that these ingredients along with other issues will not allow companies to increase prices or gross profit during the year.  Those firms trying to generate increased revenue from price increases will have a difficult time in 2002.  Keep this in mind as you begin to forecast sales for the first and second quarter of next year.  The experience of managing a business in a deflationary period is limited to just a few of us who have been around longer than we’d like to admit. 

[Ron Brakke]

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