The Experts in Animal Health

Brakke Consulting’s
Animal Health News & Notes for August 17, 2001

Copyright © Brakke Consulting, Inc.
Company Earnings Releases

>  Bayer reported that sales for the first half of 2001 for its animal health division were down 6% compared to the comparable period in 2000, of which 5% represented the divestiture of the US livestock vaccines business.  Good growth rates were achieved by the flea control product Advantage in North America and Japan, and the anti-infective Baytril in North America. (company website)

>  Novartis reported that sales for the first half of 2001 for its animal health division were CHF 490 million ($273 million), a decrease of 5% (2% in local currencies) over the first half of 2000.  Operating income for the first half of 2001 was CHF 66 million ($37 million), unchanged from the prior year period.  Shortfalls in the US, due to the economic slowdown and competitive pressures in the flea treatment segment, and setbacks in the UK due to the foot and mouth outbreak, were largely offset by the performance in Latin America and Asia.  Significant sales growth was achieved by Tiamulin and by the recently acquired vaccine businesses.  Fortekor also grew strongly.  (company website)

>  IGI, INC. reported $819,000 in operating profit on revenues of $4.1 million for the second quarter ended June 30, 2001 compared to $109,000 operating loss on revenues of $4.5 million for the comparable period in 2000.  For the six months ended June 30, 2001, operating profit was $733,000 on revenues of $7.8 million, including the nonrecurring charges, compared to $672,000 on revenues of $9.0 million for the comparable period in 2000. The company noted that there has been continued improvement during the second quarter in the Companion Pet Products gross profit and operating profit, a result of the savings generated from outsourcing and cost savings measures.  The company is continuing to focus on increasing the Companion Pet Products sales through a more aggressive sales and marketing strategy and the introduction of new products. (PRNewswire)

Company News Releases

>  Abbott Laboratories has acquired the international supply, distribution and development rights for Nexaband, a veterinary wound care product line made by Closure Medical.  The agreement excludes the US and Canada because of an existing distribution agreement, but Abbott will take over the North American distribution in 2002 when the agreement expires.  The line currently includes a product for cat declawing and another for spay and neuter procedures.  This marks the first time that the Nexaband line will be available outside North America. (Animal Pharm)

>  Pharmacia introduced the Help Educate Animal Lovers (H.E.A.L.) program for veterinarians,  wellness and educational tool for veterinarians to build awareness of pet health issues and available treatment programs with clients.  The program includes client communication resources to help build awareness of oral health and other health topics.  (company press release)

>  The American Kennel Club Companion Animal Recovery (CAR) announced its one-millionth enrolled pet.  AKC CAR is a national, round-the-clock recovery service that links veterinarians,
shelter groups and other animal organizations, and enrolls any permanently identified (microchipped or tattooed) pet.  In 1995, CAR partnered with Schering-Plough Animal Health to promote the benefits of permanent identification of pets and the SPAH HomeAgain microchip. More than 60,000 pets have been located and returned to their families through the AKC CAR registry.  (PRNewswire)

>  Pharmacia announced that Naxcel Sterile Powder (ceftiofur sodium) was recently cleared for use in goats. The use of NAXCEL for treatment of caprine respiratory disease or goat pneumonia associated with Pasteurella haemolytica and P. multocida has gained Food and Drug Administration approval. The approval is for both lactating and non-lactating goats. (company press release)

>  Bayer AG postponed until February a plan to list its stock on the New York Stock Exchange next month after the drug and chemical giant’s shares dropped 25% since pulling last week its Baycol anti-cholesterol drug because of links to patient deaths.  Bayer has stated that it doesn’t intend to raise any new capital by listing, but the move could encourage more U.S. investors to include Bayer in their portfolios and make it easier for the company to make acquisitions. (AP)

>  Iams launched, a new online order and fulfillment solution, which enables veterinarians to directly place and control home-delivery orders while enhancing value to clients. On behalf of their clients, veterinarians can now access product and nutrition information, as well as place orders for Eukanuba Veterinary Diets, Eukanuba and Iams petfood products via a “virtual product warehouse”. The products are then delivered direct to the client’s doorstep within a few business days. (Petfood Industry Enewsletter)

>  AgriStar Global Networks Ltd., a two-way broadband satellite communications firm, announced acquisition of  In addition to acquiring, AgriStar is in discussions with other leading independent Internet sites, as well as major agricultural input suppliers, food processors, content providers and financial institutions regarding various financial and working alliances.  DirectAg will continue to expand core animal health marketing and communications efforts to support the industry’s primary animal health channel participants. Additional AgriStar channels are planned for premium agricultural news, farm management services, agri-finance, land investment, value-enhanced commodity aggregation, distance learning and a variety of input supply areas. (DirectAg)

>  CANADA   Health Canada banned the sale of Pfizer’s Mecadox (carbadox), a medicated feed additive for swine, after receiving reports of misuse and accidental contamination.  Carbadox was approved in the 1970s for use in Canada and the United States to promote growth in swine as well as to prevent and treat dysentery and other conditions. Health Canada, facing pressure to ban the drug from a public health watchdog, stated that tests showed that metabolites of the drug can cause cancer in rats.  However, when an appropriate withdrawal period is observed, the drug and its breakdown products are not found in the food derived from the treated animal. Carbadox was approved on the basis that this specified 35-day withdrawal period be strictly observed. (Reuters)

>  AUSTRALIA  Sydney University’s student veterinary society is aiding Ralston Purina’s assault on the Australian pet food market by directing the supermarket shoppers to the “optimal nutritional excellence” of the company’s food lines – three for cats and four for dogs.  Ralston Purina paid the students to work in supermarkets, educating people about the benefits of good pet nutrition, at the same time making consumers aware that Ralston Purina products are nutritionally advanced. The university’s dean of veterinary science said he was aware that the student veterinary society had acted as a point of contact with the company for casual student work.  The faculty had no involvement with the company over its supermarket activities.
Purina holds a major share of the US market but has just a few percent of the Australian market. (AnimalNet – Sydney Morning Herald)

Brakke Consulting, Inc.
Due Diligence Seminar – Register Now: Seating is Limited!

Brakke Consulting announces an ANIMAL HEALTH INDUSTRY DUE DILIGENCE SEMINAR to be held in Chicago September 25-26, 2001. 

We have already filled 60% of the spaces available for this seminar.  If you haven’t registered please visit our website for online registration and information.

Whether your company is licensing in or out, buying, or selling, this seminar will help you design an efficient, effective due diligence process that will help you test strategic assumptions, determine fair market value, uncover potential problems, and avoid costly mistakes or surprises.  The speakers at the seminar will be Brakke Consultants Eli Thommsen, Ron Brakke, John Volk and John Short, and senior investment bankers from Bear Stearns, NYC. All of the speakers have extensive experience in product and compound licensing, divestitures, and acquisitions.  We encourage you to visit our web site to register for this seminar or to learn more about it.

Animal Health News

>  EUROPE   The European Union likely will probably lift a ban on U.S. hormone-fed beef by early next year, according to the EU Trade Commissioner.  The EU will comply with a World Trade Organization (WTO) ruling against the ban.  EU and U.S. officials are working out an agreement that would allow the United States to increase beef exports to the EU, as long as the meat doesn’t contain hormones. The EU banned U.S. hormone-fed beef 12 years ago, charging that the hormones may harm human health. The action prompted the U.S. government to place $117 million in trade sanctions on European goods since July 1999. Hormone-free beef accounts for a very small percentage of all U.S. beef exports. (AgWeb)

>  UK   The first livestock sales in the UK since the foot-and-mouth outbreak began were announced.  The event will take place in Orkney next Monday with restrictions on the movement of animals now eased across virtually the whole of Scotland.  However, only markets meeting strict cleansing and disinfecting regulations will be licensed to hold sales.  There are no immediate plans to resume livestock auctions in the areas, which were worst affected by foot-and-mouth disease in Scotland – Dumfries and Galloway and the Borders. (AnimalNet – PA News)

>  The European Union has earmarked for Britain 355 million ($324 million) of the 400 million euros in advance payments to member countries whose governments compensated farmers fighting foot-and-mouth disease. The Netherlands will receive 39 million euros, with 3.3 million euros and 2.7 million euros going to France and Ireland, respectively. Under EU regulations, governments can be reimbursed for up to 60% of costs incurred in paying farmers for the slaughter and cleanup of livestock. The EU has allocated about 1 billion euros ($912 million) to help cover the cost of the crisis. (AP)

>  JAPAN   Japan may launch wide-scale testing for mad cow disease among its domestic herds next year.  The program, to be carried out at Japan’s 198 public slaughterhouses, was introduced months after the government banned imports of bovine meat and processed products from 17 European countries in a bid to prevent the spread of BSE.  The costs of testing for the disease will be included in the health ministry’s budget allocated for the next year, starting in April. Annually, 1.3m cows are processed by the slaughterhouses, but the exact number to be tested for BSE will depend on the size of the budget allowance.  Health ministry officials stressed that no cases of BSE have been reported in Japan. (Emarkets –

>  US   The Association of American Feed Control Officials (AAFCO) recently requested an opinion on the use of the term “human grade” on petfood labels from the Center for Veterinary Medicine (CVM). The CVM’s petfood expert stated that (1) Terms such as “human grade” on the labels of petfood products can be misleading (2) Human grade is currently undefined; (3) In the absence of labeling indicating the product is not fit for human consumption, the term may lead some to believe the product is edible; (4) The designation “human grade” may not appear anywhere in the ingredient list; and (5) At this time, the CVM objects to the use of the term “human grade” and other such terms on labels of petfoods. Despite CVM’s current opinion on the matter, its letter indicates that the use of the term may be acceptable provided a definition and guideline for “human grade” are established, much like has already been done for “natural.”  Both a definition and guideline have been proposed by industry, and are likely to be the subjects of discussion at future AAFCO meetings. (Petfood Industry Enewsletter)

>  Research performed by the Texas Agricultural Experiment Station and reported in Science magazine found that a protein within a bacteria-attacking virus (known as a bacteriophage) acts like an antibiotic to destroy E. coli.  The protein inhibits the ability of the bacterial cell to make its protective outer wall.  (Poultry Times)

>  The USDA Agricultural Research Service and Future Beef Operations developed a method that removes hairs from the hides of cattle before they are skinned, significantly reducing the threat of meat contamination. Animals enter the slaughterhouse with many microorganisms on their hides, including E. coli O157:H7, Salmonella and Listeria monocytogenes. The technique was developed more than 10 years ago, but has only recently been successfully engineered to be cost-efficient and more environmentally friendly. Future Beef Operations will use the technology in its first Kansas meatpacking facility, opening this month. (AgWeb)

Agribusiness News

>  Belgian government and university scientists have found some unexpected DNA in Monsanto
s Roundup Ready soybeans, next to its inserted gene, casting some doubts on the biotechnology industry’s assertions that its technology is precise and predictable.  Monsanto acknowledged that the extra DNA was there, but it said it was confident that the soybean was safe and that the unknown DNA had no effect on the plant. Monsanto’s vice president for regulatory affairs said the DNA segment had been in the crop since the beginning as it went through testing to prove its safety. (New York Times)


Brakke Consulting Viewpoint

During the past several weeks we’ve had the opportunity to meet with several of the leading animal health distributors in the US.  It has been a lot of fun to interface under various circumstances with these organizations.  The sales growth that some of these companies are achieving in a market with limited growth is remarkable.  The management and the sales forces of these distribution groups are truly making positive things happen in the face of a challenging environment.  Thanks to each of these firms for allowing us to share our views of the industry and to call you our clients.

Have a great weekend.
[Ron Brakke]
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