The Experts in Animal Health

Brakke Consulting’s
Animal Health News & Notes for August 10, 2
Copyright © Brakke Consulting, Inc.
Company Earnings Releases

>  Doane Pet Care Company reported results for its second quarter and six months ended June 30, 2001. The Company reported a net loss of $6.2 million for its second quarter ended June 30, 2001 on a 6% increase in net sales to $222.7 million, compared to a net loss of $7.1 million on net sales of $210.7 million for the second quarter ended July 1, 2000.  On a pro forma basis, which includes sales from the Arovit acquisition (completed in May 2000) in both periods, the current quarter net sales were comparable to the 2000 second quarter.  The Company reported a net loss of $14.9 million for the six months ended June 30, 2001 on a 15% increase in net sales to $478.5 million, compared to net income of $3.0 million on net sales of $415.2 million for the same six month period a year ago.  On a pro forma basis, which includes sales from the Arovit acquisition (completed in May 2000) in both periods, net sales increased 3% over the comparable period. (PRNewswire)

>  Central Garden & Pet Company announced financial results for the fiscal third quarter ended June 30, 2001. Net sales for the fiscal third quarter were $343.1 million, compared with $452.4 million in the comparable 2000 period. Net income for the fiscal third quarter was $7.7 million compared with net income of $12.9 million in the comparable 2000 quarter. Net sales for the first nine months of fiscal 2001 were $880.4 million, compared with $1.1 billion in the comparable 2000 period. Net income for the first nine months of fiscal 2001 was $5.9 million compared with net income of $18.5 million in the comparable 2000 period.  (Business Wire)

>  Ivy Animal Health reported sales of $32.4 million for the fiscal year 2000, an increase of 20% over fiscal 1999.  US sales of Component implants represented 90% of revenues. The fiscal year-end date was not reported.  (Animal Pharm)

Company News Releases

>  Tyson Foods, Inc. announced the preliminary results of the successful completion of its tender offer to purchase up to 50.1% of the outstanding shares of IBP, inc. for $30.00 per share.  The cash tender offer, which was oversubscribed, expired at 12:00 midnight, New York City time, on Friday, August 3, 2001. Based on preliminary information, 106,994,197 shares of IBP common stock, representing approximately 99.1% of the total outstanding shares, had been tendered and not withdrawn by the expiration date.  Pursuant to the terms of the offer, Tyson will purchase approximately 53,499,688 of the tendered shares.  The preliminary results of proration indicate that Tyson will purchase 50.0% of the IBP shares tendered by each IBP shareholder.  (PRNewswire)

>  Virbac announced the acquisition of Helsinn Company of Portugal.  The subsidiary is expected to report turnover of around $2.3 million in 2001.  Helsinn had been distributing Virbac’s pet range in Portugal, and will now also carry the livestock product lines.  (Animal Pharm)

>  Mars Inc. reported that it has developed a new pet food that could cut rates of cancer and other age-related diseases in animals, including canine cognitive dysfunction syndrome.  The antioxidant “super-food,” developed by scientists at the firm’s Waltham Center for Pet Nutrition in eastern England, works by mopping up dangerous chemicals called “free radicals,” thereby reducing damage to animals’ DNA.  The head of research at Waltham, stated at a conference in Vancouver that the new pet food blend had reduced DNA damage in dogs by 26% over two months, compared with a conventional diet, while cats had displayed 17% less damage. (AnimalNet – Reuters)

>  Veterinary Centers of America Inc. filed with the Securities and Exchange Commission to go public and raise up to $242 million to redeem preferred stock and repay debt. The Los Angeles-based company 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 company did not disclose how many shares it plans to sell or the price range, information that will come in a later filing.  Veterinary Centers plans to list on Nasdaq but has not yet provided a proposed ticker symbol.  The IPO is being co-managed by Credit Suisse First Boston and Goldman Sachs. (Reuters)

>  Flavorx has teamed with Vedco and Penn Veterinary Supply to roll out its Flavorx veterinary system, an in-clinic compounding system that allows veterinarians to produce flavored suspensions from medications in tablet form.  The company has been providing the service on a limited basis to veterinarians for about a year.  The company may develop a home version of the system in a year, with a focus on making prescription veterinary diets more palatable.  (Veterinary Practice News)

>  Pharmacia Animal Health recently launched new Web sites for three of its dairy products: Upjohn J-5 Bacterin, Pirsue Sterile Solution, and Lutalyse Sterile Solution.  The sites offer a complete online resource for dairy farmers and veterinarians who are looking for disease information, practical health management strategies and the latest product news and research. (Company press release)

>  Heska Corporation announced the introduction of its new Allercept E-Screen test.  Allercept E-Screen is a five-minute in-clinic test that detects the presence of allergen-specific IgE, an antibody associated with allergic disease. This product utilizes Heska’s proprietary, patented technology and is designed to enable veterinarians to conduct “point-of-care” tests on dogs with allergic symptoms.  Dogs testing positive for allergen-specific IgE may be further evaluated using Heska’s Allercept Definitive Allergen Panels, a laboratory-based blood test, to determine the specific allergens to which the dog is reacting. (PRNewswire)

>  Embrex, Inc. and Cobb-Vantress, Incorporated announced that Cobb-Vantress, the world leader in broiler breeding, has agreed to provide a significant amount of Embrex’s funding requirements for its ongoing development of a patented technology and device to determine the gender of poultry in ovo. The arrangement calls for funds to be provided in several tranches tied to achievement of certain milestones in the development and commercialization of Embrex’s gender sort device project.  In return, Cobb-Vantress will receive favorable commercial terms upon adopting the gender sort device. (PRNewswire)

>  Farmland National Beef Packing Company L.P. and DMV USA, part of DMV International, have entered into a joint venture agreement to manufacture and market activated lactoferrin, a new food safety technology that protects consumers from harmful bacteria that may be found in meat. The Farmland-DMV joint venture holds the worldwide exclusive rights to activated lactoferrin for use in food safety.  Activated lactoferrin has been shown to provide fresh meat with protection from pathogenic bacteria, including E. coli O157:H7, Salmonella and Campylobacter, by preventing microbial attachment and inhibiting growth. Products processed with activated lactoferrin will be clearly labeled and trademarked so that consumers can easily identify meat and produce that include this additional food safety enhancement. (PRNewswire)

> , a pet portal, plans to launch a business-to-business site catering exclusively to pet professionals.  The password-secured site will offer veterinarians, breeders, trainers and other pet professionals an opportunity to browse new products and pet vendors in their specific trade.  (Veterinary Practice News)

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 50% 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

>  POLAND   Polish veterinary authorities have banned the import of pigs and pork from 26 countries due to fears of a potential outbreak of swine fever in flood-stricken parts of the country.
The ban, which went into immediate effect, includes all pork products that have not been processed at temperatures above 72 degrees Celsius (162 degrees Fahrenheit).  The ban applies to Austria, Belgium, Belarus, Britain, Bulgaria, Croatia, Denmark, Estonia, Finland, France, Greece, Hungary, Ireland, Italy, Lichtenstein, Latvia, Lithuania, Luxembourg, the Netherlands, Norway, Portugal, Romania, Russia, Slovenia, Sweden and Switzerland. (AnimalNet – Agence France Presse)

>  ITALY   A new case of bovine spongiform encephalopathy was identified on a farm near Pavia in northern Italy, bringing the country’s total to 22.  The four-year-old animal, one of a herd of 357, had undergone a test as it was about to be slaughtered. The positive results were confirmed by a veterinary institute in Turin. (AnimalNet – Agence France Presse English)

>  UK   The British government has awarded UK-based Cellmark Diagnostics a major contract to help farmers breed sheep with reduced susceptibility to scrapie.  Under the three-year contract, Cellmark’s parent company, U.S.-based Orchid BioSciences, will provide capacity for several million genetic tests per year to select animals less likely to become infected. Through the program, the UK government is offering the scrapie susceptibility genetic testing service to British sheep farmers at no charge. Scientists have discovered a number of genetic variations, or single nucleotide polymorphisms (SNPs), that affect an individual sheep’s susceptibility to scrapie. By selecting breeding stock with SNPs associated with a low genetic susceptibility to scrapie, farmers eventually expect to produce flocks with greatly reduced vulnerability to the condition. (AgWeb)

>  UK   A UK environment ministry spokesman reported that Britain’s foot-and-mouth crisis is projected to cost taxpayers about 2.2 billion pounds ($3.14 billion), about 300 million pounds more than the net value of all British farm produce last year. (AnimalNet – Agence France Presse)

>  CANADA   Brucellosis has turned up in marine mammals throughout the Canadian Arctic. Until recently, the bacteria that causes the illness was only thought to occur in land animals like caribou and cattle. The Department of Fisheries and Oceans has now isolated about nine cases of marine brucellosis in ring seals, harp seals and a beluga whale in
the Canadian Arctic, and it’s probably affecting narwhal and walrus as well. (AnimalNet – CBC Radio Transcripts)

>  US   The Livestock Marketing Association, eight individual cattle producers and the Western Organization of Resource Councils filed an amended complaint in South Dakota Federal District Court, asking the court to declare that the beef checkoff violates cattle producers’ First Amendment rights to freedom of speech and association.  LMA’s amended complaint was filed in response to a request by the court to address the impact of the U.S. Supreme Court’s recent decision, which held that a nearly identical checkoff program in the mushroom industry violated the First Amendment. The South Dakota federal court has already issued a preliminary injunction prohibiting the CBB from using checkoff dollars on “producer communications” aimed at promoting the checkoff itself, rather than promoting beef. (Meating Place)

>  US   The National Pork Producers Council (NPPC) and the Michigan Pork Producers Association (MPPA) have requested that a federal district judge determine the constitutionality of the pork checkoff, in addition to ruling on the legality of the settlement agreement between NPPC and the United States Department of Agriculture (USDA). In its supplemental filing, the two pork producer groups have asked the court to declare that the secretary of agriculture acted within her discretion and authority in entering into a settlement agreement continuing the pork checkoff program and further to declare that the pork checkoff program does not violate the First Amendment to the U.S. Constitution. (DirectAg)

>  AUSTRALIA   A Melbourne company has obtained exclusive rights to the technology used to make Dolly the sheep.  Clone International’s license to use the Dolly technique commercially in Australia and New Zealand would enable breeders to replicate their most prized animals.  In partnership with the world-leading New Zealand cloning company AgResearch, Clone International bought the local licence from the Geron Corporation, the United States biopharmaceutical giant that owns the worldwide rights to the Dolly technique. Clone International has begun cloning 15 prize bulls and hopes to be the first company to clone a horse within the next few years. (AnimalNet – The Age)

Brakke Consulting Viewpoint

The dog days of August are upon most of us here in the US.  Almost everyone is looking forward to having the kids back in school, cooler weather, and an increase in company revenues during the last four months of the year.

We noted that VCA, less than a year after going private, has announced that it has filed a registration statement to go public again.  Is this a move to divest a nonproductive portfolio company, or an opportunity to make a quick return on their investment?  While we have no inside information, one could assume that the financial firm that took VCA private has learned that it’s not easy to make money through the ownership of veterinary clinics.  Based on their extensive experience and business educations, the Brakke Practice Management Group has many insights into what it takes to make a veterinary practice successful. 

We’re getting a mixed message about how the major product categories are holding up this year.  The flea & tick market in total seems to be flat when compared to last year, with market share shifting between players.  Some agricultural economists and industry watchers are starting to be concerned with fed cattle prices for the last quarter of 2001.  Poultry is already under stress, even without the heat, although swine still looks like a reasonable market.  For those of you that have picked up a few pounds this summer, finish off the summer by eating more animal protein.

Have a good weekend.
[Ron Brakke]
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