The Experts in Animal Health

Brakke Consulting’s
Animal Health News & Notes for July 27, 2001

Copyright © Brakke Consulting, Inc.
Company Earnings Releases

>  American Home Products reported that sales for the second quarter 2000 at Fort Dodge declined 9% to $192 million. The decrease was due primarily to a decline in the United States livestock market causing a reduction in the use of certain animal health biological and pharmaceutical cattle products.  Also contributing to the decline in animal health product revenues was lower demand for certain pharmaceutical cattle products internationally resulting from the outbreak of foot-and-mouth disease and the continued concerns about mad-cow disease.  The decrease in revenues was partially offset by the domestic launch, in June 2001, of ProHeart 6.  (PRNewswire)

>  Pharmacia  reported that second quarter 2000 revenues from its animal health unit increased  3% during the quarter to $112 million.  Revenues for the first half of 2000 were up 8% to $225 million.  (company website)

>  Schering-Plough reported that second quarter sales of animal health products were down 1%  percent to $171 million (up 3% when foreign exchange is excluded).  Sales of animal health products decreased 2% in the 2001 first half (up 2% when foreign exchange is excluded) and totaled $324 million.  (company website)

>  Ralston Purina announced third quarter earnings before unusual items of $86.2 million
compared to earnings from continuing operations before unusual items of $64.3 million in the prior year quarter, an increase of 34%.  Third quarter sales were $707 million compared to
$668 million in the prior year third quarter. For the current nine months, sales and earnings before unusual items were $2,145 million and $245 million, respectively, compared to sales and pro
forma earnings from continuing operations before unusual items of $2,087 million and $233 million in the prior year.  (PRNewswire)

>  Colgate reported that Hill’s sales and unit volume each rose 5% against a good year ago performance.  Operating profits increased significantly, up 29% versus the second quarter of 2000 benefiting from Hills’ continued focus on cost savings programs and manufacturing efficiencies. (Business Wire)

>  Neogen Corporation announced that record quarterly revenues in its fourth quarter lifted
the Company to a revenue increase of 48% for its 2001 fiscal year, which ended May 31.  FY 2001 revenues were $34.9 million compared to revenues of $23.5 million in Neogen’s previous fiscal year.  Exclusive of proceeds from a litigation settlement in FY 2000, Neogen’s net income increased 34% in FY 2001 compared to the prior year.  Neogen reported fourth quarter revenues of $9.2 million, a record quarter for the 19-year-old company. (PRNewswire)

>  ABAXIS, Inc. reported revenue for its first fiscal quarter ended June 30, 2001. For the first fiscal quarter, revenues increased to $7.5 million compared with revenues of $7.1 million for the same quarter last year. The Company reported net income of $217,000 compared to net income of $425,000 for the same quarter last year.  Domestic sales increased by 15% while international sales, negatively impacted by the strong U.S. dollar, decreased by 34%. (PRNewswire)

>  ImmuCell Corporation announced that for the three month period ended June 30, 2001, total revenues increased by 26% to $1.837 million compared to the same period in 2000, while product sales increased by 24% to $1.768 million.  The net operating profit before taxes of $175,000
compares to a net operating profit before taxes of $64,000 for the three month period ended June 30, 2000.  During the six month period ended June 30, 2001, total revenues increased by
14% to $3.325 million compared to the same period in 2000, while product sales increased by 13% to $3.238 million.  The net operating profit before taxes of $369,000 compares to the net operating profit before taxes of $291,000 for the six month period ended June 30, 2000. Immucell manufactures First Defense oral scours preventative and WIPE OUT Dairy Wipes. (Business Wire)

>  Church & Dwight reported sales of its animal nutrition business for the second quarter 2001 were $19.3 million, an increase of 13% over the second quarter 2000.  Sales for the first six months were $37.1 million, an increase of 13% over 2000.  The Company also announced the construction of a new plant in Madera, California to supply Megalac Rumen Bypass Fat and related products to the rapidly growing West Coast dairy industry. The plant is expected to be operational in the second quarter 2002. (Business Wire)

Company News Releases

>  Pharmacia launched brand websites for two of its leading products, Lutalyse and Lincomix.  Both sites provide detailed information about using the products in a swine health program, as well as offering management tools, such as interactive calculators, to help veterinarians and producers analyze health programs from a profit impact standpoint.  Research and technical information on diagnosing, preventing and treating swine diseases is also included.  (company press release)

>  The FDA approved Bayer’s Marquis (ponazuril), the first drug approved to treat equine protozoal myeloencephalitis (EPM) in horses.  EPM is caused by a parasite (Sarcocystis neurona) and is the most commonly diagnosed neurological condition in horses in America.  Ponazuril crosses the blood-brain barrier to reach the central nervous system, where damage from EPM occurs.  It is active against the parasite at several stages of the life cycle.  Ponazuril is supplied as an oral paste to be given once at day at the dose of 5 mg/kg for 28 days in adult horses. (AnimalNet – FDA; company press release)

>  Vical Incorporated announced that Merial has extended options under a 1995 agreement
to develop and commercialize vaccines for animal health applications using Vical’s patented naked DNA technology.  Merial previously exercised selected options to acquire exclusive licenses for preventive naked DNA vaccines against several infectious disease targets in domesticated animals.  In exchange for payment to Vical of $1.0 million, Merial will receive a
renewable one-year extension of its options against additional infectious disease targets in domesticated animals.  (PRNewswire)

>  Elanco Animal Health confirmed that its Paylean ingredient for pig feeds has received approval in the Philippines and in the Latin American countries of Brazil, Colombia, Dominican Republic, Guatemala and Venezuela.  Feeding the ingredient has been shown to improve pigs’ feed efficiency and increase the meat yield from their carcasses. (Pig Enews)

>  EUROPE   Joint marketing of an inactivated PRRS vaccine in European countries has been started by Merial and Boehringer Ingelheim Vetmedica.  Merial’s trade mark for the product is Progressis while Boehringer Ingelheim uses Ingelvac PRRS KV. (Pig Enews)

>  CANADA   The Canadian federal government is putting $7.6-million toward developing the world’s first vaccine to eradicate in cattle E. coli O157:H7.  The vaccine stops the bacteria from binding to the intestine. It is expected to be available for limited use by the fall of 2001.  The government loaned Bioniche Life Sciences Inc. $7.6-million through Technology Partnerships Canada to accelerate development of the vaccine and get it to market five to seven years earlier than expected. The company hopes to have conditional licensing for limited use by the fall and be ready to market in Canada and United States by early next year. (AnimalNet – National Post)

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Animal Health News

>  IRELAND   The Irish Republic reported the possibility of its first foot-and-mouth alert since the country was declared formally free of the animal disease more than a month ago.  Samples from a calf found to be suffering from lesions of the tongue in County Cork have been sent to experts at a laboratory for testing, and the animal has been destroyed. The test results are expected to be made available next week. (AnimalNet – PA News)

>  UK   Welsh authorities ordered the immediate destruction of thousands of sheep in the Brecon Beacons hills after fresh cases of foot-and-mouth in the region. The Rural Affairs Minister received test results for 4,000 sheep with significant numbers of positive results in all the areas tested. Further testing was being carried out on thousands of other sheep which grazed in the area to determine the extent of the outbreak. (AnimalNet – Reuters)

>  UK   British Prime Minister Tony Blair has halted the clean-up of farms affected by the foot-and-mouth epidemic over fears it could cost as much 800 million pounds ($1.15 billion). The Daily Telegraph reported that a leaked government memo showed Blair had ruled that an average cost of 104,000 pounds per farm was “unacceptable.” The operation was costing the government up to two million pounds a day — 10 times more than the clean-up in some European countries, the newspaper said.  The order would not affect operations already in progress, or preliminary cleaning and disinfection work to remove the carcasses of culled animals. The decision is understood to have been prompted by evidence that the government was being overcharged. (Reuters)

>  US   The first equine case of West Nile virus (WNV) in the United States this year has been confirmed in a Florida horse by the National Veterinary Services Laboratories in Ames, Iowa. The positive horse was located in Jefferson County, Florida. Two other ill horses on two separate premises in the same county have been classified as probable cases of West Nile virus infection. This is the first report of West Nile virus infection of any animal species anywhere in the United States this year. (AnimalNet – Knight-Ridder Tribune)

>  FRANCE   The French government has lowered the age at which cattle must be tested for
bovine spongiform encephalopathy, or mad cow disease from 30 months to 24 months, according to France’s Agriculture Ministry.  In addition, all cows aged 24 months and older will be tested for BSE before being slaughtered.  According to the ministry, between Jan. 1 and July 15, more than 1 million cows were tested for BSE.  Of those tested, 31 infected cows were detected. (AnimalNet – The Meating Place)

>  US   The grand champion Yorkshire boar exhibited at the National Swine Registry’s Summer Type Conference by Creagar Farms sold for a world record price of $220,000 to Lifeline Genetics of Newcastle, Okla.  Renewed interest in purebred Duroc, Hampshire and Yorkshire genetics made hogs from the Summer Type Conference a record-breaking event.  (DirectAg)

Agribusiness News

>  In an executive decree issued over the weekend, Brazil’s government issued an executive decree requiring all foods containing 4% or more of genetically modified content to bear a consumer label.  The decree, set to take effect Dec. 31, will only be translated into practice if the country decides to legalize the sale of GMOs, which are currently banned from the market. Brazil is one of the few major agriculture-producing countries to entirely ban the sale of genetically modified seeds and foods. (Emarkets – E&E Publsihing)

>  Aventis announced it will expand its agreement to compensate farmers who grew Starlink corn. Growers who found their crop contaminated with the biotech product by cross-pollenation now are included in the agreement.  Aventis CropScience reached a supplemental agreement with 17 state attorneys general acting on behalf of growers who may suffer losses due to infiltration of StarLink biotech corn into their crop. (AP)

Brakke Consulting Viewpoint

There were a number of quarterly reports this week.  It appears that it is difficult to grow sales in the animal health market if you’re in the top 10 companies.  The smaller companies specializing in a segment seemed to have some good growth rates.  Of course, it is easier to grow on a lower sales base, unless you’re the company trying to do it.  This in my mind raises the question regarding the value of large critical mass.  Is it real or not? 

The pet food company reports indicate that the companion animals are still eating well.  We’ve also been impressed with some of the sales increases we’re hearing from some of the independent distributors.  However, we’re still a bit confused over where all the inventory is ending up in the market place.  Are we tracking take-away at consumer and producer level or are we just tracking the best loading programs?  Is a loaded customer really a loyal customer or just a victim of management not willing to face the reality of the market place?

Have a nice weekend. 

[Ron Brakke]
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