The Experts in Animal Health

Brakke Consulting’s
Animal Health News & Notes for May 18, 2001

Copyright © Brakke Consulting, Inc.
Company Earnings Releases

>  IGI, INC. reported total revenues for the quarter ended March 31, 2001 were $4.1 million, which represents a decrease of or 22% from revenues of $5.3 million for the quarter ended March 31, 2000.  The decrease in revenues was due to lower product sales for the Companion Pet Products division and lower consumer sales and licensing revenues in the Consumer Products division. Cash income from continuing operations was $115,000 for the first quarter ended March 31, 2001.  This compared to a cash loss from continuing operations of $(822,000) for the comparable period in 2000.  During the first quarter of 2001, the manufacturing of Pet Care Products was outsourced, in an effort to improve efficiencies and increase gross margins.  (PRNewswire)

Company News Releases

>  Novartis has acquired 20% of the voting shares of its competitor Roche. The acquisition agreement calls for Novartis to take over 32 million bearer shares at a price of SFR151 per share or SFR4.83 billion in total. This represents 20% of voting shares, but only 3.7% of Roche’s securities.  Roche did its best to dispel industry speculation that Novartis’s move might be a first step towards a merger of the two companies.  However, most analysts believe that a merger with Roche would not help Novartis in its planned expansion in the U.S. and would likely run into anti-trust hurdles as well. (Chemical Newsflash)

>  Ralston Purina and Yahoo! Inc. announced the release of Purina TV, a single source multi-media site that provides pet care information in streamed video, audio and text formats. Purina TV offers information on pet research, nutrition, training and health, and features hands-on demonstrations by some of the nation’s leading pet care experts. (Business Wire)

>  The Summit on FMD, jointly sponsored by Watt Publishing Co. and Vance Food Systems Group, consists of presentations from leading American and European experts on the disease, its economic effects and the best means to deal with it at all levels. The Summit on FMD will be held June 4 at the Hyatt Regency O’Hare Hotel in Chicago.  For more information, contact Marcia Riddle at 1 (815) 734-5633.  (company press release)

>  Doane Pet Care Company announced that it sold its Deep Run, Pennsylvania, USA wet petfood business. The Deep Run transaction between Doane and Menu Foods Limited includes the sale of all equipment, certain intellectual property and inventory for gross proceeds of approximately US$15 million, subject to certain adjustments. Doane retains ownership of all real property and fixtures. Production will be moved to Menu’s Pennsauken, New Jersey manufacturing facility during the next two months. (PetFood Industry)

>  Vet-Kem products are now available from Wellmark International to help veterinarians put an end to pet owners’ flea and tick control problems. The original founder of the Vet-Kem brand, Wellmark (formerly Zoëcon) is a leader in the development of insect growth regulator (IGR) technology for flea control.  (company press release)

>  Dr. Jack Stephens, founder and president of Veterinary Pet Insurance, has established the VPI Skeeter Foundation to share his belief that pets are a powerful influencer on human health. The foundation’s two primary missions are: (1) facilitating local volunteer groups in taking pets to childrens’ hospitals and senior care centers; and (2) funding studies documenting how the human-animal bond promotes better health and faster recovery.  In addition, the Foundation directly contributes to other pet-related needs such as: funding scholarships for veterinary students; generic studies to eliminate genetic defects in pets; and a pilot program which provides insurance policies to indigent, disabled or elderly pet owners who exemplify the human-animal bond.  To promote its commitment to the VPI Skeeter Foundation, Veterinary Pet Insurance will make a donation with every policy sold and with the passing of a pet, in the pet and owner’s names. (company press release)

>  Premier Pet Products, which holds the exclusive US license for Gentle Leader headcollar, acquired Animal Behavior Systems.  Financial terms were not disclosed.  ABS is a supplier of training devices primarily based on citronella spray technology.  (Veterinary Practice News)

>  eMerge Interactive, Inc. a technology company providing supply chain management and marketing solutions for the $40 billion beef production industry, announced that the Company plans to increase its focus on businesses with the most growth and gross margin opportunity, such as individual tracking and beef safety technologies, and discontinue its online storefront. Emerge is the owner of the CattleinfoNet information-management and marketing network. (company press release)

>  A new pet treat company has been formed recently called Chomp, Inc. Chomp has developed a unique new line of dog treats with human candy-style packaging. The company has positioned the new line to be sold as impulse buy, low-priced with portable packaging in the pet, mass market and convenience store channels.  Initial limited launch will begin in June, with a national roll-out planned for September 2001. Chomp is headquartered in New Jersey. (PetFood Industry)

>  EUROPE  Swedish biotech company Medicarb is in the process of launching its first products, which include a protective coating for cows’ udders.  Medicarb, which has been in business since 1991, bases all of its products on two biologically active carbohydrates, heparin and chitosan. European sales are being handled by Irish distributor Kilco Chemicals Ltd.  The next market in line is the United States, where Medicarb needs both to find a distributor and to win approval from the USDA. The company expects to launch the product in the United States within 18 months. (Reuters)

    2001 US Animal Health DISTRIBUTORS Directories are now available

2001 U.S. Animal Health Distributors Directories are here!  If you have already ordered this directory, you should receive it in the mail early next week. 

If you have not ordered your new directories you can do so by contacting Jane Morgan in our Dallas office.   The directories are $250 each.  Additional copies of the same directory to the same shipping address are $75 each.   Orders maybe placed by contacting Jane Morgan in the Dallas office at or (972) 243-4033.  

Animal Health News

>  For the first time since foot-and-mouth disease was confirmed in Britain three months ago, no new daily cases were reported. The Ministry of Agriculture reported Thursday night that no new cases had been confirmed in England, Scotland and Wales for the day. The current total is 1,603 cases in Britain with four confirmed cases in Northern Ireland. (E-markets – AP)

>  In Australia for a farmers’ group meeting, the heads of both U.S. and British farming groups claimed that eco-terrorists may be behind the rash of foot-and-mouth disease outbreaks across the globe, and that opponents to intensive forms of agriculture could not be ruled out as the source of disease outbreaks.  The head of the U.S. Farm Bureau confirmed that his organization had begun talks with the FBI into possible eco-terrorist activity.  (AnimalNet – AP)

>  HONG KONG Hong Kong ordered the slaughter of 4,700 chickens after public health officials detected a new strain of avian influenza.  Officials said that, unlike the previous strain which killed six people, there is no evidence that this strain affects human beings. But it has killed 797 chickens in three poultry markets over the last several days, prompting the government to take what it called precautionary measures.  In late 1997, Hong Kong killed every chicken in the territory — about 1.2 million birds — in an effort to stamp out a strain of avian, or bird, flu. (New York Times)

>  BRAZIL   Brazil’s government recommended killing not only a few hundred cattle infected with the highly contagious foot-and-mouth disease but also cattle from “neighboring properties’’ – a dictum that could include hundreds of thousands of uninfected animals. The recent outbreak of foot-and-mouth in Brazil began about 10 days ago about 310 miles southwest of Porto Alegre, the state’s capital. Five days later, cases were found about 90 miles away. (E-markets – AP)

>  ARGENTINA  Argentina has vaccinated close to 28 million of the country’s roughly 49 million cattle against foot-and-mouth, and expects signs of the disease to disappear by 2003.  Argentina said in April that it planned to vaccinate 98% of the country’s herd to bring the disease under control. (Reuters)

>  US   The USDA reported that a new livestock-reporting system that was supposed to provide more accurate and timely data to farmers and ranchers instead miscalculated wholesale beef prices for the first six weeks it was in operation.  Producers may have lost millions of dollars because of USDA’s inaccurate data, but the extent of the problem won’t be known until the pricing reports are corrected. Contracts between packers and producers are tied to the reports, and producers who sell on the open market watch wholesale prices for signals about changes in demand. The mistakes, which continued from April 3 until this week, caused wholesale beef prices to appear lower than they were. Agriculture Secretary Ann Veneman was “extremely disturbed’’ to learn of the error and ordered a “top-to-bottom review’’ of the system, said spokesman Kevin Herglotz. (AP)

>  US   The European Commission and the Bush administration have agreed to try to find a solution to the long-running trade dispute about hormone-treated beef. Currently, the EU prohibits most U.S. beef, claiming the use of growth hormones makes the meat unsafe. U.S. Trade Representative Robert Zoellick and EU Farm Commissioner Franz Fischler now plan to pursue a solution based on compensation.  Fischler will meet Agriculture Secretary Ann Veneman in Washington this week to discuss trade and policy issues.  (AgWeb)

>  FRANCE   The president of the French oilseed producers federation, FOP, stated that more and more animals in the European Union are being fed on genetically modified soya in the wake of the crisis over mad cow disease.  Not enough homegrown soya is being produced in Europe, and the EU currently has to rely on soya imports for 80% of its vegetable protein needs, mainly from North America.  Half of this is genetically modified.  The French food safety agency, AFSSA, is currently carrying out research on the risks to humans of consuming products from animals fed on genetically modified organisms (GMOs). (AnimalNet – Agence France-Presse)

>   CANADA   A new vaccine developed by research scientists at the Veterinary Infectious Disease Organization (VIDO) in Canada could significantly decrease piglet mortality caused by Streptococcus suis.  S. suis is a widespread disease found in 90% of hog herds surveyed in
Western Canada.  Currently, the only remedy is antibiotics. VIDO has partnered with the Alberta Research Council Inc. (ARC) to further develop the vaccine for licensing.  (AnimalNet – company press release)

>  US   A federal appeals court has ruled that a Missouri law aimed at leveling the playing field for smaller, independent beef producers is constitutional. The decision could give other states more leeway to regulate competition in the livestock industry. The law passed in 1999 by the Missouri Legislature requires beef packers to pay the same price for cattle they buy from different producers, and to make those prices public. Larger producers often receive premiums for the
livestock, giving them a competitive advantage. Under the Missouri law, livestock producers can sue for three times the damages and attorneys’ fees if they aren’t offered the same price as the
packer offers another Missouri producer for meat of similar quality. (AP)

Agribusiness News

>  Syngenta has filed suit against Bayer over the rights to a class of insecticides – chloronicotinyl insecticides, asking that a new patent granted to Bayer be tossed out as invalid.  Bayer has received a patent covering the Syngenta insecticide Thiamethoxam. In announcing its reception of the patent, Bayer says the move was designed as a step to “stop the activities of its competitor Syngenta in infringing Bayer’s intellectual property rights.”  Bayer claims development of Thiamethoxam is in direct competition with Bayer’s Imidacloprid. The company is suing Syngenta claiming development of Thiamethoxam infringes on its patents.  Meanwhile, in its new suit, Syngenta claims that the new patent issued to Bayer is invalid. (DirectAg)

>  Syngenta intends to invest more than $85 million in China’s largest agricultural chemical joint venture.  Other partners in the joint venture include Jiangshan Agrichemical and Chemical Co. and Nantong Petrochemicals Corp., who have just a 6% share in the project. The project will focus on producing the popular Gramoxone weedkiller.  In China, Syngenta has invested US$150 million in crop protection and seeds. The Swiss company contributes more than 4% of the foreign investment in China’s crop protection industry. (E-markets – China Online)

>  China has passed regulations that require clearer labeling of biotech products. China’s State Council considered and passed the Regulations Concerning the Biotech Safety Management of Agricultural Gene Alteration (Draft Version).  The new legislation will regulate the biological products with gene alterations–requiring the above-mentioned food labeling, for example–so that the issues related to gene alteration can meet international standards. (E-markets – China Online)

>  StarLink has turned up in nearly one out of four grain samples undergoing the government’s most stringent tests, a far higher number than previously reported and another sign of the chaos the corn’s presence has caused. The USDA has tested 118,000 samples since November. Overall, about 9% have tested positive for StarLink. But since February, the USDA has carried out more accurate tests that can determine one kernel of StarLink in a batch of 2,400 — the standard used by some export markets and the FDA.  Of those 6,000 samples, 22% have tested positive for the corn.  (E-markets – Knight Ridder Tribune)

>  Aventis chairman Juergen Dormann has said that Aventis will not split up its agro-chemical business, Aventis Crop Science, in order to sell the division.  He added that a decision will be made about the sale this year. (E-Markets – AFX)


Brakke Consulting Viewpoint

Is the animal health industry on offense or defense?

Are we pessimistic or optimistic about the future of the industry?

How do your 3-year and annual plans answer these questions?

Is your sales growth rate for the next 3 years going to exceed 5-10% per year without price increases?

Will 20% of your sales come from new products by the year 2003?

What are you doing to create new business and revenues for your customers?

These are six basic questions that we think every manager in the animal health industry needs to ponder a bit.  We believe that more companies should be optimistic regarding the future of the industry.  We’re all paid to be risk-takers, and we see a few too many managers hiding in the foxholes.  The leading companies in 3 to 5 years will be those that are taking risks today.  Think about whether your company will be one of these leaders.

Have a good weekend.

[Ron Brakke]
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