The Experts in Animal Health

Brakke Consulting’s
Animal Health News & Notes for February 23, 2001

Copyright © Brakke Consulting, Inc.
Company Earnings Releases

>  IDEXX Laboratories, Inc. reported net income of $9.8 million for the quarter ended December 31, 2000, compared to net income of $8.8 million for the fourth quarter of 1999. Revenue for the three months ended December 31, 2000, increased to $91 million from $89 million for the same period in 1999. For the year ended December 31, 2000, net income was $36.6 million compared to net income of $32.6 million for the prior year. Revenue for 2000 increased to $367 million from $358 million in 1999. (company website)

>  Heska reported financial results for the fourth quarter and year ended December 31, 2000.  For the year, total revenues increased by 3% to $52.7 million.  Product revenues from the company’s continuing core business increased 26%, attributable to strong growth in veterinary medical instrument products and increases in other product lines.  The company’s Diamond Animal Health subsidiary also posted solid revenue growth.  The company’s net loss for the year was ($21.9) million, a 39% improvement over 1999. In the fourth quarter of 2000, total revenues declined by 20% to $11.4 million, primarily due to soft sales in the Diamond Animal Health subsidiary and the effect of businesses sold and discontinued product lines.  The net loss for the fourth quarter was ($5.5) million, compared to a net loss of ($12.7) million in the fourth quarter of  1999.  (company press release)

>   Purina Mills, Inc. reported net income of $1.4 million for the fourth quarter of 2000 on sales of 1.1 million tons of product.  Since emergence from Chapter 11 reorganization on June 29, 2000, the Company incurred a net loss of ($481,000) on 2.0 million tons of product sold. At emergence the Company had secured bank debt of $175 million.  During the six months ended December 31, 2000, the Company repaid $19 million of the debt.  Additionally, in the first 45 days of 2001, the Company has repaid another $21 million of the secured bank debt reducing its outstanding bank borrowings to $135 million at February 10, 2001. (PRNewswire)

>  Biopure Corporation announced its financial results for the first fiscal quarter ended
January 31, 2001.  For the quarter, the company reported a net loss of $10.6 million, compared with a net loss of $12.2 million for the corresponding period in 2000. Total revenues were $735,000 for the first quarter of fiscal 2001, compared with $598,000 for the corresponding period in 2000.  This increase reflects more than 20% growth in unit sales of Oxyglobin. (PRNewswire)

Company News Releases

>  Tyson and IBP executives stated at the annual Cattle Industry Convention & Trade Show that Tyson has no intention to vertically integrate livestock production as it has done in poultry production.  They also said that Tyson plans to use its expertise in producing value-added food products to accelerate IBP’s move into value-added beef and pork products.  (Feedstuffs)

>  Fallout from a costly accounting fiasco at the DFG Foods unit of IBP Inc. continued to mount, as IBP disclosed that it will take a $108 million charge to write down the value of the DFG assets. The big charge is only the latest in a series of problems linked to DFG’s accounting travails: The mess has already caused poultry giant Tyson Foods Inc. to put its pending $3.2 billion acquisition of IBP on hold, and spurred federal officials to launch an investigation into IBP’s accounting. Tyson hasn’t commented on speculation that it will seek to renegotiate a lower buyout price, in view of IBP’s diminished profits. But investors clearly have reservations about whether the $30-a-share deal will go through: In New York Stock Exchange trading Thursday, IBP shares (IBP) closed up 22 cents at $26.94 — an unusually wide “spread” between the buyout price and the trading price. (Emarkets – Knight-Ridder)

>  The European Commission has cleared Cargill Inc’s acquisition of Agribrands International. The commission said Cargill and Agribrands’ animal feed businesses are largely complementary and only overlap in Spain and Portugal where their combined market share is below 15%. In the oil seed meal market, where Cargill has an EU wide market share of over 25%, the commission found there are several large competitors. (E-markets – AFX)

>  Embrex announced the establishment of Embrex France and Embrex Iberica to market Inovoject systems in France, Portugal and Spain.  Portugal and Spain represent the two largest markets for Inovojects in Europe, with more than half the chickens produced in the two countries vaccinated with the Inovoject system.  (Feedstuffs)

>  Manna Pro Corp. announced that is and Capital Resource Partners have discontinued all discussions relating to the sale of Manna Pro to CRP, and plans to move forward on the transaction have been halted.  An announcement was made in December 2000 that CRP would merge Manna Pro and Buckeye Nutrition to form a new company.  (Feedstuffs)

>  Banfield, The Pet Hospital, signed an estimated $10-$15 million five-year agreement to
adopt Abbott Laboratories’ SevoFlo (sevoflurane) to be used exclusively as the 250-hospital practice’s gas anesthesia. Banfield will also adopt Abbott’s PropoFlo (propofol), an instant injectable anesthetic. The change also represents a significant training and equipment investment, with the goal of all Banfield hospitals changed over by the summer. (Veterinary Practice News)

> announced that Pfizer has joined as a new e-business partner. Pfizer is the most recent livestock company to join This new partnership will bring customers Pfizer livestock products, including Dectomax parasite control products, and CattleMaster and RespiSure vaccines. In addition to leading products, Pfizer will provide an animal health “Tip of the Week”, titled Pfizer Focus, which is a column of practical herd health tips that span the beef, dairy, and pork segments. Pfizer Focus will cover herd health issues relevant to producers and offer practical solutions to everyday situations. (company press release)

>  Trading of the new Degussa shares on the German stock exchange began on February 12. German chemicals manufacturers Degussa Huls AG and SKW Trostberg AG have finally merged, effective February 9. The new Degussa share will continue to be listed on the DAX 30 share index. (Chemical Newsflash)

>  Fiji Chemical Industries in Japan announced the launch of Clear Guide Diro, a test kit to detect canine heartworm antigen in blood and Sensi-Vet, a test kit to determine sensitivity of 17 antibiotics against bacteria and Candida/Malasezia yeast infections in animals.  (Brakke Japan correspondent)

>  Pauls Limited of Australia has launched a new line of milk products enriched with Reducol, a cholesterol-lowering functional food ingredient. The milk, which is called LOCOL, is available in two forms: no fat (less than 0.15 percent) and reduced fat (1.5 percent).  Forbes Medi-Tech Inc., which makes Reducol, says the product has been clinically shown to reduce LDL (“bad’’) cholesterol levels by approximately 24% in conjunction with a healthy diet.  Nutrition Business Journal predicts that the market for so-called “functional foods,” which contain added ingredients to improve health or prevent disease, will reach $83 billion worldwide in the next five years.  (AgWeb)

>  Nufarm Limited of Australia will exit its 19.91% shareholding in IAMA following last week’s vote by IAMA shareholders to approve a merger proposal with Wesfarmers Dalgety.  The merger includes an exit option for existing IAMA shareholders valued at $1.65 per share. The exit option represents a premium on the average cost of Nufarm’s investment in IAMA and that the capital realised from the sale of IAMA shares can be more effectively re-deployed in other areas. (company press release)


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Animal Health News

>  The French government announced plans to slaughter up to 10,000 cattle a week in order to support beef prices forced down by the mad cow disease crisis.  The agriculture minister called it an emergency measure and said the beef would be frozen for sale later. The whole continent already has a backlog of both frozen and pulverized cattle because many diners, restaurants and institutions have stopped buying beef out of fear of the human form of BSE.  Because beef prices have fallen as much as 80%, the ranchers have also been demanding that the government pay them between $140 and $500 for each head of cattle that they cannot sell. (NY Times)

>  Britain uncovered its first cases of foot-and-mouth disease in 20 years, prompting Europe to consider measures against the highly infectious virus and plunging the UK pig industry into a fresh crisis. Britain’s National Pig Association (NPA) said the disease was a further blow
to the struggling industry, which has only just weathered an outbreak of classical swine fever in southern England leading to export bans in Europe and the United States. Britain suffered its last outbreak of foot-and-mouth in 1981 but since then pig farmers have struggled with low prices, a strong pound and growing consumer concern over meat after a series of scares including mad cow disease. (Reuters)

>  Johne’s disease has infected more than 15,000 dairy cows in northern Vermont, causing alarm among the state’s farmers, veterinarians and legislators. Local veterinarians say Vermont has experienced increasing cases of Johne’s disease during the last several years. They are concerned this may be the tip of the iceberg. Area lawmakers are working to draft legislation to deal with the problem.  (AgWeb)

>  The beef cattle industries in the US, Canada and Mexico have signed a joint statement stating that they are committed to preventing the introduction of BSE in North America.  The National Cattlemen’s Beef Association, Canadian Cattlemen’s Association and Conferacion Nacional Ganadera will work with governments, feed and rendering industries, processors and veterinarians to ensure full compliance with all established measures to prevent the introduction of the disease.  (Feedstuffs)

>  The AFIA Board of Directors has implemented additional safeguards to prevent BSE from occurring in the US.  The Board approved measures advocating the voluntary withdrawal of ruminant-derived meat and bone meal from facilities that produce feed for ruminants, and creating a certification program ensuring compliance with the two current mammalian protein feeding ban instituted by the FDA.  The actions were taken in response to increasing consumer concern over BSE.  (AFIA press release)

>  Spanish scientists have developed a technique to test whether cattle have been given illegal animal-based feeds. The Superior Council of Scientific Investigations (CSIC) adapted a technique used by archaeologists and paleontologists to determine diets of early humans and animals, that measures a certain type of nitrogen isotope that is more common in animals fed animal proteins than in those fed with plant proteins.  The test can be used on dead or live cattle. A first series of 350 samples has already been tested in Spain, showing that 20% of the animals had been given animal-based feeds despite a European Union prohibition in force since 1994. (E-markets – Deutsche Press-Agentur)

>  The Veterinary Infectious Disease Organization (VIDO) of Canada has received $900,000 in government funding to advance testing of a patch drug delivery system. The funding will be matched by industry partners, including Helix BioPharma, to complete the $1.8-million three-year project. Helix and VIDO are also the research partners in the project. (AnimalNet – The StarPhoenix)

Agribusiness News

>  President Bush is reportedly considering a proposal to hire a biotechnology coordinator to provide a single voice for the administration’s views on biotech and genomic issues and avoid the conflicts when different federal agencies present differing opinions, according to US Senator Timothy Hutchinson, Republican of Arkansas.  Currently, the Food and Drug Administration, the Department of Agriculture, the Environmental Protection Agency and the US Trade Representative’s office present policies and views that may conflict. (Emarkets – Knight Ridder)

>  The Japanese unit of Aventis SA has applied to sell its StarLink biotech corn to Japan for use in animal feed.  StarLink is not approved for either human or animal consumption in Japan. The gene-spliced corn has become a hot topic in Japan. The discovery of StarLink traces in food and animal feed in late October prompted Japan to sharply cut its purchases of U.S. corn.  Ministry officials declined to comment on whether or when the approval would be made. The ministry, which overseas feed products, said earlier this month that its test results showed no genetic problems in poultry raised on feed containing StarLink corn. It is also conducting similar tests on chicken eggs, dairy cattle and pork, it said. Japan imports four million tonnes of corn per year for food and another 12 million tonnes for animal feed, mostly from the United States. (Reuters)

Brakke Consulting Viewpoint
The animal protein market remained under pressure this week with several stories on BSE in one form or another. The good news is the industry response to the seriousness of the problem.  The AFIA board took a very positive step in initiating a program to remove all animal related ingredients from facilities producing bovine products. Now all the AFIA members and others need to comply. 

There were a number of stories this week related to various animal disease outbreaks.  It appears that we still need improved drugs, biologicals, and programs to keep animal disease under control.  With most companies reducing R&D and regulatory pressures increasing it is a bit difficult to visualize the innovation that is needed for solutions to these problems.

[Ron Brakke]
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