Animal Health News & Notes for April 28, 2000

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Brakke Consulting’s
Animal Health News & Notes for April 28, 2000
Copyright © Brakke Consulting, Inc.
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Company Earnings Releases

> Heska Corporation reported its financial results for the first quarter ended March 31, 2000. Total revenues increased 30% to $14.4 million for the quarter compared to $11.1 million for the first quarter of 1999.   Net loss for the first quarter of 2000 was $5.9 million compared with a loss of $7.9 million for the first quarter of 1999.  During the first quarter of 2000, Heska recorded a restructuring charge of $435,000 related to the rationalization of its Diamond Animal Health subsidiary.  Also during the first quarter, the Company completed the previously announced sale of its United Kingdom diagnostic laboratory business, which was no longer deemed strategic to the Company’s future operations. (PRNewswire)

> Destron Fearing Corporation reported that it achieved strong earnings on record second quarter sales results. Net sales for the quarter ended March 31, 2000, increased 21% to $6.6 million from the previous second-quarter record of $5.4 million set last year.  Net income was $1.4 million compared with last year’s second quarter net income of $1.1 million before an extraordinary gain. (PRNewswire)

>  Veterinary Centers of America Inc. reported financial results for the first quarter ended March 31, 2000.  During the current quarter of 2000, the company finalized the sale of its investment in Veterinary Pet Insurance Inc., recording a one-time gain of approximately $3.2 million ($1.9 million after-tax).  Net income for the quarter, excluding the gain on investment in 2000 and net charges in 1999, increased 16% to $4.5 million compared with $3.9 million in the first quarter of 1999.  Revenues in the first quarter of 2000 increased 12.9% to $83.4 million from $73.8 million in the first quarter last year. Hospital same-store revenues increased 8.1% for the first quarter of 2000. (Business Wire)

>  Ralston Purina Company announced second quarter pro forma earnings from continuing operations (before unusual items) of $79.9 million, compared to $77.7 million in the prior year, an earnings increase of 3%.  (Pro forma comparisons are necessary because Ralston spun-off its Battery Products business on April 1, 2000.)  Second quarter sales were $690.8 million compared to $690.6 million in the prior year second quarter.  Business trends continued to be solid in all three business segments — North American Pet Foods, Golden Products and Pet Products International. (PRNewswire)

>  Cobequid Life Sciences reported record revenue and earnings growth achieved during the first 6 months of the year ended February 28, 2000. Sales growth remained strong with revenues of C$6.4 million (US$4.4 million), an increase of 39% over last year. Major new contributors were in feed additives with an increase of C$447,981 and vaccine sales in Chile up C$885,279. Net income increased 28% over the previous year to C$1.5 million (US$1.0 million). To date, full integration of vaccines in the Chilean salmon market has been slower than anticipated. However, it is following a predicable pattern and the company is confident it will establish itself as the major vaccine supplier to this large market over the next twelve months.  (CNW-PRN)

>  Embrex, Inc. announced revenues and earnings for the first quarter ending March 31, 2000.  First-quarter revenues for 2000 were $9.3 million, an increase of 16% over revenues of $8.0 million for the same period in 1999.  First quarter net income was $1.8 million, an increase of 62% over net income of $1.1 million for the same period in 1999.  The company’s first-quarter revenue increase was primarily attributable to increased injection activities in North American hatcheries as well as additional Inovoject systems and injection activity in Europe, Asia and Latin America.  (PRNewswire)

>  Continued strong results by IBP’s fresh meat operations, including increased export sales, helped deliver solid first quarter earnings for the company. Net earnings before unusual items for the first three months of 2000 totaled $61 million versus $57 million during the same period last year. Net sales for the quarter totaled $3.9 billion, compared to the $3.2 billion recorded last year. Prior year results were restated to reflect the acquisition of Corporate Brand Foods America, Inc. (“CBFA”), which was accounted for as a pooling of interests. (Business Wire)

>  ConAgra has acquired Seabord Farms, a move that will vault the company from fifth to third place in the US chicken industry, behind industry leaders Tyson Foods and Goldkist Inc.  The acquisition will increase ConAgra’s chicken sales from just over $1 billion to around $1.5 billion.  Terms of the sale were not available. (World Poultry)

> Pets.com announced financial results for its first quarter 2000. Net sales for the first quarter of 2000 were $7.7 million, an increase of 48% over net sales of $5.2 million in the fourth quarter of 1999. First quarter net loss was $39.1 million, compared with a net loss of $42.4 million in the fourth quarter of 1999.  By the end of the quarter, Pets.com’s cumulative customer count reached approximately 264,000 from approximately 144,000 at Dec. 31, 1999. (Business Wire)

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Company News Releases

>  Pharmacia & Upjohn Animal Health has launched a new website that connects the global animal health community as never before.  The site is located at www.pnuanimalhealth.com. A focus on country-specific and species-specific information are key features of the site.  Another unique feature of the site is a direct link to local P&U sales representatives and technical support specialists.  In the U.S., for example, a person who selects their state, county and species of interest will see who the nearest sales representative is and can send an e-mail message directly to him or her.  In addition to the main site, several new sites that focus on specific products also are now accessible. (company press release)

> Pharmacia & Upjohn announced that Pharmacia & Upjohn Animal Health acquired worldwide rights to Heska’s PERIOceutic Gel product for the treatment and control of periodontal disease in dogs.  Under the deal, Pharmacia & Upjohn has assumed a supply agreement with Fort Collins, Colorado-based Atrix Laboratories, whose technology is used in the delivery of the PERIOceutic product in pet dentistry treatments.  Financial terms of the agreement were not disclosed. (company press release)

>  Alpharma announced that it intends to significantly expand its worldwide presence in animal pharmaceuticals with the acquisition of the Medicated Feed Additive (MFA) business of Roche for approximately $300 million.  Consummation of the transaction is expected to take place in May.  Specific terms of the transaction were not disclosed.  The Roche business has annual sales of approximately $200 million and consists of products used in the livestock and poultry industries for preventing and treating diseases in animals.  (PRNewswire)

>  Synbiotics Corp. announced that it has acquired the poultry diagnostics business of Kirkegaard & Perry Laboratories Inc. (KPL). The KPL poultry diagnostics business consists of specialized tests used by producers and laboratories to manage the risk of infectious diseases in commercial poultry flocks. The KPL poultry diagnostics business had sales of approximately $3.1 million and operating profits of approximately $1 million in 1999. The purchase price for the business includes an initial cash payment of $3.5 million, an additional cash payment of $1 million when the KPL manufacturing transfer is final (expected to be completed in about one year) and a maximum of $1.5 million in royalties on the sales of the acquired products over the next four years. (BW HealthWire)

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Animal Health News

>  Japan appears to be winning its three-week battle to contain an outbreak of foot-and-mouth disease in the nation’s main cattle-raising region. Agriculture Ministry officials have stated that no new cases have been detected over the past 10 days, but several more weeks are needed to confirm eradication of the disease. The ministry is about to lift a ban on the transfer of cattle, pigs and other cloven-hoofed animals within a 50 km (31 mile) radius of the farm where the outbreak of foot-and-mouth disease was found among cattle last month. (Reuters)

>  eMerge Interactive, Inc. a business-to-business value-chain integrator serving the $40-billion U.S. beef-production industry, announced that it has acquired two companies to accelerate its unique value-add business strategy: the sales and support infrastructure of Eastern Livestock Co., the nation’s largest livestock-marketing operation; and Jordan Cattle Auction, pioneers in the field of cattle-health certification.  The combined transactions are valued at $27.8 million in cash and $14.5 million in stock.  (PRNewswire)

>  Celera Genomics announced that Celera AgGen, its agriculture business, has signed an agreement with ViaLactia Biosciences New Zealand Ltd., to discover novel bovine genes that are important for increasing dairy productivity. Under terms of the agreement, Celera will use its unique high-throughput DNA sequencing, library development and advanced bioinformatics capabilities to identify important expressed genes in dairy cattle. All intellectual property will be jointly owned. Further terms of the agreement were not disclosed. (AnimalNet)

>  Travel agents who specialize in pet transportation are becoming more popular, as air shipment of animals has come under scrutiny following several well-publicized cases of pet injury or death on flights in recent years. There are 65 domestic and 35 foreign members of the Independent Pet and Animal Transportation Association International (IPATA). The association’s members handle the arrangements for shipping not only cats, dogs and other family pets, but all kinds of animals within the United States and around the world. Pet travel agents actually have been around for at least two decades, but it’s still a relatively unknown industry.  According to the co-founder of IPATA, pet travel has become a multi-million-dollar industry. (AP) 

>  The Animal Health Institute released the following statement regarding a study published in a recent issue of the New England Journal of Medicine regarding antibiotic use in animals:  The article’s conclusion that the antibiotic resistant strain of Salmonella evolved primarily from cattle is speculative and is not supported by the data.  No evidence is provided to show that the cattle were treated with the antibiotic in question or, for that matter, with other antibiotics. In fact, the researchers concede that they “were unable to establish its use (Ceftriaxone) in these herds” and that “unknown environmental factors” could have been the source of the resistant pathogen.  Ceftriaxone is a human prescription drug and is not approved for use in animals.  (PRNewswire)

>  The German Cabinet has announced that it wants all domestic beef labeled as originating in Germany beginning September 1, ahead of a EU schedule for country of origin labeling.  The EU requirement does not go into effect until 2002.  The German parliament is expected to debate the labeling measures on June 9. (E-markets; AP)

>  The National Pork Producers Council has announced a new checkoff-funded marketing effort to change the way consumers think about pork.  The undertaking will focus on the “other” in the slogan “Pork: The Other White Meat.”  New print and TV advertising, a revamped internet presence, and retail, foodservice and export initiatives are all part of the multiyear effort.  The NPPC has earmarked $26 million for the first year of the program. (E-markets; Business Wire)

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Agribusiness News

>  DuPont Qualicon, a wholly owned subsidiary of DuPont, announced the opening of a laboratory to provide testing services to determine if specific genetic modifications are present in food products.  The laboratory, located at the DuPont Experimental Station in Wilmington, will provide a precise determination of the percentage of genetically enhanced materials contained in soy- and corn-based products. This service will enable food processors to easily and inexpensively monitor supply chains and establish identify preservation systems to comply with the labeling requirements necessary for some markets. (PRNewswire)

>  Japan’s Ministry of Health and Welfare accepted a recommendation from a government panel that mandatory safety tests on genetically modified products should be required before importing them into Japan.  The recommendation follows a decision by the Japanese government last year to require labeling of products that contain GMOs.  Japan is one of the largest customers of US agricultural producers, buying imports worth about $10 billion per year.  US officials played down Japan’s new stance, stating that it formalized existing procedures, and was not expected to have any negative impact on the biotechnology industry or on exporters to Japan. (E-markets; Financial Times)

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Brakke Consulting Viewpoint

Most of the industry appears to have had a reasonably good first quarter.  In my current travels I have found that most firms are exceeding sales and profits for the same period prior year.  There are a lot more smiles on the faces of the managers than in 1999.  It appears that cattle and swine prices will hold for most of the year.

We appreciate the positive response to our new business model article that was mailed to many of you last week.  If you misplaced your copy and would like another one please call any of our offices.  We look forward to assisting many of you in the coming weeks in the review of your ability to meet the challenges of the 21st century.
 
[Ron Brakke]
 
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